In recent conversations with global luxury business leaders and American fashion entrepreneurs, young designer brands and fashion executives in the UK's high-street behemoths, the mood has been decidedly downbeat, with rapidly decreasing sales leading to increasingly desperate sale signs. Hiring freezes and spending cutbacks are in place almost across the board.
Emerging fashion businesses I have spoken to are reporting significant decreases in orders for Spring/Summer 2009. Orders are being cut back or canceled altogether and there are reports of fabric mills in Italy and manufacturers in China facing dire straits as the brakes are put on consumer spending around the world.
The sudden freeze in spending is a reaction to dramatic drops in the value of individual pension and stock portfolios, plummeting residential real estate prices, and impending job losses. And probably most of all, the ongoing messages of depression-era doom and gloom screaming from the front pages of newspapers, making everyone question every purchase.
The spending cutbacks ripple backwards into boutiques, shopping malls and department stores and then to the companies that supply them, and backwards still to the fabric mills, shipping companies, and raw materials suppliers at the beginning of the fashion value chain, additional blows are made to the economic foundation. This leads to further job losses, and the cycle starts again. Some observers are predicting levels of unemployment in the U.S at higher than 8%, up from 6.1% today and a recession that could run two or three years.
Whereas once we we may have thought we were only dealing with a crisis in our financial system, we are now also dealing with a more fundamental crisis in the economy at large. Previous recessions have been short and shallow partly because consumers, who make up the lion's share of GDP, kept spending. This is not the case this time around.
But there is opportunity in all of this. As a dual-purpose reality-check about the seriousness of our current situation and antidote to the doom and gloom, may I recommend this video from the Business Summit of the Centennial celebrations of the Harvard Business School.
A group of outstanding business leaders and world thinkers spoke to Charlie Rose in the most thoughtful and thought-provoking discussion I have heard or read thus far about the problematic state of the world economy today, its potential solutions and the opportunities that lie ahead. Plenty of food for thought -- and two hours of it at that.
Yes, things in the economy are going from bad to worse, but there is increased hope and discussion about how we will get ourselves out of this economic malaise, even if it is years away. Now, if only Harvard Business School had an embed function on their video player that would allow me to share the video footage of the roundtable with you directly.
You can click here instead.
Photo courtesy of oandu.