Purchasing any item online whether it is clothes, grocery items or food from a restaurant is the most convenient way nowadays. However, this easy access has resulted in a paradigm shift in consumer habits and it is more significantly noticed in the world of fashion.
This fast way of shopping may have worked wonders for a few fashion brands but most of the apparel retailers and chains are now found to be chasing sales. This has put them into debt and most of them are now found juggling debtin spite of being highly leveraged. With the high demand for such clothing in the market, it hardly takes more than a week for these fashionable apparels to move from catwalks and find a place in the online stores.
Effects of the trend
In fact, such a trend has taken the US market by storm both the positive as well as in the negative sense.
- As for the positive effect, the consumers can now find easy access to fashionable garments at affordable price fast and easy but for the retailers it seems to be bad news. It is the distraught specialty apparel retailers who are among the leading casualties.
- This shift in consumer habits has left their business models, policies and balance sheets in tatters. This is even more profound in case of the smaller and slower chains. Ultimately, these apparel retailers have jacked up debt due to such leveraged buyouts.
Apart from the fast and easy access to fashion, the traditional apparel chains are also being hurt by thishurrying shift to online shopping. According to research, online retail giants such as Amazon that also happens to be the leading internet retailer according to 2016 Top 500 Guide, lure away customers offering free shipping part from the most desired convenience of buying items from their sofas.
Shift in habits
According to several market analysts, customers of today think differently and they never look back. It is therefore very easy to lose your customers. It is due to the shift in consumer habits that has left a large number of apparel retailers struggling to find a steady footfall in their store and for increased revenue. This has resulted in a shortage of cash exactly when they need it the most.
Cash is required for several reasons such as:
- It is needed to buy updated systems
- It is required to keep the shelves in the store constantly refreshed
- It is also required to keep up with the pace with their nimbler and newerrivals.
The final result of this shortage of cash is alarming and has left the apparel retails high and dry. This has in fact the biggest welter of bankruptcies and restructurings since the Great Recession.
The market analysts warn that there are more on the way. According to them and their findings, those companies that have the highest leverage will be able to the least to address these newer challenges. They will not be able to invest their capital for the necessary exploration of other different strategies so that they can evolve the business models and policies.
They even go a step ahead and warn that there will continue to be such a slew on these smaller challenges and necessary fillings. This will compel the restructuring group to focus more on ways that will ease their struggling situation. They may even run into huge debts that will be hard to manage and repay.
The bigger issue
Though some of these companies have sought breaks from their creditors in several ways, the bigger issue lies somewhere else. Companies now find debt relief through different options such as:
- Debt swaps
- Extended loans or
- Even hire financial and legal advisers for better restructurings.
Few companies ultimately resort to debt settlement even and look frantically for a reliable debt settlement company to help them out from this sticky situation. You can visit here to know more about debt settlement companies sand to find one quickly if you need.
Squaring off with the creditors repeatedly over new terms by the companies laboring under debt will not help much to deal with the change in fashion shopping habits. Looking into refinancing and senior notes of repurchasing retail chains lag behind on replacing their stale inventory.
Fast fashion being an expensive proposition for the traditional specialty merchants they are often found compromising and sacrificing with their merchandise quality, analysts said. Small retailers especially find them in a very difficult situation since even the high-end fashion brands are moving into fast fashion.
On the other hand the apparel names that are less indebted face same secular pressure but are better equipped to adapt but the specialty apparel should not expect a significant break anytime soon.
High credit risk
Big retail and apparel names face a very high credit risksince the recession and the change in taste and behavior of the customers in fashion shopping will make it all the more impossible for them to get to the even level.
Market analysts corroborate that the younger shoppers have conveniently and successful gravitated towards fast fashion brands. This is due to several reasons such as:
- They are more comfortable
- The clothes are more affordable
- They are able to capture quickly
- They can incarcerate the latest looks and
- They can get these in a fraction of the time than other traditional merchants need.
Cheaper prices and faster availability also mean that the customers will always expect a wide and ever changing assortment of these clothing brands that sometimes are referred to as ‘disposable fashion.’
The credit risk and high level of competition exacerbates this crunch and companies scrounge for cash to retort. The risk is most immediate and is highly experienced by those fashion chains that are smaller, similar and highly levered. These chains are often private equity-owned and therefore are most troubled among all retailers. They possess a negative outlook for their profile and feel that they are unfit for such competition and ultimately find their credit ratings deep inside the junk territory.