How the Coronavirus Has Spread Across the Luxury Fashion Market
By Anna-Karina Yuill
The Evening Standard is calling it the biggest crisis the fashion industry has faced since the financial crash of 2008. With a continually rising population of almost 1.4 billion and the growth of a new middle class looking for luxury, China has been a key hotspot for luxury fashion sales. But with the outbreak of Coronavirus, originally in Wuhan but now spread across multiple cities in China (and indeed globally), how will the fashion industry cope with China’s hibernation?
It may seem trivial to comment on the Coronavirus’ impact on the fashion industry when people are suffering from not only the virus, but also the quarantining, fear and racism that come from it. However, its effects can be greater still - the fashion industry is worth $2.5 trillion globally and £32 billion to the British economy, and so it begs a look into how much suffering it will endure.
According to Bain & Company, Chinese customers account for more than a third of global luxury goods sales and were responsible for 90% of growth in 2019’s market. But with the arrival of the Coronavirus, Chinese consumerism has all but ground to a halt. Many consumers are self-quarantining for fear of contracting the virus, others are obliged to do so, and restrictions are only getting tighter the more the virus spreads. This means that health is rightly being prioritised over shopping for a luxury branded item.
Moreover, brick and mortar stores are seeing fewer and fewer customers through their doors each day. Capri Holdings (owner of Versace, Jimmy Choo and Michael Kors), as well as predicting a yearly revenue $100 million lower this year, has closed 150 of its stores in China. Burberry has temporarily closed more than a third. Even Nike, not necessarily a luxury brand, but indisputably a global megabrand, have closed half of its Chinese stores.
What’s worse, this outbreak of Coronavirus has taken place during one of the busiest spending periods in the Chinese calendar: Chinese New Year. Many Chinese nationals travel back home to celebrate, generally leading to a rise in sales during this period. For any brands relying on this holiday to help increase profits in 2020, this seems highly unlikely.
Furthermore, with increasing restrictions on flights to and from China, from the likes of British
Airways and Virgin Atlantic for instance, European sales have also been affected. Chinese tourists account for a large percentage of sales in high fashion houses in many European cities such as Milan, Paris and London. According to Visit Britain, Chinese tourists spent £700 million in the UK in 2018, where it is estimated that half of that ended up in luxury retailers such as Harrods and Selfridges.
With sales not only being affected in China but in other major luxury capitals, the impact on these brands can only be labelled as colossal. So what are luxury brands doing to combat the virus’ impact? Many, including LVMH (which owns Louis Vuitton and Dior) and Kering (which owns Gucci and Balenciaga) have donated more than $1 million of funds and supplies in an effort to prevent further spreading of the virus.
Overall, there is not much that can be done within the fashion industry except to wait it out. If the virus doesn’t last too much longer, the industry should be able to make a recovery, as shown following the 2003 SARS outbreak, China’s economy still grew by 10%. But if the virus continues wreaking havoc for a number of years, this could be a very different story. The Coronavirus has certainly proven itself capable of creating a detrimental and lasting change on the global luxury market.
Image credit: https://qz.com/1807385/coronavirus-will-cost-the-luxury-industry-an-estimated-40-billion/