The Corona Virus Threatens the Global Apparel Industry

The Coronavirus (Covid-19) is a global epidemic with unprecedented effects on the Asia and International Supply Chains that go beyond the health threats.  Many factories are not allowed to return to work until the virus is under control.  This deadly virus has shaken all of the Chinese businesses and their exports; it has drastically affected the apparel and footwear industries.   

No sooner, there is partial relief from the China and USA trade war (Signing Day – Details of the Phase One Trade Deal), and then the world is faced once more with this serious harm to the world economy.  

Updated February 19, 2020

What are the real numbers, as many cases are not specified? 

The government has restricted travel for 60 million Chinese people; they are advised to avoid public places and stay in their homes.  Many fashion brands like Uniqlo, IKEA, and H&M have closed down their showrooms and outlets across China to protect its employees.

Famous luxury brands like LVMH, Kering, and Swaroski have collectively donated more than $3 million.

Many fashion stores and industries have been shut down; furthermore, many fairs and exhibitions have been canceled or postponed.  This has begun to seriously affect the Chinese economy.

Store Closures

International brands have been shutting down stores in Chinese cities, because of the markedly decreased foot traffic.

Usually, there is a large spending power during Chinese New Year; but with government restrictions in place, citizens have been told to stay home and in some regions, they have been banned from traveling.

Burberry Group announced that 24 of 64 Burberry stores in Mainland China would be closed while the remaining stores operated with reduced hours. Capri Holdings (Michael Kors, Versace and Jimmy Choo) announced the closure of 150 of its 220 stores in the region.

Nike closed half of its stores in China.   VF Corp (Timberland, The North Face, Kipling) temporally shut 60% of its stores. 

E-commerce

Alibaba Group Holding Ltd warned of a drop in revenues at its key e-commerce businesses this quarter as the coronavirus hits supply chains and deliveries.

Many E-commerce websites like Pinduoduo, JD.com, and Taobao have shown a spike in the sales for sanitary and medical products. The Chinese citizens, faced with boredom, anxiety, frustration, and separation from their families in the festive season have used the Internet to send gifts to there loved ones.

Chinese e-commerce giant JD.com and its partner, Dada Group, announced they are creating 35,000 jobs for those unable to work because of the outbreak.

Financial loses

According to the analytics from Bain and Co., the Chinese consumers account for more than 90% of the global luxury product market growth and 33% of the overall business. By 2025, Chinese consumers will account for 46% of the global market.

Luxury companies, especially the major fashion brands are revising their financial forecasts for the next fiscal year.  However, they are confident about their long-term goals and believe growth will return to the region shortly.

Fashion fairs are postponed or canceled

Many big fashion fairs, exhibitions, and industry events have been affected, not only in China but also in American and European countries.

ISPO Beijing and Spin Expo Shanghai have been canceled; Chic Shanghai has been postponed; and Messe Frankfurt’s textile fairs Intertextile Shanghai Apparel Fabrics, Yarn Expo and Intertextile Shanghai Home Textiles – slated for March – have been postponed.  This will affect the Chinese apparel industry directly and drastically.

Many fashion shows in Europe will be conducted without the presence of Chinese buyers.  Textile shows in Portland and Boston (The Materials Show), which are popular with the Chinese, have been postponed.  Sourcing fair Asia Apparel Expo of Berlin has been delayed, and is expected to take place in June.

Fashion Week

Many shows during fashion week in Paris, Milan, and London will suffer from the absence of thousands of Chinese consumers (clients, influencers, and editors).

The usual Chinese buyers will not be present during fashion week, but the London and Milan show will have live telecasts of their fashion shows with product advertisements.

Chinese brands will not participate in Paris Fashion Week; as well as employees of top luxury brands will be unable to attend. 

Legal Issues

Over 100 businesses in China have chosen to invoke force majeure exemptions from contract duties, citing the coronavirus outbreak as a qualifying disaster.

Dan Harris, of Harris Bricken in Seattle, had the following comments to share:

“A lot of American and European companies are going to lose a lot of money and product over this. Some companies, in the USA and in China, are going to disappear.”

What’s Next

The impacts of the Covid-19 will affect the global industry of textiles and apparel.

The closed stores and outlets of some luxury brands lost an estimated €2 billion during the protests in Hong Kong.  The territory is now being hit again because of the virus outbreak.  Significant industries of the world have stopped trading with China, resulting in a mutual loss.

Conclusion

China’s apparel industry is not likely to recover its losses anytime soon.  As the virus crosses more and more geographical boundaries, it is likely to cause a global economic crisis, especially in the apparel and textile industry.

This is not the first time a virus epidemic has attacked the Chinese mainland.  The longer the crisis the more danger to worldwide global economies.

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