At the start of the pandemic, consumers were bombarded with a new and hastily constructed form of advertising. In those “uncertain times,” customers were promised, they could rely on their favorite brands for help. The ads – often featuring somber piano music and/or declarations that everyone was “in this together” – were ubiquitous. Now that the dust has settled on the COVID-centric advertising flurry, new research reveals the tactics behind these often-largescale advertising campaigns, and why consumers (and thus, brands, themselves) should be wary of marketing in a crisis.

When COVID first began to plague individuals across the globe, and governments were unsure about how to respond, corporate advertising sought to define the pandemic in ways that made companies – and their products – an essential part of whatever the solution might turn out to be. In a review of advertising campaigns that ran between mid-March to the end of April 2020, companies used ads to tell three main types of stories about COVID. Some, like the global shipping giant Maersk, emphasized the supply chain impact of the pandemic and pointed to their role helping to get essential equipment to the right places. This kind of marketing defined COVID as a crisis of logistics – a problem for which corporate managers could argue they have the most specialist expertise.

Others, especially consumer goods brands like Starbucks, concentrated on the financial side of the situation, and their role in donating food or money to those in sudden need. This kind of marketing defined COVID as a crisis of capital. If the problem is not enough cash, then wealthy corporations can swoop in as heroes by freeing some up quickly. And then there were those – especially fashion and luxury brands – that focused on the emotional impact of the pandemic, and pointed to their products as a way to make the experience easier and more enjoyable. These adverts made the case that personal consumption – shopping from your lockdown – could be a form of humanitarian heroism, with you as the grateful recipient, or a way of taking care of yourself.

But there were risks attached to these messages, and not all of them landed well. Some ads seemed oblivious to the wider social problems that were making the crisis harder for some to bear. Fashion advertisements targeted at women that described the pandemic as a kind of “staycation,” for example, sat uncomfortably next to news reports about women who were leaving the workforce under the crushing burden of childcare and housework. E-cigarette advertisements encouraging consumers to take up vaping “for your health” invited a backlash when hospitals were filled with COVID patients on ventilators.

Some companies even provoked consumers by mocking the severity of the pandemic, including an Italian ski resort that invited travelers to “experience the mountain with full lungs” in a place “where feeling great is contagious.” All the while, social media companies struggled to stamp out misinformation from “influencers” hired by wellness brands to promote untested products as COVID-19 cures.

Even companies behind advertising campaigns that took the pandemic seriously found themselves on shaky ground. When the UK was coming out of its first lockdown, cleaning brand Dettol went viral (in the wrong way) when it appeared to be encouraging commuters to return to the office. Some consumers conflated the ads with government public service announcements promoting shopping as a way of boosting the economy. The misconception contained a grain of truth, as Dettol was the government’s corporate partner for sanitizing public transport. Indeed, several brands in our research mentioned partnerships with government as one of the benefits of the crisis. 

Meanwhile, advertisements encouraging consumers to shop to “help” rebuild the economy (and companies in it) have proliferated.

Beyond the Pandemic: Consuming with a Conscience?

Advertising that addresses social concerns is common, and not just in relation to COVID. In fact, such advertising extends to a range of causes where consumers are primed to see corporate solutions for everything from poverty to climate change. Our research shows that this type of advertising is frequently designed to influence how the public understands social problems, and encourages people to think of ethical consumption as a way of helping

As others have argued, such marketing related to good causes “creates the appearance of giving back, disguising the fact that it is already based in taking away.” For example, consumers can be deterred from campaigning for more radical change, believing they have already played their part through “ethical” purchasing. One familiar example is when companies boast that a percentage of proceeds from certain products goes to a social cause. The amount donated is often small  while the revenue the new product generates for the company is considerable. (Another comes in the form of fashion industry capsule collections that tout the products as “sustainable” or “recycled,” and thus, may deter consumers from cutting back on their consumption due to the “eco-friendly” nature of the offerings.)

Against this background, the risks of attaching a social issue to an advertising campaign are considerable – for the company, the consumer, and the cause, itself. Our research suggests that not every time is the right time for advertising, and we should beware of brands bearing gifts.

