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Insecurity mounts amongst Chinese luxury and fashion groups as Coronavirus spreads

"Though Coronavirus (COVID-19) outbreak is disrupting supply chains for mid-market apparels in China, it is also affecting luxury sales as most of these US-listed luxury brands are dependent on China for their business. China is a major producer of cotton, fabrics and silk. Its factories churn out everything from coats to swimsuits for fashion brands from Hennes & Mauritz and UK’s Next to higher-end designers such as Tory Burch."

Insecurity mounts amongst Chinese luxury and fashion groups as Coronavirus spreadsThough Coronavirus (COVID-19) outbreak is disrupting supply chains for mid-market apparels in China, it is also affecting luxury sales as most of these US-listed luxury brands are dependent on China for their business. China is a major producer of cotton, fabrics and silk. Its factories churn out everything from coats to swimsuits for fashion brands from Hennes & Mauritz and UK’s Next to higher-end designers such as Tory Burch.

The outbreak has led to five of its designers cancelling their fashion shows for Paris Fashion Week next week while brands Chanel and Prada have postponed their events planned for May in China.

Brands activate contingency plans to contain epidemic

To mitigate these effects in the Chinese market, Kering’s brand Gucci recently live-streamed its catwalk show forInsecurity mounts amongst Chinese luxury and fashion groups as Coronavirus autumn-winter women’s collection in Milan, using Weibo, one of China’s biggest social media platforms. Viewers were also treated to a bird’s-eye view of the area where models were being made up. Several luxury brands also activated contingency plans that included closing stores and offices in China, scaling back product launches and advertising, and clamping down on staff expenses globally. This has created a somber mood across the country which is preventing conspicuous consumption.

Delivery disruption to delay A/W collections

Retailers who follow a traditional two-season model with long lead times, have already dispatched most of their stocks for spring and summer. However, manufacturing and dispatch of autumn/winter stock is likely to be disrupted due to delayed return to work in China after the lunar New Year. Next has about £20 million inventory at risk in China as a delayed delivery to retailers is likely to result in the clothes arriving too late for the intended season and being marked down to sell.

Fast-fashion brands such as H&M and Zara usually have a diverse supply base in North Africa and Turkey and can shift volumes from one supplier to another which protects them against the disruption in China.

However, as Edited, a London-based retail data analytics start-up reveals, shipments of mass-market clothing from China to the US and UK are likely to fall by 3.5 per cent this year. New York-based company Hilldun Corporation is also worried about its designers missing their delivery deadlines, which will compel them to fly their products instead of shipping them. This will further intensify the insecurity for both Chinese factory owners and brands across the world.

 
 
 
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