Displaying items by tag: China

Wednesday, 25 March 2020 19:50

ChicGeek Comment COVID 19 The Bounceback?

fashion covid 19 tom ford said china bounced backThere will be life after COVID 19, but it’s guesswork to how much and how quickly it resumes to pre-virus levels. American designer, Tom Ford, told WWD today, “In China, for example, with our cosmetics, we’ve completely recovered. We’re back to 100 percent. And our ready-to-wear and accessories, which was down about 95 percent, it’s now back up to 50 percent.” 

That is in just over a month. The Chinese saw a spike in infections on 12th February.

Tom Ford has just 4 own brand stores in China. His beauty brand, in partnership with Estée Lauder, will be available more widely. Tom Ford Beauty was projected to turn over $1 billion in global sales by 2020.

Admittedly, the person who can afford Tom Ford might be slightly more immune to a downturn than others, but it’s more the attitude and feel good factored needed to buy an expensive handbag that is interesting here. It’s a strong bounce back and one many other luxury brands will be looking and hoping for. 

Tom Ford, while a big name, is relatively mid-sized in terms of luxury with very select (limited) distribution. The brand generates an estimated $500 million in yearly revenues for its men's and women's ready-to-wear and accessorises. But, he will be sat alongside, in retail terms, the best of the world’s brands and designers, so it shows the Chinese shopper is back out.

Italy, the worst-affected country in Europe, is starting to see the number of new cases of Coronavirus cases start to fall. The peak in the country was four days ago, on March 21, when 6,557 new cases of the virus were reported. Two days later the number was down to 4,789 and, although yesterday the number increased again to 5,249, that is still 20% below the peak.

A week after South Korea hit its peak, which was much lower than major European countries at just 851 cases on March 3, the number of new recorded cases had dropped by 87%.

In Germany, the peak number of new cases was on March 21 at 4,528 cases. Yesterday, 24th March, the number of new cases was down to 3,935, a drop of 17%.

While we have to take Chinese virus numbers with a pinch of salt, it might not be as bad as we think for the fashion business after all. A strong domestic consumer bounceback will be the catalyst the fashion industry needs.

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Published in Fashion
Tuesday, 18 February 2020 10:10

ChicGeek Comment The Coronavirus COVID-19 Effect

Coronavirus covid 19 effect on luxury brands fendi maskWhen China sneezes, the world catches a cold. So, when China caught the new coronavirus, or COVID-19 virus, there was going to be major economic repercussions. With the world’s second largest economy on virtual lockdown, its effect on both domestic and international sales for fashion companies will be seismic.

While there is no way to predict how long it will take to runs its course, companies have already started to make tentative statements about how it is affecting their bottom line. Those companies heavily reliant on the Chinese market and high spending Chinese tourists will be particularly affected and be crossing their fingers that this is over quickly.

Left - Fendi - FF Silk Face Mask - £170 from Luisa Via Roma 

While it is hard to predict the length of the outbreak and its impact, we can look back at the last major virus outbreak, SARS, which originated in China in 2002. It's thought that this strain of the coronavirus usually only found in small mammals mutated, enabling it to infect humans in the same way as COVID-19 has. By the end of the nine-month long SARS outbreak, the virus had spread to several other Asian countries as well as the UK and Canada, killing 775 and infecting more than 8,000 people.

The current stats for COVID-19 are 71,499 confirmed cases and 1,776 deaths, that’s a 1 in 40 death rate compared to over 1 in 10 for SARS. In terms of stats it looks less serious, with many people being carriers and displaying no symptoms. The under reporting of Chinese authorities has been questioned and how they are trying to minimise the severity of the outbreak, but they seem to be taking swift action to prevent contagion. 

The world in 2020 is very different from 2002. The Chinese are travelling much more and have become some of the world’s highest spending tourists. In 2005, there were 95,000 Chinese visitors to the UK, in 2018 that number had reached 391,000 and was continuing to grow. Chinese tourists make up the largest share of visitors to the UK (32%) and they have one of the highest average spends of any national group. In 2018, the latest set of statistics, the average spend of a Chinese tourist in the UK amounted to £1,373. They were only surpassed by visitors from Qatar and UAE.

In London’s West End, accounting for a quarter of all non-EU tax-free spend in 2018, on average, Chinese customers spent £1,630 per shopping trip, making them 59% more valuable than other international shoppers.

