COVID-19: How Far Has it affected the Luxury Industry?
With Chinese consumers accounting to 90% of global luxury market growth in 2019, Luxury Industry is one of the worst hit industries due to the corona Pandemic. Around 33% of consumers of Luxury items are Chinese and are expected to rise to 45% by 2025. Chinese consumers were responsible for ½ of the € 260 billion spent on the personal luxury goods in 2018, according to Bain and company.
Brands such as Burberry are among the worst sufferers. Over 40% of their revenue is generated in China and they had about a third of their store closures there. Jimmy Choo, Versace faced a similar grim due to the closure of their stores in the Chinese mainland where their parent company Capri Holdings cut its annual revenue forecast for the year by $100 million! The owner of Calvin Klein and Tommy Hilfiger, has lost almost 49%. Ralph Lauren has declined 27%.Citigroup Inc. also downgraded a long list of apparel and luxury companies, including Tapestry, Capri, PVH, Ralph Lauren, Signet Jewellers Ltd., Citing a “weaker demand environment”.
Consumers all over the world, at all income levels are feeling insecure regarding their upcoming financial situation which has led to a sharp decline in consumer confidence. 1/3 of Moncler's stores are closed and foot traffic in existing stores is down 80%. The latter has fell 14.7% in the Luxury shops in North America in the first week of March, where the retailers overall experienced a drop of 9.1%, according to location-data provider Prodco analytics.
A former LVMH executive calls coronavirus 'a disaster' for Luxury Brands as Chinese tourism evaporates.
Dr. Martina Olbertova, founder of Meaning.Global in an interview with The Forbes warns that unless luxury brands take a longer term view, their brands could face a crisis after the coronavirus lifts.
Besides the diminution revenues , luxury brands such as LVHM, Kering, Richemont have not stepped back from their responsibility and donated money to the Red Cross societies of China. The Armani Group announced all of it’s Italian production plants have now switched over to the production of single use medical overalls to be used by medical workers.
In the long run, analysts expect the luxury industry to make a full recovery as there will be a lot of pent up demand to spend, from Chinese consumers. It’s difficult to predict exactly when the consumer confidence will pick up again. For now, let’s hope the situation get better and the companies pay heed to the piece of advice by Jing Daily, China’s leading retailing site, that if Luxury companies want to stay in the market, they must start creating value instead of defining themselves as luxury through expensive prices and beautiful designs.
Source: Bloomberg.com, Bain and company,
Forbes, pymnts.com, The closer look,
business Insider, CNBC.