COVID-19 Impact: Global Fashion and Apparel Industry Grapples with Coronavirus Threat

By Isabel Wong

After all the glitz and glamour from the Paris Fashion Week earlier this month, the global fashion industry is bracing for the gloom and doom ahead. Instead of being busy fulfilling regular clothing orders, European fashion houses are finding themselves scrambling to implement emergency business continuity plans to cope with the COVID-19 outbreak.

Louis Vuitton owner LVMH, which saw its stock suffer an over 20 percent plunge since the beginning of the year, announced it will use its perfume production lines to start making hand sanitiser to help tackle a nationwide shortage of disinfectants across France. COVID-19 has also led to the postponement or cancellation of a number of fashion shows for the fall 2020 and resort seasons as well as fashion weeks in Shanghai, Melbourne, Beijing, Seoul, Moscow and Tokyo.

LVMH has announced it is converting three of its perfume manufacturing facilities, where it normally makes fragrances for Christian Dior and Louis Vuitton, to hand sanitiser factories. (Photo: Getty Images)

Multinational fashion and apparel brands are also affected by further disruptions in the global supply chain as some key parts such as zippers and buttons are not able to be delivered from manufacturers due to wider travel restrictions.

While fashion houses are still assessing the potential financial damage from the outbreak, negative impacts on the industry are already reflected in data. From January 17 to March 11 alone, the MSCI Textiles, Apparel & Luxury Goods Index fell 23 percent, wiping out USD$152 billion in market value.

A Billion-Dollar Setback

Multiple consulting firms, including Boston Consulting Group and Bernstein had previously predicted in February the luxury sector could lose €30 to €40 billion in sales this year. But the projections were made before Italy was put on lockdown, and the country’s fashion and textile industry alone is worth USD$107.9 billion.

“The SARS outbreak in 2003 is not a right benchmark. This time the impact on the fashion and apparel industry is much broader and deeper,” said Andrew Cai, former president of Greater China at Michael Kors, “the loss of revenue and profit would be so significant that companies like Tapestry and Capri started issuing profit warnings. This means some companies would miss their revenue and profit targets set previously for the current fiscal year”.

But Cai does not see the pandemic as a factor that will affect the long-term outlook of the fashion and apparel industry, as he anticipates a rebound in sales in the Chinese market as soon as the global health emergency is over.

Live-Streaming Efforts Ramped Up

During a time when social distancing is recommended in most COVID-19 guidelines for precautions, e-commerce is one of the few sectors that sees demand surges. Global fashion houses have also gone digital to cope with the slowdown in retail business with Hermès launching its online store in Hong Kong and Macau this month.

In China, fashion brands have been using social media platforms such as WeChat to connect with their customers. “Many fashion brands have started WeChat groups to sell new season items while off-season items often come with at least 50 percent off discounts,” said Amelie Mongrain, co-founder of FashionEx Shanghai and president of the Entrepreneurs’ Organisation Shanghai chapter, “live-streaming also took off. As well as live classes on crisis management for business owners, brands have started to use this opportunity to engage with customers. Such live-streaming is usually done by sales representatives of individual stores who are trying to sell things ranging from clothes, cars to new homes.” 

Case in point, Chinese lingerie brand Neiwai has been leveraging the live-streaming function of e-commerce platforms such as Taobao to broadcast mini ballet classes with ballet instructors wearing their products while making the items featured available for sale at the same time.

In the face of the coronavirus threat, global luxury fashion houses are also slowly catching up and beginning to engage with their international audience especially the digital-loving Chinese consumers. For example, Prada has recently joined Alibaba’s B2C channel Tmall, while Belgian fashion brand Delvaux launched its first Chinese e-commerce channel on JD.com. Earlier this month, Chanel also live-streamed its fashion show for the first time to sustain its exposure.

Chinese brands have been leveraging the live-streaming function of social media platforms to connect with customers and minimise financial impact due to the coronavirus. (Photo: Neiwai)

“During this period, many shopping activities such as buying groceries could only be done online, this may also prompt permanent changes in consumer behaviours and further move retail activities to digital. Even older generations in their 50s and 60s have started buying groceries online through apps such as Meituan and Ele.me,” Mongrain added. 

But the president of the Entrepreneurs’ Organisation’s Shanghai chapter also said the negative impact of the coronavirus will still result in overall financial losses in Q1 and Q2 for the entire chapter while tax reliefs, subsidies and loans will be some of the much-needed remedies for small and medium business owners in China.

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