Coronavirus: Luxury Brands Under Pressure
How fashion and luxury companies are coping with China's lockdown
Hello readers!
After a two-week hiatus welcome back to the Fashion Business Reader!
This week I would like to recap the hottest topic of the past month - coronavirus outbreak and its impact on the fashion & luxury industries.
Luxury Feels Coronavirus Effects
As the China’s coronavirus outbreak started to dominate the news at the end of January, shares of the top luxury players went down, especially hurting the ones most dependent on China and Chinese consumers (among which Burberry, Capri Holdings, Ferragamo and Tod’s).
For more financial details read BoF’s Luxury Feels the Impact of Coronavirus
The outbreak is already drawing comparisons to SARS, which resulted in the death of hundreds in 2003. That virus’ economic impact was short-lived, though at the time China didn't play as big a role in the global economy, and certainly wasn't the principal driver of growth for fashion brands that it is today.
Recommended reading: How coronavirus is impacting luxury in China
China’s lockdown and travel restrictions due to epidemics have exposed how reliant upon China and Chinese nationals traveling abroad both fashion & luxury companies have become. According to WWD, the companies can expect to be dealing with the commercial fallout at least in the next six months:
Many of the larger companies have said at least half or more of stores in China are closed and that the ones that are open aren’t seeing much foot traffic. Although most have chosen to not publicly estimate the financial impact — some have ventured a guess in recent days, while others have simply stated that it will be “material.”
As the fallout of the coronavirus continues to affect the operations of luxury companies, The New York Times states:
Most analysts think that well-managed luxury brands with enduring popularity and high margins should be able to withstand the short-term volatility. Concern is reserved for hard luxury players (groups, like Richemont, that largely sell watches and jewelry) and midmarket labels with less ability to absorb financial shocks or that were already seeing sluggish sales.
In order to support the fight against coronavirus, LVMH, Kering and other luxury market players have provided material and financial support and also adjusted their stores hours or temporarily closed in China.
Taking into account that the virus spreading coincided with Lunar New Year, which is one of the most important Chinese holidays and shopping & travel occasions, with people spending all days at home during the quarantine, there was a boost in online sales in China.
Increased online activity could have been an excellent opportunity for luxury companies to demonstrate their core values and empathy to China and focus on building brand equity by engaging with Chinese consumers, however many Western companies weren’t as proactive in communicating directly with their Chinese audience as local players did.
Related reading: How are Luxury Brands Communicating with their Chinese Consumers During the Virus Crisis?
Recommended reading: How Brands Can Navigate the Coronavirus Situation and Prepare for China to Bounce Back
Several world's biggest trade exhibitions were either cancelled or postponed not only in China but also in Europe and America. While China remains under quarantine, Shanghai Fashion Week has been postponed indefinitely and the world’s fashion capitals will be missing many if not most of China’s buyer, editorial, and influencer representation during the current fashion week season.
In order to enable the Chinese audience to partake remotely in the fashion experience, Camera Nazionale della Moda Italiana (CNMI) has launched an initiative titled “China We Are With You”. Milan Fashion Week is starting tomorrow, so we will see whether these efforts to connect with China through the “digital bridge” will bear fruit.
Related reading: Everything Fashion Brands Need to Know About the Coronavirus
Thanks for reading and 中国加油!
Asia Assanbayeva
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