Lisa Ann Richey is a Professor of Globalization at Copenhagen Business School. Maha Rafi Atal is a Lecturer in Global Economy at the School of Social and Political Sciences, University of Glasgow. (This article was initially published by The Conversation.)

Reshoring and nearshoring are making headlines after the limits of a long and strong wave of offshoring – which has seen manufacturers move their factories abroad, often to lower-cost countries, such as China – continue to emerge, especially in the fashion industry. These include hidden costs in logistics, quality and in coordination, as well as counterfeiting, negative impacts on the environment, and poor working conditions. Trends are also changing more rapidly, making long supply chains problematic. The fashion industry is an interesting case as it is labor-intensive – particularly when it comes to stitching, which has not yet been automated – and most of its occupants have off-shored substantially to lower their costs and boost margins. Yet, it is also an industry where clusters exist and flourish – whether it be Italian cities of Prato and Florence or the garment centers in London and Paris.

A study from Boston Consulting Group shows a reduction in the gap between labor costs in China and in the United States because of an increase in Chinese labor costs and rising productivity in the United States. This, therefore, suggests in numerous industries, there may be a wave of reshoring – bringing manufacturing back after it was offshored. Reshoring is also becoming a buzzword in Europe, and the benefits of manufacturing for European countries are clear. (These trends are being accelerated, as COVID-19 and subsequent supply shortages have shed light on the fragility of global supply chains.)

While offshoring can cut some costs, it has been shown to reduce firms’ capacity for innovation. Gary P. Pisano and Willy C. Shih, who are researchers from MIT, for instance, have proposed a framework that allows industries to be classified based on their innovation type – pure product innovation, pure process innovation, process-embedded innovation, and process-driven innovation. Fashion is considered a process-embedded innovation industry, which means that design and manufacturing have to be co-located for firms to sustain their capacity to innovate. As a consequence, the recommendation from Pisano and Shih is to co-locate the two activities in the country of origin, and innovation is presented as an additional argument in favor of reshoring.

Digitization, automation and the industry 4.0 technologies are also presented as changing the manufacturing landscape in fashion, encouraging closer manufacturing locations.

Not Reshoring, but omnishoring

An in-depth analysis of 20 European fashion companies (realized by Celine Abecassis-Moedas and Valerie Moatti within the ESCP Europe Lectra “Fashion and Technology” Chair) shows a more complex picture. First, European firms perceive sourcing countries differently depending on whether they are distant (i.e., located in Asia) or located closer to home (such as in Europe, Turkey or North Africa), rather than in accordance with the usual dichotomy of local versus distant sourcing. Manufacturing in a company’s home country is virtually non-existent; one of the fashion companies examined reshored from far-sourcing countries to its home country, while quite a few shifted manufacturing back to places that are closer to it – i.e., nearshoring. The majority of firms, however, are manufacturing more than half of their volumes in close-sourcing destinations, and “finishing” those products in their home country in order to benefit from loopholes in national labeling laws.

All of the firms examined manage a complex portfolio of sourcing locations, which see them either allocating certain products to particular locations (jeans are made in Turkey, for instance) or allocating the same products to different sourcing locations depending on the product life cycle – close in smaller series at the beginning of the season, then distant in large quantities, and again close for replenishment at the end of the season. This is what we call “omnishoring” – or a portfolio of multiple sourcing locations (close and far) that depends on the specific products and their degree of innovation, and that serves to complement the whole.

Strategies to coordinate & manage distance

The need to coordinate design and manufacturing when these operations are not co-located is essential, and firms use a variety of strategies that go beyond co-location in the home country. Some have developed a reverse co-location system, in which they move design close to manufacturing, rather than the other way around. For example, some large players in the European fashion industry have moved (part or all of) their design department to Hong Kong or China. Another coordination mechanism is to physically situate prototyping operations – i.e., an early step of manufacturing that is considered to be critical for the innovation process – close to design, and then allow the rest of the manufacturing phases to be carried out in a more distant locale.