Hong Kong-based airline, Cathay Pacific, has already cut 90% of its capacity into mainland China and announced that overall capacity would be slashed by 30% as a result of falling demand related to the outbreak. British Airways announced that it would temporarily suspend its flights to mainland China, following the UK Foreign Office’s advice against all but essential travel to the country.

The most visited country in Europe was France with 2.2 million Chinese nationals visiting in 2018. Paris was already having to contend with transport strikes and gilet jaunes protests and now one of its most valuable visitors is staying away. The same could be said about Hong Kong; months of riots now followed by COVID-19 will have taken its toll on this important luxury retail location. The majority of the world’s major cities will be affected by the lack of Chinese tourists.

For British luxury giant, Burberry, Chinese consumers account for 40 per cent of revenues worldwide. Burberry Group plc released a statement at the beginning of February saying, “The outbreak of the coronavirus in Mainland China is having a material negative effect on luxury demand. While we cannot currently predict how long this situation will last, we remain confident in our strategy.” said Marco Gobbetti, Chief Executive Officer.

Currently 24 of Burberry’s 64 stores in Mainland China are closed with remaining stores operating with reduced hours and seeing significant footfall declines. This is impacting retail sales in both Mainland China and Hong Kong “The spending patterns of Chinese customers in Europe and other tourist destinations have been less impacted to date but given widening travel restrictions, we anticipate these to worsen over the coming weeks.” the statement said. Burberry was planning to hold a fashion show in Shanghai in March but that has been put on indefinite hold, while Chanel has cancelled its May Métiers d’Art show scheduled for Beijing. 

Coronavirus covid 19 effect on luxury brands off white mask

Estée Lauder gave a recent update to the markets saying it it expects adjusted earnings of $5.60 to $5.70 per share in 2020, down from a previous estimate of $5.85 to $5.93 citing the coronavirus. Fabrizo Freda, Estee Lauder president and chief executive, said: “The global situation will also affect our financial results in the near term, so we are updating our fiscal year outlook. We will be ready to return to our growth momentum as the global coronavirus is resolved.”

Other brands who have focussed on growth in China will feel the effects. Luxury outerwear brand, Moncler, warned that footfall at its stores in China had plunged 80% since the coronavirus outbreak and it earns 43% of its total revenues from Asia. Michael Kors and Versace owner Capri Holdings saying it would take a $100m hit from coronavirus in China, where it was forced to close more than 150 stores.

Right - Off-White - Logo Print Face Mask - £65 from Farfetch

Kering makes 34% of its sales in Asia Pacific, excluding Japan. Kering’s chief executive officer, François-Henri Pinault, said - on the 12th February - the group - Gucci, Saint Laurent, Balenciaga, Bottega Veneta - had experienced a strong drop in sales over the past 10 days. Many of the group’s stores in China are closed or running reduced hours. The company said it will halt advertising spend and postpone new openings in China in the near-term in a bid to limit the damage caused by the virus. Pinault said that planned product launches might also be reconsidered and is also shifting inventory to other regions to make sure stocks don't pile up in China. Without giving an estimate for any impact from the virus on earnings, he said online shopping was not really making up for the decline in store footfall. "The warehouses are shut. People can place orders but there are no deliveries," he said.

While being strong in China and in the Chinese market has been a boon for many years, this outbreak shows the danger of having all your eggs in the Chinese basket. Once a high growth area, this is a double whammy for brands; you have the domestic market closed and the free spending tourists are no longer shopping. 

China’s growth was already slowing, but it was just about to come out of the trade wars with America. Even if this outbreak is over in a relatively short window of time, it’s the momentum it has lost that will take the longest time to get back. Getting those Chinese tourists to rebook their flights and travel plans, brands reworking expansion plans and product and consumers getting that feel good factor to spend will take months to correct. Many brands are downplaying the current impact to protect their share price. Hopefully, the epidemic will be over shortly, but the repercussions of COVID-19 will be felt by the fashion industry well into 2020.

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Published in Fashion
Thursday, 16 May 2019 14:33

ChicGeek Comment New Burberry Working?

Is new burberry working? Gigi HadidArguably the finest looking retail street in London, Regent Street’s sweeping thoroughfare is home to the world’s largest Burberry store. The former theatre and cinema is a huge, cavernous stage for the only domestic luxury mega-brand the UK has. What you’ll notice recently, as you walk past, there is never anybody in it. Worryingly, the store always looks empty of customers, and, as is often the case in fashion, you don’t need to see financials or figures to see whether something is instinctively selling or not. 

