Pulse Survey on the development of the fashion market: retailers, manufacturers and financiers disagree on their outlook
Within the next 24 months, stationary fashion sales will return to pre-Corona levels. Only 53% of fashion manufacturers and 21% of financiers and trade credit insurers expect this. The assessment of fashion retailers is different: here, 72% are optimistic that this target will be achieved again. More than one in three (35%) fashion manufacturers see the pre-Corona level never coming back. On the financiers' side, more than half (53%) assess it that way. This is one of the results of our Pulse Survey 'Fashion 2021'.
A minus of 25 to 30% in the textile retail trade – the Corona year 2020 threatens to become a disaster not only for the fashion industry but also for the landlords of the business units. Even the top locations will not be spared the expected increase in insolvencies. Suppliers must now prepare themselves for this - and act.
The industry update provides an up-to-date overview of the entire market situation of the real estate industry during and after the Corona crisis.
Drought, pests, new regulatory requirements and changing consumer behavior: these are just some of the reasons why the number of insolvencies in the agricultural, food and forestry industries has been rising for years. In 2019 alone, a quarter more companies in Germany had to declare insolvency than in the previous year.
We look at what farmers and foresters have to do now to make their businesses fit for the future.
Germany: One seventh of the temporary staff is missing...
The number of temporary workers in 2019 was 748,400, about 10% lower than in 2018, and a full 14% lower than in 2017, the industry's all-time high. As early as 2018, 10 of the 25 largest temporary employment agencies recorded their first revenue declines. The fact that industry revenues were nevertheless in a sideways movement overall is mainly due to a price effect (collective wage increases). However, due to the parallel increase in wage costs, the growth in sales did not lead to a significant increase in margins.
Temporary employment is currently facing various challenges – the economic situation is only one of them. Learn more in our current industry snapshot:
After 31 years, DAX veteran Thyssen-Krupp descends from Germany's leading index, world market leader ArcelorMittal cuts back production at several locations, Salzgitter and Voestalpine suffer slumps in profits, Schmolz Bickenbach repeatedly collects its profit forecast and Klöckner & Co. is in the midst of restructuring. It is easy to see that the steel industry is in crisis.
European demand for steel fell by 7.7% year-on-year in the second quarter of 2019. But it is not only the economy that is weighing on the industry: it is undergoing structural change, because even in peak phases steel consumption is growing only moderately. Steel is increasingly being replaced by alternatives. Added to this are rising energy and CO2 emission costs, which are impairing competitiveness in the global market.
Our current industry snapshot highlights the current causes of the crisis and the prospects for the German steel industry.
Even though the early summer of 2019 was a long time in coming – the German Weather Service warned weeks ago that last year's heat wave could be repeated in 2019 and possibly even surpassed. This would have some dramatic effects in various sectors.
Our current brief study illustrates the immediate consequences, in particular the significant impairment of the ability to service debt, using the sectors of trade, agriculture, industry and energy as examples.
The number of companies in the fashion industry has consolidated from 396 (2008) to <250 (2018). Restructurings and insolvencies have increased in recent months. A trend that will continue in 2019 – for a number of reasons which we highlight in our latest sector update.
Is an "orderly retreat" the only solution for this industry? Or are there concepts and innovations that open up opportunities and offer shopping incentives? Learn more in our latest sector update.
For furniture manufacturers, the online sales channel is both a challenge and an opportunity: For many manufacturers, having an online presence is turning into a question of existential importance. This also offers the potential, however, of opening a door to direct sales.
Rising challenges because of imports, changed distribution structures and consumer behaviour intensify current challenges and need for action.
Learn more in our current industry sector update.
The Agriculture and Food Industry has suffered huge economic upheaval caused by the heat wave in summer 2018. According to the German Farmers’ Association (DBV), it was the “worst harvest of the century”. The government has provided financial support to farmers whilst prices for agricultural products have increased significantly.
What is the impact of these actions and the next steps? Find out more in our industry update.
There are a number of warning signals in the wind industry, e.g. declining sales and earnings at Nordex or Vestas. The reasons include the difficult international environment (political risks, price pressure, USD exchange rate, Asian competitors). In Germany, the reformed energy law (EEG 2017) has made the tendering procedure for determining the feed-in tariff for all wind power systems binding. This system is intended to encourage the industry to achieve greater cost efficiency and prevent oligopolisation of the market, but also confronts the industry with major challenges. Learn more in our industry profile.
So far, Blockchain technologies have been used by only 3% of medium-sized (family-owned) companies. This is the result of a survey of 1,444 German companies commissioned by the management consultancy FTI-Andersch. The reason: lack of knowledge, complex implementation and lack of existing solutions. Professor Gilbert Fridgen, holder of the PayPal Chair at the University of Luxembourg as well as founder of the Fraunhofer Blockchain Lab, and Dorothée Fritsch, Blockchain expert at FTI-Andersch, provide an assessment for relevant key industries: Logistics, Consumer Goods, Automotive, Engineering and Energy. Where does Germany stand - and what opportunities are there today?