Alternatively, some firms manufacture in distant countries that have some cultural proximity – for example, British firms can choose Thailand because of a greater level of English fluency. Others manufacture in distant locations in their own facilities or through strong partnerships, which allows for greater control and stronger coordination. Finally, the use of manufacturing and communication technologies (PLM, 3D design, etc.), intermediaries, and/or regular and systematic trips of designers to manufacturing plants is also a strong coordination mechanism.

Ultimately, our analysis shows a more dynamic approach to what distance is, one that goes beyond its purely geographical dimension, and how it is managed. Four strategies to manage distance between design and manufacturing emerged: (1) Avoiding distance by co-location or reverse co-location; (2) segmenting geographical distance, by segmenting manufacturing between prototyping and product development, and bulk manufacturing; (3) hedging against geographical distance through other forms of proximity, such as cultural or institutional proximity (manufacturing in distant locations in a firm’s own facilities); and (4) managing geographical distance through the use of technology.

The term omnishoring reveals a rich portfolio of sourcing destinations (both close and far) and of institutional models (a firm’s own facilities and contracted ones) that allows firms to manage different products, seasons, series, and more. This study of the fashion industry shows that the need for co-location between design and manufacturing can be managed in different ways. These strategies are also food for thought for other industries that want to manufacture outside of their home country without sacrificing innovation.

Céline Abecassis-Moedas is an affiliate professor at ESCP Europe and Universidade Católica Portuguesa. Valérie Moatti is the Professor Lectra Fashion and Technology Chair at ESCP Business School. 

This article was initially published on November 28, 2018, and has been republished in light of recent shifts within the supply chains in the fashion industry – including efforts by the likes of Calvin Klein and Tommy Hilfiger-owner PVH to move manufacturing operations closer to home – much of which has been prompted by the onset and enduring impact of the COVID-19 pandemic, and subsequent supply chain shortages.

As part of a six-pronged national strategy to combat COVID-19, President Biden announced last week that all private employers with 100 or more employees will need to ensure that their workforce is fully vaccinated or require any workers who remain unvaccinated to produce a negative test result on at least a weekly basis before reporting to work. Non-governmental entities and their work forces are expected to have between 50 and 90 days to comply with the order once it is signed off on by the Department of Labor as part of a sweeping mandate that will impact a combined 100 million private sector and federal laborers. 

Biden’s initiative – which is the latest push to get individuals across the U.S. vaccinated – will raise an array of logistical and legal questions for the companies that it applies to. Among them, according to Troutman Pepper attorneys Emily Schifter, Tracey Diamond and Richard Gerakitis: Who will pay for non-vaccinated employees’ COVID-19 tests; whether employers will continue to be required to provide exemptions; whether the mandate will cover remote employees; how employers can verify the vaccination status of their workforce; and how the 100-employee threshold will be determined (the 100-employee trigger will apply on a company-wide basis, rather than on the number of employees at a particular site, per Occupational Safety and Health Administration (“OSHA”) senior advisor Ann Rosenthal, but it remains unclear how things like joint employment will factor in.)

(The impending Emergency Temporary Standard (“ETS”) on COVID vaccinations, which will be drafted by OSHA, will almost certainly bring about court challenges, including from states, employers, and/or labor unions. However, as Womble Bond Dickinson stated in a note this weekend, companies should still prepare for its implementation, with “the Biden administration likely to argue that the OSH Act – which generally gives OSHA the ability to issue an ETS that would remain in effect for up to six months without going through the normal review and comment process of rule making – provides OSHA the authority to issue Emergency Temporary Standards for employee safety.”

Meanwhile, Beveridge & Diamond PC attorneys Mark Duvall, Jayni Lanham, and Heidi Knight expect OSHA to defend the vaccine ETS by pointing to “rising infection rates, particularly among unvaccinated persons; the high transmissibility of the delta variant; and resistance to receiving the vaccine.” They note that the key requirements for an ETS are that OSHA determines that: “(1) employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards, and (2) such emergency standard is necessary to protect employees from such danger.”)

Beyond purely legal and logistical issues, companies are expected to face potential public relations fall out depending on if/how they respond to the impending mandate. “Even if it does not spark many all-out protests, a company’s decision to ignore the mandate might impact brand image,” data intelligence company Morning Consult determined from a recent survey of 4,400 adults in the U.S. Aside from refusing to adopt the mandate, “The longer corporations wait to comply with the new rule, the more they risk reputational damage,” the survey suggests, with the majority of respondents (59 percent) saying that they support corporations with more than 100 employees requiring their staffs to be vaccinated or enforcing weekly testing. 