After two distinctly underwhelming, but vast collections under new Creative Director Riccardo Tisci, the first results are in and it doesn’t bode well. Sales are flat in a market that has seen stellar performances from Kering and LVMH. Burberry’s sales grew by just 2% to £2.7B over the year to March 2019 with an adjusted operating profit of £438m. According to Bain & Company, the luxury goods and experiences market grew by 5% in 2018 and to put this into further context, LVMH was up 10% and Kering was up an incredible 26.3% over the same period.

Left - Gigi Hadid in Burberry's latest campaign. The collection could easily be confused with Fendi

After Burberry’s huge growth under previous Creative Director, Christopher Bailey, the brand’s new strategy is to take the brand more upmarket and completely change the feeling and identity of the brand. Marco Gobbetti, Chief Executive Officer, who hired Tisci, puts a positive spin on it in the brand’s latest financial release, “We made excellent progress in the first year of our plan to transform Burberry, while at the same time delivering financial performance in line with expectations. Riccardo Tisci’s first collections arrived in stores at the end of February and the initial reaction from customers is very encouraging. The implementation of our plan is on track, we are energised by the early results and we confirm our outlook for FY 2020.”

The two stores Burberry had in Knightsbridge have closed and are now a trashy souvenir shop and while they said they are taking a new store above the Tube station, it is a long way off from opening with only the facade currently standing.

The only hope is that they are still selling in China. There was a report in Jing Daily, the leading digital publication on luxury consumer trends in China, in April, that said Burberry had shut down four retail stores in Shanghai since August 2018, with the latest closure occurring on March 31, when the brand ceased the operation of its flagship store at the city’s L’Avenue, which it opened in 2013. The article said “the company had been laying off Chinese staff in preparation for the closure until only seven of them remained”. The publication also said the permanent closure of the L’Avenue store represented a “landmark event” in Burberry’s perceived exit from Shanghai. 

According to the results, in Asia, it’s seen low single digit growth in Asia Pacific, Korea and China, stable in Hong Kong and declining in Japan. Which is worrying. Burberry is also cutting costs to shore up the balance sheet.

The company is pinning all its hopes on the new Tisci product. The statement said “The first deliveries of Riccardo Tisci’s products arrived in stores at the end of February. Although it is currently a small portion of our offer, the initial reaction from customers has been very positive with sales of the new collections delivering strong double-digit percentage growth.” It’s not clear what the growth is in comparison to.

The company says it is currently on a multi-year journey to transform and reposition Burberry. “FY 2019 and FY 2020 are foundational years where we will re-energise the brand, rationalise and invest in our distribution and manage through the creative transition, after which we will accelerate and grow.”

In retail, they say they are focused on refreshing flagship stores, with over 80 retail doors expected to be “aligned” by the end of FY 2020. "To ensure we are focusing our resources on the most impactful locations, we will also be closing 38 smaller, non-strategic retail stores in secondary locations. In wholesale, we stepped up our wholesale rationalisation in the second half of the year, phasing out non-luxury doors.” says the financial statement. In total, Burberry closed a net 18 stores (seven mainline, nine concessions and two outlets) in the year and new openings included the relocation and expansion of the Dubai flagship and openings in Shin Kong Place, Xian (China). Fourteen retail stores had been aligned to the new aesthetic by the end of the period. 

Tisci’s first collection ‘Kingdom’ hit stores in February, but it didn’t create the much needed desire within the fashion community which ripples out to consumers. In that period, we’ve seen Givenchy fly, Gucci continue to power on and Bottega Veneta get a new designer and start to make waves. Unless you make positive gains from the energy around a new star creative designer, the energy quickly falls flat and the new Burberry seems to have been striped of identity during its rebrand. 

Riccardo Tisci’s and Christoper Bailey’s Burberrys were always going to be very different. One was incredibly successful and turned the company into a global, billion dollar player, the other, was a fresh start, hoping to equal the growth and appeal of its predecessor but with a new, more street-like aesthetic while trying to elevate the brand. 

Burberry feels like a brand going into reverse and unless new collections start to create some form of excitement people won’t be willing to pay more. The momentum it has built up over the past decade will disappear and it will be a tough job to get that back. This feels like a brand to ‘sell’ before the evidence of the failure of this new strategy becomes even clearer.

Published in Fashion

The real reason luxury fashion companies are no longer using real furThis article isn’t a discussion on the pros and cons of real fur and offers no moral viewpoint on its use. I acknowledge that this contentious issue/material is divisive and has passion on both sides. 

