The coronavirus could cost the luxury goods market billions, according to a recent survey by industry executives, as new cases of the virus have surged outside of China.
Compared to the realities of this health crisis, high-end goods and luxury fashion seem unimportant—but the impact on those involved in the industry is by no means small.
Giorgio Armani showcased its collection to an empty room on Sunday at Milan Fashion Week, taking a last-minute decision to stream its catwalk to a remote audience because of the coronavirus. “This is a preventative measure decided by Mr Armani to support national efforts in safeguarding public health,” the brand said in a statement on social media.
Michael Kors was forced to cancel over similar fears.
Reports say the virus was the main talking point on the ground in Milan. Paris Fashion Week followed Milan’s, where there was lower attendance from Chinese buyers and cancelations from some Chinese brands.
Luxury brands have become increasingly reliant on the Asian market over the past two decades.
Taste for luxury has grown among Chinese, with Chinese nationals accounting for around 35 percent of global luxury purchases, according to Coresight Research.
During the SARS outbreak in 2003, Chinese nationals accounted for just 2 percent of global luxury demand.
Brands are anticipating a $33 billion to $43 billion dollar hit to luxury sales, according to figures from Alliance Bernstein and Boston Consulting Group. Top industry executives the group surveyed said they are expecting a nine to 11 percent cut on their sales and a 13 percent hit on earnings.
“Sales in Greater China have ground to a sudden stop and the lack of travelling Chinese are holding back sales in Asia and in Europe,” Alliance Bernstein said in its assessment. It added that most of the luxury executives expect to return to their pre-crisis revenue targets by 2021.
Travel restrictions have held back sales both inside and outside of China.
Bicester Village, a shopping center in Oxfordshire about 45 minutes on the train from London, is a popular attraction for Chinese tourists visiting the UK. Announcements in Mandarin and Arabic are made at the station in London, but not so many Chinese people would have heard it this week.
On Wednesday morning, a local Chinese fashion buyer at Bicester Village said it’s been noticeably quieter than before and there have been about 50 percent less visitors. The press office didn’t respond with a comment to requests asking about the fall in figures.
“The China market today is 10 percent of the world luxury market, but Chinese [nationals] are 35 percent of world luxury sales, which means 25 percent of the world luxury market is Chinese tourists. Twenty-five percent. It’s huge,” said Jonathan Siboni CEO of Luxurynsight, a data intelligence firm for luxury brands.
Siboni says consumers in China are turning to online purchases.
“You will engage much more digitally,” he said. “Maybe you’re going to engage much more with virtual reality, trying your make-up on your phone and so on, because you’re staying home for two weeks, three weeks.”
Perhaps streaming of shows, like Armani’s to remote viewers, is a sign of things to come.
David Vives contributed to this report