While 70 percent of the individuals surveyed stated that they would “not go so far as to boycott companies that ignore the mandate, 30 percent said they would consider taking that action against brands that resist Biden’s new rule.” The survey similarly revealed that roughly 1 in 3 consumers (34 percent) would be “more likely to buy products from companies that adhere to Biden’s plan, compared with 12 percent who said they would be less likely to purchase from those businesses.” In terms of prioritizing companies that abide by the vaccine order and do so swiftly, Morning Consult found that “baby boomers [individuals who are currently between 57 and 75 years old], those who earn more than $100,000 per year, and white-collar employees are especially likely to spend money with brands that abide by the rule.” 

With this in mind, companies are not only encouraged to begin preparing for OSHA’s ETS now, including by determining whether the ETS applies to their workplaces, how to deal with remote workers, how to handle employees who refuse both vaccination and testing, and how to keep records supporting compliance, among other things; they should also consider the role that the risk of bad press will play should they fail to abide by the mandate and implement it in a timely manner, as not only are monetary fines at play (the mandate is expected to carry with it a penalty of $14,000 per violation), potential damage to their reputation is at stake, as well. 

Ningbo-Zhousan may not exactly be a household name, but find something in your house made in China – from apparel and accessories to tech gadgets and homewares – and it was likely delivered from there. Overlooking the East China Sea, some 200km south of Shanghai, Ningbo-Zhousan is China’s second-busiest port, handling the equivalent of some 29 million 20-foot containers every year. As of mid-August, the port had more than 50 ships waiting to dock. This was because the Ningbo-Meishan terminal, which handles about one fifth of the port’s total volumes, has been closed for a week after a member of staff tested positive for COVID. 

While this proved to be a temporary, two-week shuttering of operations, it is merely the tip of the iceberg in shipping. China has eight of the top ten busiest ports in world, and they are running at well below normal capacity because of COVID restrictions. From Shanghai to Hong Kong to Xiamen, ships are in long queues to unload – and the diversions from Ningbo only made this worse. Not limited to China, the U.S. west coast has also seen bad congestion, with many ships anchored in California’s San Pedro Bay, awaiting access to the ports of Los Angeles and Long Beach.

This drove the cost of shipping rates for containers through the roof in recent weeks, with the cost of moving a 40-foot container from China to Europe is currently running at around $14,000 or about ten times what it would normally be. So, how long will this continue, and what will the knock-on effects be? 

The Pandemic and Other Problems

The situation is noticeably different than it was in 2020. COVID restrictions had, of course, weakened the cargo-handling capacity of ports then, but it was less of an issue because global demand for consumer products was so much lower earlier in the pandemic as consumers focused almost exclusively on essential goods as opposed to discretionary products. Now that many countries have vaccinated large numbers of people and their economies are reopening, demand has bounced back with a vengeance. Look for further than the latest revenue reports of luxury goods giants for proof. With consumers shopping again, ports are not coping well.

On top of that, there have been other problems, not least of which was the Suez Canal blockage in March. With ships stuck for a week after the huge Ever Given container ship got stranded, transport companies were under more pressure than usual to return to Asia after they finally reached their destinations in Europe and the Americas. As a result, many did not wait to be fully loaded with empty containers, which, in turn, contributed to a lack of shipping containers in Asia, something that was already becoming an issue because of ships not always calling in at their usual ports during the pandemic because demand was much lower than normal. 

The upshot is that containers have become more expensive, thereby, forcing shipping companies to charge higher freight rates to cover the cost. 

At the same time, weather has caused problems over the summer. Both the southern Chinese port of Yangtian and part of the port of Shanghai have spent periods closed in recent weeks because of typhoon alerts. The backlog has also been worsened by major importers baulking at the shipping costs and chartering their own ships instead. Home Depot, the big U.S. home improvement retailer, was among the companies that did this in June. 