The medium-sized German mechanical engineering sector appears to be struggling – even before the pandemic. The reason: Due to the good order situation in the past decade, many important trends were noted but not implemented. And so today there is a lack of know-how at the same time as increasing price pressure. In cooperation with Professor Dr.-Ing. Gisela Lanza, Head of the Production Systems Department at the wbk Institute of Production Engineering at the Karlsruhe Institute of Technology (KIT), we describe the most important trends in industry from today's perspective – and show what machine builders must do now to make up for strategic deficits.
COVID-19 effects pose acute challenges for (German) city centers, they reinforce the structural change of recent years.
How robust are the 52 largest German cities with regard to COVID-19 effects incl. effects on tourists, students, trade fair visitors, etc.?
The rising numbers of infections in the Corona pandemic threaten to paralyze travel once again after the summer vacations. Particularly affected: German regional airports, which have already had difficulties generating operating profits before. Recovery is not expected before 2024.
What can airports and other companies in their ecosystem do now to position themselves more competitively for this phase in the long term?
The growing divergence of market valuations and fundamentals of disruptive companies has culminated in Tesla being the most valuable carmaker in the world, despite less volume produced and less cash generated. Disruptive companies are driven by narratives and not yet developed business models, therefore speculation about the future performance Tesla itself, and its competitors. The interdependent nature of the problem, as well as a lack of non-retrospect studies, gives rise to the need of having a holistic valuation framework incorporating the unique underlying parameters of highly disruptive companies.
The author combines traditional valuation frameworks with the specific knowledge of management consulting, start-up accelerators, and technology experts to capture interdependencies. This approach shall lead to a framework capturing the existing business as well as the value of the most likely business extensions within the scope of traditional valuation techniques. Contrary to what the valuation of Tesla reflected at the effective date, the valuation framework leads to a c. 110% upside, given the incorporation of adjacent business streams in a base-case scenario and c. 340% in an upside-case scenario. While working on this thesis, several new articles were published which confirmed the adjacent business streams are part of Tesla’s strategy, therefore driving up the stock market valuation. The main findings of this thesis are the legitimacy of viewing disruptive companies not as a static business to grow but as a platform for new business streams as well. Due to increased uncertainty about not yet to know business models, the outcome of this thesis does not claim completeness and comprehensiveness. However, the framework is an approach on how to dynamically develop a view on the valuation of fast-moving, disruptive companies.
Internal corporate venturing (ICV) in family businesses
How family businesses systematically develop innovation
German family businesses and medium-sized businesses ("German Mittelstand") are often accused of lacking innovation and digitization capabilities. However, many traditional companies have already established innovation centres and their own units that develop new products and business models in a targeted manner. There are fundamental differences to both start-ups and corporations. Our study in cooperation with the WHU Otto Beisheim School of Management provides quantitative and qualitative insights.
Only a minority of German family-owned companies are already using future technologies - only a small majority use basic IT
55% of German family-owned companies feel prepared for the challenges of the digital transformation. But only a minority of them already uses technologies such as cloud computing (38%), Big Data (19%) or applications for artificial intelligence (5%). These are the findings of a study conducted by the WHU Otto Beisheim School of Management, that examined which digital and IT technologies German family-owned companies are already using.
The study, sponsored by Andersch, divides the technologies into four different categories: Basic IT, advanced IT, modern IT and future technology. "It is frightening that even in the use of basic IT, only a small majority of people are actually using these applications," says Professor Nadine Kammerlander, Head of the Chair of Family Businesses at WHU, who accompanied the content of the study. For example, 66% of companies use an ERP system to control business processes and suppliers, 55% send invoices electronically, 52% use social networks and 50% have introduced a digital system for managing customer relationships.
Companies know about the potential, but have problems with investment, expertise and actual implementation
"50% of the companies have told us that they already know about the application possibilities and performance potential of modern information technology," says Nadine Kammerlander. "However, a major hurdle mentioned was that the lack of technological interfaces between existing applications and new technologies in particular would limit the possible applications in practice. Further difficulties included acquisition and implementation costs as well as lack of know-how.
