How much is the Coronavirus costing the fashion industry From fast fashion to luxury, every sector is starting to coming to terms with a decline in sales
The Coronavirus pandemic has crystallized our daily lives in an in-home quarantine, the end date of which is still unknown. Leaving aside the human factor of this epidemic (which is taking thousands of lives), the spread of COVID-19 will inevitably have devastating consequences on the global economy, an impact that has not been fully understood and analyzed yet.
What is certain for the moment is that with thousands of closed stores, cancelled events, postponed collections, the fashion industry is starting to deal with the effect of COVID-19 on its turnover. Business and sales trends accurately reflect the spread and evolution of the same virus, which started in China and soon arrived throughout Europe, the United States and the rest of the world. If at the beginning the biggest drops and losses occurred in China, it is precisely from this territory that the brands are already slowly starting to start again, taking a breath of fresh air from the European and US market that will have the worst effects, living what China went through two months ago.
The Kering Group, the luxury conglomerate that owns among others Gucci, Saint Laurent, Balenciaga and Bottega Veneta, estimates a -14% drop in sales in the first quarter of 2020. The group that last year billed $17 billion dollars said it expects similar losses in the second quarter of the year, mainly because a solution to this global pandemic is not yet visible, even though there are encouraging signs and a timid return to purchases in China.
Although purchases have grown by 2.7% steadily throughout 2019, the Prada group also expects a slowdown in these first months of 2020, without however providing further indications of the estimate for the coming months.
SPORTSWEAR
Sportswear brands deserve a separate discussion, in particular the two giants Nike and adidas, which especially in the case of the Swoosh perfectly reflect the evolution in consumer shopping habits in this moment of quarantine. But not only: in addition to representing a fundamental and strategic market for them, China is for both the main production country, and it is therefore inevitable that the temporary closure of the Chinese factories has had tangible effects on the entire production of the brands.
With stores closed across Europe and the United States, the disruption of distribution chains, the suspension of the NBA season and the postponement of the Tokyo 2020 Olympics, Nike could lose up to 3 and a half-billion dollars. There is talk of a drop in global sales of 21% and 16% in the value of the shares. In contrast to these numbers, however, there are data on online purchases, which have increased by over 30% on Chinese territory. More generally, online sales increased by 36% in the quarter ending February 29th. Nike said that 80% of its stores in China are open and operational, and therefore expect sales from that region in line with annual estimates.
After closing 2019 at its all-time high, following the spread of COVID-19, adidas found itself forced to cancel all wholesale shipments and declare that it planned to eliminate the excess inventory for the rest of 2020. While most of the factories in China have returned to operation, its distribution chain has suffered disruptions, without particularly affecting the company's general budget. adidas, as well as PUMA, makes nearly a third of its sales in Asia, and although many of its factories are back in business and production is slowly restarting, PUMA admitted that it did not expect such a drastic drop in sales in the Chinese markets, Singapore, Japan and South Korea.
Beyond seasonal estimates and quarterly profits, it remains to be seen whether this quarantine period will change the way consumers shop even when online shopping is no longer the only possible option. In the United States, online shopping, for example, accounts for a third of all clothing purchases, and 12% of luxury purchases are made online. There are brands that at this time not only have closed all the physical stores, but also the online ones, as in the case of Patagonia. Given the results of online quarantine shopping - just think of the Nike case - it is clear that brands, of any level and sector, will continue to invest in the digitalization of purchases, not only to achieve a further increase in sales but also to go to create a sort of fund, of insurance, in the event that such a situation arises again.
The sad title of winner in this dramatic situation will bring it home Amazon, probably the e-commerce platform that is gaining the most in these quarantine times, so much so that it has to look for 10 thousand new employees, given the number of orders and the pace at which they arrive. Streaming platforms such as Netflix, Amazon Prime Video and Disney+, video conferencing apps such as Zoom and Skype, and couriers and various delivery services follow closely.
