The blow to fashion and luxury sales by the coronavirus should be much more difficult than expected, as a decade of growth comes to an end.
According to the Boston Consulting Group, revenues are expected to dip between 25% and 35% this year as a direct result of store closings due to coronavirus closings.
The impact on fashion and luxury – a category that includes clothing and accessories, watches and jewelry, perfumes and cosmetics – is expected to be more severe this year than the recession a decade ago, with total sales rising from 450 to 650 billion dollars compared to 2019. the levels.
The outlook is much darker than that suggested by the firm at the end of February, when it estimated that sales for the year would drop by around 15%. This was before the virus settled in Europe and the United States and was declared a pandemic.
“It’s worse than 2008,” said Sarah Willersdorf, luxury manager at BCG. “There is no doubt that we are going to have a defined V-curve. The question is whether it moves in a U or an L.”
Like the 2008 recession, the pandemic caused a financial shock that hurt consumer sentiment and demand, she said. “To that, you have this additional uncertainty in the market regarding the crisis, the prolonged store closings that you did not have in 2008 and the disruptions in manufacturing.”
Some regions will be more severely affected than others, depending on the strength of their economy, the severity of the epidemics and the extent to which they depend on tourism sales for fashion and luxury sales, the group said.
Southern Europe is expected to suffer the largest decline, with sales of between 85 and 95% between March and May. The region’s economies are not as strong as the United States or China and persistent travel restrictions will further hamper the recovery, said the BCG.
However, sales are already picking up quickly in China, after reaching their lowest point (down 75-85 percent) at the height of the crisis in February. Revenues are only expected to drop 5-10% from 2019.
Gucci’s parent company Kering said this week that it “is already seeing encouraging signs in mainland China”, with declining store traffic and “falling” sales. The French conglomerate expects sales to decrease on a like-for-like basis by 15% in the first quarter compared to last year.
Sales in North America, the world’s largest fashion and luxury market, are expected to fall 75-85% from last year in March and April and recover to 10% by then. the end of the year.
“Honestly, the jury is still out on this,” said Willersdorf, noting that the measures taken by the US government to stop the spread of the pandemic have been less aggressive than countries like China and Singapore, which have quickly put implement social distancing and data – follow-up measures. “The reason the United States should return to this level is because of the size and strength of its economy.”
While some regions are expected to rebound quickly, the impact on consumer habits should be felt in the longer term, said Willersdorf, with consumers shifting spending more online and embracing new technologies such as augmented reality, which let buyers try. home clothes and accessories.