Update published March 9, 2020:
The COVID-19 virus is non-discriminatory regarding territories, as Jing Daily sees in terms of infected cases and market reactions. By market close on Monday, all three major indexes in the US were all falling beyond 7%, while the Dow had its worst single-day drop since 2008, according to the WSJ. Meanwhile, China’s Hang Seng Index sunk 1,106 points, or 4.23%, to 25,040. And the Stoxx Europe 600 shed over 7% to 339.
Thanks to a stringent quarantine policy from the central government, China seems to have the virus under control, with 42% of almost 140,000 reportedly infected cases being cured. However, the battle for the other 108 infected countries has just begun, as Italy recently announced to lock down the entire country, and many US companies like Amazon and Facebook encouraging staff to work from home. As the Chinese society and businesses limp back to normality after over a month-long lockdown, can Western luxury brands translate what has worked in China — from cloud shows to livestreaming — to prepare for a “worst-case scenario,” as investor Ray Dalio said, while the COVID-19 epidemic takes over the world?
Update published March 5, 2020:
Dolce & Gabbana is cooperating with the Italian private college Humanitas University to support a study into immune system responses to the deadly COVID-19 virus. The research objective is to lay a foundation for developing diagnostic and appropriate treatment.
The donation will support a study coordinated by Professor Alberto Mantovani, the Scientific Director of Humanitas and Emeritus Professor of Humanitas University, along with Prof. Cecilia Garlanda of Humanitas University and Professors Elisa Vicenzi and Massimo Clementi from the San Raffaele Vita-Salute University. This is notable because Professor Vicenzi and Clementi were “the first in Italy to isolate the pathogen responsible for SARS.”
This project is not the first collaboration between the Italian fashion house and Humanitas University. In fact, Dolce & Gabbana awards yearly grants for students of the MedTec School program in Medicine through Humanitas University and Politecnico di Milano, another Italian university.
“We felt we had to do something to fight this devastating virus, which started in China but is threatening all mankind,” said Domenico Dolce and Stefano Gabbana in a statement. “In these cases, it is important to make the right choice. This is why we thought Humanitas University would be the ideal partner, whose excellence and humanity make it a special entity, with which we have already cooperated on a scholarship project.”
Update published March 4, 2020:
As the COVID-19 crisis continues, luxury brands are looking for digital solutions, including e-commerce and “see now, buy now” live-streaming, to offset revenue loss caused by the virus. Last week, for example, Prada joined Tmall, Alibaba’s business to consumer channel. This week, the Belgium brand Delvaux launched on JD.com, it’s first e-commerce channel in China. And the prestigious French label Lanvin, which is under the Chinese group Fosun, also joined forces with the high-end e-commerce platform Secoo, live-streaming their Fall/Winter 2020 runway show with a popular “see now, buy now” function. As Chinese consumer spending sentiment is still slowly recovering, to what extent this will help brands with their sales is unknown, but it’s certainly a strategic move for many brands.
Update published February 24, 2020:
As of Monday, with over 200 confirmed Covid-19 cases and five dead, Italy has stepped up measures to contain the virus by placing a dozen towns in northern Italy, including the regions of Lombardy and Veneto — home to Milan and Venice — on lockdown. This had a profound effect on Milan Fashion Week. In order to ease health concerns of attendees and stop the possible spread of the virus, a few brands, including Giorgio Armani and Laura Biagiotti, decided to livestream their runway shows. How this will affect Paris Fashion Week, which starts today, is still unknown.
Update published February 18, 2020:
Chanel announced today that it will postpone showing a replica of its Paris – 31 rue Cambon 2019/20 Métiers d’art collection in May in Beijing due to the Covid-19 crisis. The collection, which debuted in Paris in December, was inspired by the studio of founder Coco Chanel. The decision to prioritize “the health and well-being of its teams and clients,” however, was in line with the brand’s recent $1.4 million (10 million RMB) donation to support China and its citizens, as reported by BoF. While the restage strategy has been regarded as a fundamental initiative to engage Chinese consumers, this isn’t the first time the brand has had to reschedule an event in China due to unexpected challenges. Last year, they had to cancel their Hong Kong cruise show because of ongoing protests. Similar postponements have hit other luxury brands, including Prada, which recently put on hold its upcoming Prada Resort show in Japan for May 21. New dates for both events are yet available.
