The End of the Booming Mask Economy Is Near
By: Adam Bluestein
Tags: Economy, Retail, Face Mask, Business, Ecommerce

Right now, masks appear to be the one solution for everyone’s problems. “If you’re not selling anything, then [pivoting to] selling something probably makes sense,” says Barbara Kahn, a professor of marketing at Wharton Business School and author of The Shopping Revolution (2018). “A lot of companies had extra fabric and people not buying clothes. If you can turn that into masks, at least you get something out of it.”

This spring at Gap, there was nothing to lose. Of all the iconic American retailers on the verge of extinction even before the pandemic hit, Gap Inc. was near the top. In February last year, after years of declining sales growth at its flagship Gap and Banana Republic brands, plagued by a lack of marketplace relevance, it announced plans to close 230 stores. CEO Art Peck, a 15-year company veteran, was shown out in November. And this January, Gap scuttled a move to spin off its most successful brand, Old Navy, in an IPO. The first quarter of 2020 was the 51-year-old company’s worst ever, as it closed 90% of its stores, furloughed 80,000 store employees, and booked a $932 million loss.

The introduction of masks across all of its brands, in mid-April, was an adrenaline shot. In May alone, Gap’s brands sold 3 million masks. In the second quarter, mask sales contributed $130 million to overall sales. Boosted by mask searches — Gap brands come up high in the Google Shopping results for “face masks” — masks were key in driving Gap’s massive surge in online sales, which were up 95% in the second quarter, accounting for 50% of all the company’s sales. Seventeen percent of Gap’s 3.5 million new customers this year bought a mask, and the company had 165% more new customers than in 2019. More than T-shirts, more than jeans, more than, well, anything, masks are now Gap’s bestselling item.

More than T-shirts, more than jeans, more than, well, anything, masks are now Gap’s bestselling item.

For many brands like Gap, masks are the new customer acquisition tool, essentially a lower-priced entry-level item to attract people to the brand. Think of a Burberry scarf, a Coach keychain. “It’s always been a luxury strategy to offer an entry-level product to make younger, less affluent customers aware of the brand,” says The Shopping Revolution’s Kahn. With heritage luxury brands expected to see sales drop as much as 35% in 2020, according to Bain & Co., it’s not surprising that they too have come around to masks. In late August, Burberry became the first major luxury brand to launch a face mask “collection,” available in blue or beige versions of the company’s vintage plaid pattern, for $120.

For some smaller brands that got an early edge in the mask game, it’s completely altered their trajectory. L.A.-based Hedley & Bennett, a 70-person maker of professional chef’s coats and waxed-canvas aprons, pivoted into masks by late March. Its high-end fabric masks went viral on the internet — “Instagram in particular created a surge,” says founder and CEO Ellen Bennett — with zero paid digital marketing. Suddenly sales went up dramatically on other products, including aprons, tote bags, and socks, Bennett says. Prior to Covid-19, Hedley & Bennett’s business was split about 50/50 between hospitality industry customers and online direct-to-consumer sales. Now, online consumer sales are about 80% of the total — particularly useful at a time when restaurants and hotels aren’t exactly stocking up on new gear. The company has sold more than 1 million masks, and total sales are up five times over last year. All of this, says Bennett, “has focused what we’re doing and accelerated where we’re headed as an apron and kitchen-gear brand.”

But as the market for masks reaches saturation, companies need to spend more on marketing to stand out, earn repeat business, and convert new mask customers into purchasers of other stuff. Basically the challenge of any new direct-to-consumer brand, à la an Away suitcase or ThirdLove bra. So those email mask offers from Old Navy, the Vistaprint ad following you onto the New York Times, the cute little Etsy boutique stalking you everywhere you go on the internet — all of that costs money.

Since the start of the pandemic, there’s been a historic 74% increase in social media spending, according to a June 2020 survey of CMOs conducted by Deloitte, Duke University’s Fuqua School of Business, and the American Marketing Association. While marketers have cut back in almost every category, from TV and print to outdoor display, mobile ad spending is up 70% since February. Digital ad spending within the apparel industry as a whole declined 5% from Q1 to Q2 this year, as brands backed off on promoting everything from shoes and socks to formal wear, but ad spending on “accessories” was up 136%. Included in this category: masks.

What makes the mask-making moment so extraordinary is the sudden surge of demand, matched by the nearly instantaneous surge of supply to match it — with the foreboding sense that the demand could stop at any moment.

At Etsy, the online crafts marketplace, masks are now its top-selling product. When the CDC made its fabric mask announcement back in April, Etsy immediately emailed its sellers and told them that the platform was experiencing “unprecedented demand” for mask searches. By Q2, new sellers to the site increased 100% and accounted for nearly a quarter of the 29 million–plus face masks — $350 million gross merchandise sales — sold on the site. As a result, Etsy saw an influx of 18.7 million new and “reactivated” buyers and a 94% year-over-year increase in sales of products other than face masks.

But Etsy, with revenue now up 137%, has also more than doubled its marketing expenses compared to the same quarter last year, including launching a beefed-up new offsite ad platform. As the company put it in its quarterly report: “We leaned in across many of our marketing channels to build top of mind awareness, and to better engage new and existing buyers everywhere they are — on Etsy and off.”