“There will be a before, and after Coronavirus...” This is what scientists, economists, ecologists and even business leaders collectively agree on in the face of this unprecedented global crisis.
In light of the recent pandemic, we’re bringing you a digestible overview of the immediate and projective impacts of COVID-19, across different industries. This is part of a series of regular analyses including articles, webinars and reports, and will be covering the luxury sector. All of our content and key findings will be brought to you via our communication channels.
The immediate impact to Fashion Week
In the past 2 months, fashion houses have been fast to adapt to the evolving COVID-19 pandemic. Its rapid progression during fall fashion week forced designers in the “big four” to cancel, postpone and adapt their events across Paris, Milan, New York and London. Many improvised and adapted to the situation by airing their shows online, through brand web sites and more importantly, social media platforms. Armani even decided to broadcast their women’s FW20-21 Milan show without a physical audience.
The immediate impact at fashion week was a sharp and noticeable decline in Chinese retailers, reporters and buyers in light of heavy travel restrictions. And while physical presence was limited, brands took to social media to reach a continent in lock down. The British Fashion Council partnered with Business of Fashion China to share content with remote Chinese consumers. Most brands weren’t prepared to make full use of the complex range of Chinese social apps in time, in what Jing Daily is calling a lost opportunity. The crisis has raised the need for brands to innovate the way they broadcast to their primary consumers and the rest of the world.
During Milan fashion week, 3 Chinese designers were forced to cancel shows resulting in a loss of around 1000 Chinese attendees and fashion buyers. A small figure that plays a part in a much bigger picture. Jefferies Investment Bank estimates Chinese consumers to account for almost 40 percent of the €281 billion spent globally on luxury goods in 2019, and to have driven 80 percent of the growth. McKinsey had anticipated luxury Chinese consumers to reach this percentage of global consumption by 2025.
But it’s not empty fashion show seats that pose the real problem, as executive president of Paris Fashion Week declared. The industry will suffer because of hold ups in supply chains and empty showrooms. The big four fashion weeks are not only the opportunity to display collections, but to sell them. Retailers such as Nordstrom, Macy’s and e-commerce platform Net-a-Porter, employ fashion buyers in this period to negotiate with brands over price and select the collections that make it into stores.
Though it's too early to predict the long term impact, it’s clear significant cancellations and decline in air travel will continue to limit overseas spending. As China was the epicenter of the virus, many fashion brands were also forced to halt the production and sales of their goods in the region including Prada, Coach and Burberry. In February, Kering reported a serious drop in traffic and sales in mainland China after temporarily closing half of its 36 stores where customers account for 30 percent of its global sales. According to figures produced by Alliance Bernstein and Boston Consulting Group, luxury brands sales are anticipated to lose $33 to $43 billion.
Luxury brands need to look beyond business
The pandemic has alternatively driven high demand in other sectors such as FMCG and e-commerce. Hygiene products namely hand sanitizer and protective surgical masks are now in limited supply due to panic buying and a nationwide shortages of both stock and key ingredients.
The global luxury goods giant LVMH, donated $2.3 million to the Chinese Red Cross Foundation to address shortages in medical supplies. On March 16 it converted it’s cosmetics and perfume facilities, Guerlain, Christian Dior and Givenchy, to purely hand sanitizer manufacturing. On March 21 it announced it will be ordering 40 million masks from a Chinese supplier to support health workers in France.
While Dolce & Gabbana announced on March 16 that it had partnered with Humanitas University to fund a research project, focusing specifically on the responses of the immune system to the virus. The project aims to develop diagnostic and therapeutic interventions against the COVID-19 disease.
During this temporary economic downturn, luxury brands have the opportunity to rethink their fundamental and underlying values. Though their roots are deep seated in scarcity and luxury, a true legacy brand creates history that extends beyond a prominent logo. Corporate philanthropy can play an important role during unprecedented disasters. While short term marketing messages display commitment to helping a cause, brands can act and respond in much more powerful ways. Many players in the luxury industry have shown true empathy with their positive contributions that will go onto create continued loyalty and brand equity in the long term.
Step up your digital strategies
This is the first time in the modern digital era that every continent is collectively experiencing a state of lock down. Entire populations have naturally adapted to digital to continue working remotely, and none more so than Millennials and Generation Z. Vogue Paris is taking advantage of their consumers online screen presence by offering this month's March addition completely free via PDF format.
Tout le monde peut ainsi lire de manière simple le dernier Vogue Parishttps://t.co/1xoc3FrZUM— Vogue.fr (@VogueParis) March 17, 2020
WWD China and Rakuten Fashion Week Tokyo, announced the world's first digital only fashion week. Lasting 6 weeks, the summit will include industry experts and environmental scientists to help break down sustainable fashion. It will be live streamed globally to reach confined viewers.
Though it's too early to present results, US retailers recently reacted to increasing store closures by discounting their e-commerce inventories. This includes the likes of Net-a-Porter providing 10 percent discount, Neiman Marcus 20 percent, and Moda Operandi 20 percent. Omnichannel and e-commerce purchasing in this period provides a critical opportunity for brands to analyse consumer behavior and responsiveness during confinement.
Turn to cause marketing
In China, luxury brands adapted their messaging to a nation under quarantine. Using social networks they tried to boost morale and show their solidarity to a country under intense scrutiny. Crisis situations as we’ve seen are a challenge, but can also pose opportunities.
Louis Vuitton launched a cause marketing campaign on the social platform Weibo called, “Love has no fear”. Numerous celebrity brand ambassadors got involved to record videos encouraging the residents of Wuhan to support and share their appreciation of medical workers. In the first week alone it generated 4.2 billion views.
Source: Louis Vuitton WeChat post. “Every paused journey will eventually restart. Louis Vuitton hopes you and your beloved ones stay safe and healthy.”
On Valentines Day LV also launched an exclusive online pop-up store via WeChat. It created an exclusive mini program featuring curated gift recommendations that would influence customers to purchase online. It demonstrated solidarity by representing love amongst individuals and groups as well as couples. The campaign reportedly doubled e-commerce sales in comparison to last year.
While the world recovers, one thing remains certain. Brands now more than ever need to pay attention to their consumers through the most direct and accessible sources available. In this unique period of confinement social media is keeping the world connected, every minute and hour of the day. As in any new and unprecedented situation, companies will have to be creative in the presentation and format of their offer, and flexible in the face of rapid change.
Communicate with your audiences to alleviate uncertainty, put the well being of your customers before business and take this period to improve your digital offering.