Looking Forward

There was actually a slight decrease in shipping rates in over an almost two-week period in mid-August, which prompted the Freightos Baltic Index – the metric for global container freight rates – to fall from $10,380 to $9,568 per 20-foot container. But this is nothing to get excited about. It broadly reflects the fact that the price of shipping goods from China to the U.S. has come down after many ships diverted to that route to make the most of the high prices. Other routes, such as China to Europe and Europe to the Americas, are still mostly going up in price.

As for whether this will continue, it is extremely difficult to say. Some freight companies have ordered new container ships to help address the shortage, but these vessels take two or three years to build. So, that is not going to make any difference in the short term. 

What matters is future COVID outbreaks and to what extent China and other major port nations have to impose tough regulations to protect their populations. Perhaps, we will be lucky and the situation will steadily improve from here, or perhaps this mismatch between supply and demand will endure for several years. In the meantime, we can expect inflation to rise as importers pass on the costs of shipping to customers. Given that governments and central bankers were already worried about rising inflation for various other reasons, they could do without this extra dimension.

If the problem with shipping rates endures, it is also likely to feed into already-existing boardroom discussions – including among fashion and luxury goods purveyors – about whether it is wise to rely so heavily on China as the manufacturing hub of the world. With relations between China and the west already at a low, and much talk of globalization giving way to regionalization, many companies are already arguing that they should make more consumer goods closer to home – or prioritize “nearshoring,” as it is known in the trade.

But more imminently, one big issue will be putting enormous pressure on retailers: Christmas. All of the ships that diverted from their usual China-Europe route to help serve the U.S. are cutting it close to get back to China in time to restock. The crossing takes about 45 days, and they need to then leave China by about mid-October to make the 35-day crossing to get goods to Europe in time for December. If there is still congestion at the Chinese ports by October, this may not be possible. 

Against this background, many brands are busy preparing for the holiday season with a level of urgency that has not been felt in recent years. New York-based Tapestry, which owns the Coach and Kate Spade brands, has been “stockpiling its handbags and other accessories ahead of the holiday season to ensure it can meet consumer demand amid ongoing delays in the delivery of products from suppliers,” Bloomberg reported last month. 

“We find ourselves in a dynamic where the consumer demand backdrop is strong, while supply chain remains challenging,” Scott Roe, Tapestry’s chief financial officer, said in a quarterly earnings call in August, telling analysts and investors that the group is working overtime to “secure significant expedited deliveries, at an additional cost, in order to mitigate the impact of supply chain disruptions, at least through the holiday period.” 

Stavros Karamperidis is a Lecturer in Maritime Economics at the University of Plymouth. (This article was initially published by The Conversation)

LVMH Moet Hennessy Louis Vuitton’s most recent quarterly results suggest that the sales-specific impact of COVID-19 “is passing,” with strength in “numerous categories from Fashion & Leather goods to Wines & Spirits and across continents implying a broad-based recovery in demand for luxury goods” despite the striking drops in sales that have plagued luxury players as a result of the pandemic. In its Q2 letter to investors, investment management firm Polen Capital says that it is continuing to bet on the Paris-based conglomerate, holding that the group – which reported in late July that it generated $33.7 billion in revenue for the first half of the year (up from $21.7 billion in H1 of 2020) – is “poised to continue growing its total returns to shareholders at a low double-digit rate over the coming five years.” 

Looking specifically at the Bernard Arnault-run group’s top revenue-generating brands within the Fashion & Leather Goods division, Polen stated that both Louis Vuitton and Christian Dior “maintained their leadership [in the market],” which the firm says “suggests that the largest luxury brands are continuing to take market share from smaller competitors,” including privately-held ones, as the luxury market as a whole continues to make gains. This is in line with findings from Jefferies analysts, who estimated last month that LVMH’s share of the global personal luxury-goods market has risen from a pre-pandemic 10 percent to roughly 16 percent, helped along, at least in part by its acquisition of Tiffany & Co. LVMH’s growth comes as the global market for personal luxury goods, as a whole, rose by 5 percent between 2019 and 2021, according to Bain, as reported by the Wall Street Journal

The success of conglomerate-held brands in the midst of the pandemic – and rising costs of competing against them in the digital battle field, where many luxury brands were slow to adapt – has opened the door to a steady stream of merger-and-acquisitions, with Etro, Jil Sander, Pucci, Sergio Rossi, Tod’s, and Christian Louboutin, among others, selling off stakes since the onset of the pandemic. And if M&A chatter is any indication, more deals are likely to come, as a handful of key brands remain in independent hands. 