Strategic partnerships and collaborations can help to develop a culture of innovation
Nadine Kammerlander says: "In summary, it can be said that all that appears almost omnipresent in public discourse today, German family-owned companies only operate in a - sometimes single-digit percentage - minority. Pioneering technologies such as Blockchain or AI are even isolated cases. Many family-owned companies act according to their DNA: only when they are completely convinced of the use of a technology and believe that it pays off do they invest. This is a perfectly legitimate strategy. However, at the same time it also means that they cannot gain experience with the new trends and technologies outside of lectures and press coverage. The minority that is already using and trying out new technologies today will in future be more likely to be able to bring about necessary changes more quickly, in a more targeted and efficient manner. In the worst case, the majority of family businesses could, in the worst case, give up the possible competitive advantages of the future today".
Mike Zöller, partner at Andersch, is very sympathetic to the problems of family businesses. "Companies with which we work often lack the necessary expertise and openness to innovation to deal with new technologies - sometimes in a playful and exploratory way," says Zöller. "Not every new technology will directly increase sales or profits. It is much more a question of investing today in order to remain competitive. Those who cannot or do not want to build up their expertise completely on their own should look for strategic partners and collaborations. These make it possible, even with limited resources, to try out new digital applications, analyze them and test them for their usability. At the same time, such an opening can be the first step towards a new culture of innovation".
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The study 'Digital Transformation in Medium-Sized and Family Enterprises' was conducted at the Chair of Family Enterprises at WHU Otto Beisheim School of Management lead by Prof. Dr. Nadine Kammerlander and with the support of Andersch. The study examines the question of how the current status of digital transformation in this business segment is to be assessed today. To this end, 1,727 top decision-makers from 1,444 companies were surveyed, 689 of which are majority-owned by families and 755 of which are non-family owned. 94% of the respondents are executives, 53% of whom are members of the management/board of directors and 34% are the respective chairmen of this body.
Die ›vierte industrielle Revolution‹ (›Industrie 4.0‹) bringt grundlegende Umwälzungen für industriell geprägte Unternehmen mit sich und führt zur Entstehung neuer Geschäftsmodelle, Wettbewerber, Produkte und Substitute. Die vorliegende Studie analysiert die Herausforderungen und Potenziale, die sich für den deutschen Maschinen- und Anlagenbau ergeben, und leitet Lösungsansätze zur Erhaltung der internationalen Wettbewerbsfähigkeit ab. Die vorliegende Publikation ist Teil der Andersch-Studienreihe »Branchen im strukturellen Wandel«.
In the ICR (International Corporate Rescue) article our colleague Tammo Andersch and Ursula Schlegel (German lawyer and English solicitor) propose solutions for the imminent ‘German Scheme’ (driven by the EU Directive on Insolvency and Restructuring’) against the background of the aftermath of COVID-19 challenges. Ursula and Tammo suggest that the ‘German Scheme’s’ milestones, i.e. likelihood of insolvency, drafting and negotiation of the restructuring plan and the prospects of the restructuring plan to prevent insolvency should build into a modular system to be time and cost efficient; with the court, when confirming the restructuring plan, using the expert reviews underpinning these modules. It is also proposed for the expert providing such reviews to be appointed as PIFOR.
The article crosses with the draft law on the same subject published by the German Ministry of Justice (BMJV), a draft law proposing – inter alia – a modular system for the imminent German preventive restructuring framework. Representatives of the German insolvency/restructuring industry are invited to comment on the draft law by 2 October 2020.
(The ICR article was based on a German article published by Ursula and Tammo in German magazine INDat Report on 29 April 2020)
In the cover story of the latest INDat Report, our colleague Tammo Andersch and lawyer Ursula Schlegel present pragmatic approaches to achieving a time- and cost-efficient preventive restructuring framework, e.g. through a modular, step-by-step structure of the restructuring documentation geared towards usability by the court or a "personal union" of the restructuring expert and EU-Directive’s "professional in the field of restructuring”. An English version of the article will be published shortly.
A thorough understanding of the current liquidity situation enables the management to assess the scope of action, implement suitable liquidity measures and make sound strategic decisions. We have many years of expertise, proven processes, and employ tailor-made software solutions. We provide transparency on the liquidity situation of your company in a time and resource-efficient manner.
Key elements of active cash management include: (1) daily reports on the group-wide liquidity status; (2) a reliable short-term liquidity forecast and (3) active control of working capital. In order to establish an understanding of liquidity, a weekly Cash Desk shall be introduced to discuss and gradually optimise these elements.
When companies find themselves in challenging corporate or financial situations, their management is constantly focused on the day-to-day business and acute questions drain the available resources. The lack of focus on strategic aspects – this is particularly the case where the impact of increasing digitalization is concerned – is an additional threat to the sustainability of the business model.
We are convinced that the digital revolution is not just a catchword or a temporary trend. The digital transformation should not be neglected in challenging situations because it effects every industry, sector, and company department. It is precisely in the context of restructuring – where it comes down to creating and developing resilient sustainability concepts – that the effects of digitalization and its resulting demands on the company have to be clearly defined and accounted for.
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