Update published February 12, 2020:
Burberry, the British heritage label, recently issued an urgent warning about the material effects of the coronavirus on the luxury market, and updated its own outlook for fiscal year 2020 as well. The announcement scrapped their positive sales forecast to a low single digit percentage increase envisioned in the brand’s third quarter trading update released last month. Moreover, they did not discuss any updates on either their previously scheduled Shanghai runway show in April or their first social retail store in partnership with Tencent. Along with their warning, however, Burberry only touched upon the “mitigating actions” they are taking to compensate for losses due to the coronavirus, but did not discuss further details.
Update published January 24, 2020:
As concerns about the coronavirus escalate, many Chinese tech companies are joining in to help. For example, Tmall, JD.com, and others have blocked vendors from jacking up prices on facial masks and other health and cleaning supplies. Also, in responding to the Wuhan city lockdown announced recently, cross-border e-commerce BorderX Lab has prepared plans to deliver supplies to Chinese consumers threatened by the coronavirus. And to minimize customers’ costs, several airlines, as well as China’s state railway company and online travel agencies, are offering refunds for trips related to Wuhan.
The timing of the outbreak during Chinese New Year, a time when Chinese travelers on the mainland and overseas make their way back home, marking the “world’s largest human migration,” only added to the spread of the virus. A total of seven cases have been confirmed outside of China, including Thailand, Japan, South Korea, and the US, updated by financial media Caixin. On Thursday, January 23, WHO clarified that the virus is not yet a global emergency. However, it’s likely to continue impacting not only travel and duty-free industries, which typically expect an increase in sales during the holiday, but also luxury retailers overseas who should brace themselves for potential hits.
Update published January 23, 2020:
Since Tuesday, when Jing Daily reported on the decline of Western luxury groups’ stock prices due to the coronavirus, prices have continued to spiral downward as the virus continues to spread in mainland China and beyond its shores. LVMH and Kering’s stock prices, which shed 25.2 euros and 36.8 euros respectively as of the close of the European stock market today, reached a 30-day low. The question is: how low will they go?
The Chinese public’s growing concern that any official action by the Chinese government, which states as of Wednesday, January 22, that there are 571 reported cases of the coronavirus and 17 deaths, has been affected by delays and censorship on the local level.
Meanwhile, the government has put an unprecedented quarantine on Wuhan, the epicenter of the coronavirus, with all public transportation, including airports and trains, that keeps the massive city of 11 million people running to a halt. And now, with four more nearby cities announcing similar measures, the concern is how to stop the global spread of the coronavirus and what lingering damage it may cause.
Original article published January 21, 2020:
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.
China’s new strain of the coronavirus, which has already spread to at least three other countries and could spread further during the Chinese New Year holiday travel rush, has sent European luxury stocks tumbling, including the likes of LVMH, Kering, Richemont, and Burberry. Official reports say that coronavirus, a respiratory virus that causes pneumonia-like symptoms and that can be passed in between humans, has already killed four people and infected nearly 291 in China, according to state media China Daily on Tuesday. But the actual outbreak might prove worse.
An estimate by scientists from University of Hong Kong said today that nearly 1,700 people in Wuhan, China — where the virus outbreak started — may have also been infected. As China’s 40-day Spring Festival travel season just kicked off, health experts are also discouraging people to travel to Wuhan, though major cities like Beijing and Shanghai already have confirmed cases. Given the increasing concern of a global outbreak, stocks of European luxury brands that rely heavily on the Chinese market have slumped as a result. Compared to last Friday, LVMH and Burberry’s stock fell 3%, while Kering lost over 4%, and Richemont’s declined almost 5.5%.
The Jing Take:
Luxury veterans might still remember how the SARS outbreak in China left the industry in despair in the early 2000s, leading to billions in losses and cost the Chinese GDP growth by nearly 1%. At the moment, however, it’s difficult to predict how much economic damage a potential coronavirus outbreak will be for China, as well as the global economy. For Western luxury brands, there is not much they can do at this point other than paying close attention to how their consumers are reacting and pray that the Chinese government has potential epidemic under control, as it claimed this Monday. Time will tell.