Addressing LVMH’s acquisition of Tiffany & Co. Polen stated that the famed jewelry company showed “a promising start to the year,” but noted that “management cautioned that turning this recently acquired business around would take ‘years, not quarters.’” 

The Rise & Role of E-Comm

Another key takeaway for Polen was LVMH’s increased reliance on e-commerce, which it says “continues to power results during lockdowns.” In its first half report, LVMH specifically highlighted the role that e-commerce has played within its Perfumes & Cosmetics division, stating that its brands “are benefiting from continued growth in online sales, partially offsetting the impact of the suspension of international travel and the closure of many points of sale.” It similarly pin-pointed the “progress” of online sales on a global basis in connection with its Selective Retailing business group, under which Sephora falls. The cosmetics chain revealed in June that it would further expand its digital reach by partnering with Berlin-based e-commerce company Zalando in order to create “an unrivalled online prestige beauty experience for European customers.” That venture is expected to launch later this year. 

“Despite recent strength [in the e-commerce space],” Polen asserts that “LVMH management believes luxury shopping will be an omnichannel experience, with discovery happening online but purchases happening in stores.” This seems particularly likely for brands like Louis Vuitton, for instance, which has significantly bolstered its online offerings, but still does not appear to offer its entire collection for sale online. Of the 466 handbag styles that appear on Louis Vuitton’s e-commerce site, for instance, only 134 are marked as “available online.” At least some of the items are not listed as available online, as they are “out of stock,” but others require consumers to call for availability. 

In this same vein, it will be interesting to see what approach Phoebe Philo takes when she launches her new LVMH-backed eponymous label early next year. The former Celine creative director adamantly opposed social media and e-commerce when it came to the advertising and sale of her quiet-but-pricey offerings. While that approach may have worked in the past, the new demands that have come about as a result of the pandemic, both in terms of mandated lockdowns and corresponding store closures, and in wavering consumer comfort in shopping in-store as opposed to online, particularly in light of the recent onset of the Delta variant, have forced formerly online-resistant brands to embrace digital shopping experiences for fear of missing out on tens of billions of dollars’ worth of sales. 

Uncertainty in the Chinese Market

What still remains to be seen is how luxury goods groups like LVMH will fare amid impending crackdowns on rising wealth inequality in China, which have the stock market spooked and luxury brands in a potentially problematic position, given their large-scale reliance on Chinese consumers for a huge portion of their revenues and growth. While striking stock drops for the likes of LVMH, Kering, and Hermès, among others, on the heels of Xi Jinping’s August 17 call for wealth redistribution, have stabilized, uncertainty continues to loom in light of the messaging coming out of Beijing.

In a note last week, Jefferies analysts Flavio Cereda and Kathryn Parker stated that they believe that the situation in China “is likely to result in some change in spending habits [for the fast-growing cohort of high spenders], certainly in terms of visibility, and may also tweak the marketing campaign of brands.” In addition to changes in the nature and content of brands’ marketing efforts, the looks of their wares very well may be impacted, as well, with a shift towards less ostentatious uses of logos – and even a move away from pricey materials like exotic skins, etc., which have typically been promoted in heavy-spending markets like China – likely to come into play due to the planned crackdowns on excess wealth. This could prove to be damaging to brands, which rely heavily on the margins of logo-heavy offerings, for instance. 

At the same time, brands will also be notably impacted by any additional taxes that are levied on luxury goods. Although, it is unclear if that is the route that the government plans to take, particularly given its sweeping efforts in recent years to get consumers shopping on the mainland. That effort has been helped along significantly by the onset and enduring effect of COVID, but it is not a given that once borders open again, Chinese consumers will not resume their old ways of buying tens of billions of dollars’ worth of luxury goods beyond China’s borders.