Will the modest survive? COVID-19 puts fashion industry to the test

“Keep trying until you succeed,” Ghizlan Guenez wrote on her Instagram in October. Six months later, the founder and CEO of The Modist stopped trying and shuttered the three-year old modest fashion e-commerce platform. “You take risks, sometimes disproportionate to the potential reward,” wrote Guenez at the time.

The Modist on Apr 3 said the “global crisis”, referring to the COVID-19 pandemic, left the “young business vulnerable with no option but to cease operating”. Whether or not it was wholly the impact of the pandemic—sharply falling consumer demand intensified by supply chain disruptions—that claimed the high-profile modest fashion business, the crisis inflicted by the spread of the coronavirus could be the start of a big downturn in the fashion industry.

In an April coronavirus update of its report The State of Fashion 2020, consulting firm McKinsey estimates 27-30% contraction year-on-year in revenues for the global fashion industry, although it does say the sector could regain positive growth of 2-4% in 2021. The firm also expects a large number of global fashion companies to go bankrupt in the next 12 to 18 months as over 50% of them were not even earning their cost of capital in 2018.

No doubt the modest fashion industry will mirror some of these predicted mainstream fashion developments. As far as its first victim goes, unlike most other modest fashion businesses, The Modist was generously backed by venture capital. In 2018, the e-commerce retailer received $15 million from investment fund Vaultier7. A year later, in March 2019, Farfetch and Italian fashion-billionaire Nicola Bulgari infused more capital into the business.

But these capital injections and The Modist generating an estimated $6 million net sales in 2019, according to e-commerce revenue analytics company ecommerceDB, weren’t good enough.

The financial situation of one of The Modist’s financiers further reveals the vulnerability of fashion players. Luxury e-commerce retailer Farfetch recorded a negative EBITDA from 2015 to 2019, reaching $121 million, according to the company’s 2019 annual report. In addition, within a year, the company’s stock price slumped by 72% below the $7 mark at the beginning of this month.  

But what of the smaller companies and those that sell their own brands and products, which more typically characterizes the modest fashion industry?

Hafsa Lodi, a Dubai-based fashion journalist and author of the book Modesty: a Fashion Paradox, doesn’t believe The Modist’s closure speaks to the state of the modest fashion industry as a whole. The examples of the two following businesses may well support her assertion.

STAYING TRUE

One veteran calls on modest fashion industry players to take the COVID-19 crisis as an opportunity to reflect on the values of the Islamic faith.

“If we are honest with ourselves, we will see that the modest clothing industry has drifted far away from its religious mooring,” Anas Sillwood, co-owner of SHUKR, told Salaam Gateway. 

“The hijabi fashion trend has taken few strides to change spiritually unhealthy cultural norms, or to recast definitions of beauty and a woman’s worth,” Sillwood added. “Instead, in many cases, it has simply put a headscarf on mainstream fashion with all of its failings, including an extremely narrow and exploitative view of beauty and sexuality.”

Regardless the state of the industry’s Islamic values, the COVID-19 crisis has resulted in SHUKR’s sales dropping by more than 50%, but the company is still plodding along.

While still running two manufacturing sites, the company closed two of its three physical stores in Amman due to the unfortunate economic situation in Jordan even prior to the pandemic. 

“Like every business, we are being forced to take a hard look at our structure and costs and downsize wherever possible until the market improves,” Sillwood said.

Commenting on the limited financial resources the government has available to help local SMEs, Sillwood noted, “We are left to fend on our own.”

Apart from crisis management, and despite having built a regular overseas business, the Jordan-based label is concerned about limited growth over the past few years.  

“We started as a small company and grew organically, financed along the way by small investments from family and friends,” said Sillwood about the 2001 established brand.  

The Brit, who converted to Islam in his twenties, cited the entry of VC-funded modest fashion marketplaces like Modanisa and Hijup as a reason for the decline.

“The large marketplaces like Modanisa can easily eat into the market share of smaller companies. Just like Amazon has increasingly been taking over market share across all retail sectors,” Sillwood explained.

STARTING SMALL

Another modest fashion business also started small, and resisted going down the way of VC-backing. Like SHUKR, U.S.-based Veil Garment also appears to be strong enough to weather the crisis downturn due to its size and organic growth.

When Ahmad Ghanem started Veil Garment he was concerned that venture capital firms would push growth too hard, at the expense of sustainability. So the 26-year old American designer opted for crowdfunding to launch his e-commerce operation.

Between 2015 and 2016, he raised a total of over $69,000 on Kickstarter to begin the production of his invention — cooling and water-repelling hijabs.

With the help of three employees and shipping out of a warehouse in Brunswick, Ohio, Veil Garment has served about 55 countries so far.

“Our first five years were all about creating a brand built to last, profitability, and sustainability,” Ghanem told Salaam Gateway. “We wanted to put ourselves in a spot where once we’re ready to go full throttle, our engines won’t bust.”

Having grown the revenue by 450% compared to 2019, and once the current crisis is over, the team is ready to venture into the physical sphere, bringing together the best from online and brick-and-mortar stores.

“I hope that by 2021 Veil products are sold in at least 50 shops around the world,” the entrepreneur divulged, assuming that the COVID-19 disruption won’t last too long.

“By then, we want to offer three to four new sportswear lines, one new sports hijab line, and our first modest swimwear line.”

STAYING MODEST

Smaller and leaner companies with lower cost bases, such as SHUKR and Veil Garment, may be more nimble to weather the COVID-19 crisis better than a Dubai-based luxury outfit such as The Modist, that one industry player told Salaam Gateway in an earlier interview commanded high salaries that made cashflow difficult.

Fashion journalist and author Hafsa Lodi explains further. “The Modist specialized in luxury designer wear and only targeted a minority of the population,” Lodi told Salaam Gateway, adding that many women seek affordable and accessible modest wear.

“Often, modest fashion businesses are founded on faith-based principles of modesty, but with idealistic motivations, proper, thought-out business plans are equally crucial for success,” Lodi said. She firmly believes that modest fashion depicts a sustainable, long-term industry.

Lodi’s view is shared by Dubai-based Alia Khan, founder of the Islamic Fashion Design Council (IFDC).

“Modest fashion consumers are loyal,” Khan told Salaam Gateway. “Regardless of good or bad times — they’re going to have the same modest lifestyle needs for the parameters of their faith.”  

Based on her experience, Khan warns industry entrants about a level of naivety. “Without business acumen, in this industry, it will be tough to survive just on creative ideas.”

How modest fashion has been a success as a movement was the topic of an article by three Malaysian academics in the second volume of the 2018 Journal of Islamic Management. It isn’t without the authors challenging its overall positioning, however.  

“To be a sustainable industry, modest fashion needs to break into the mainstream craze and find a permanent position in the global retail space.”

In any case, conquering global fashion requires taking risks, which may or may not be rewarded. Just ask Ghizlan Guenez.

(Reporting by Petra Loho; Editing by Emmy Abdul Alim emmy.abdulalim@salaamgateway.com)

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