The real ‘fur’ industry has seen massive growth, since the beginning of this century, driven by international consumers and trims on accessories and coats. It is now a $40 billion industry. It was inevitable that it would have a backlash and there would be a reaction to it, most notably from younger consumers. 

I put ‘fur’ into speech marks because it’s a very broad term and while some brands may no longer use mink they continue to use the skins of other animals and there’s no definitive reason for the choice of some animals making the used list and not the others. Read more here - ChicGeek Comment Fur Debate: You Either Use Animals Or You Don’t

Brands such as Gucci, Versace and Martin Margiela have decided to announce they will no longer use real fur. Donatella Versace recently said, “Fur? I am out of that,” she said. “I don’t want to kill animals to make fashion. It doesn’t feel right.”

“Naturally we were disappointed to hear that Versace has said it won’t use real fur in collections. However, the majority of top designers will continue to work with fur as they know it is a natural product that is produced responsibly. When Donatella Versace says ‘I don’t want to kill animals to make fashion.’ presumably her company will soon stop using silk and leather?” says Andrea Martin from the British Fur Trade Association.

“It is disingenuous to claim that leather is a by-product of the meat industry, a cow still had to die to provide the product. Silk cocoons are placed in boiling water to help unravel the thread with the silk worm inside,” says Martin.

Italian accessories brand Furla has formally declared that it will be banning fur from its collections from November of this year, which would coincide with the launch of its Cruise ’19 collections. This follows decisions by Michael Kors and Yoox Net-A-Porter, which has declared that all its stores and websites would be real fur-free zones.

“I think some of the brands have gone fur free under pressure from anti-fur trends, and some are genuinely concerned. If brands don’t want to use animals for fashion then they need to consider leather, exotic skins, silk, sheepskin, makeup and products, all of which use animals. I also think human welfare is important to consider when producing fashion, and this often gets forgotten.” says Rebecca Bradley, a London based fur designer.

So, why are luxury brands really dropping the use of real fur? 

I think it is pure economics and the high margin greed of today’s luxury industry. It’s the same reason many restaurants are pushing vegetarian and vegan options: the margins are higher and therefore the profit. By charging slightly lower prices for something which is much cheaper to make, the margins increase. There are only so many €25,000 full-fur coats a brand will sell and the ceiling price is sensitive, so you can’t factor in the same margins you would on your other products. If you make it in faux-fur you'll get a higher margin and a bigger percentage of profit. You’ll also sell more and probably generate more money overall.

The irony is, the reason a real fur coat is so expensive is because of the high welfare standards of the European producers. Luxury brands wouldn’t be able to use cheaper real-fur from other sources witout criticism and scrutiny.

“Fur coats may seem expensive, however the price of a fur coat should reflect a high standard of animal welfare, and therefore with a beautiful, high quality fur, many skilled people are involved with production, including a furrier, and finisher to create a fur coat that will last for many generations, ” says Bradley.

Fur, for the majority of brands, is a very small part of their businesses and therefore it’s not difficult to heroically declare you’re no longer going to use it. It’s also easily replaced by a cheaper, synthetic alternative while not altering the price very much or at all. You can paint the use of a fake fur trim as an ethical choice rather than a cost saver to the consumer. It’s cynical I know, but it’s working.

PETA’s Director, Elisa Allen, says, “Fur is dead, dead, dead. As well as making sense for designers' conscience, ditching fur makes business sense, as today's consumers are demanding animal and eco-friendly clothing for which no animal has been electrocuted, strangled, or caught in a steel-jaw trap. From Armani to Versace, the list of fur-free designers is growing every day, and innovative vegan fashion is on the rise. The tide has turned irrevocably, and there's no going back.”

Many brands used the word ‘sustainable’ when announcing their decision to no longer use real-fur, but again, this is another term in fashion that is very broad and has little full meaning until you see the detail. I’m not sure a fake fur coat is particularly sustainable, but then again it does depend on the material.

But, you also have to acknowledge that nobody needs to wear a real fur coat. We could easily survive without real fur, but it’s interesting how, out of all the animal products we use, this is one of the most offensive to some and creates the biggest reactions and protests.

The real fur industry continues to grow in China and with other newly rich consumers and markets. It is now a US$17 billion-a-year industry in China and Haining, near Shanghai, is its hub.. Fur companies will be a bit like tobacco companies: the falling sales in established markets will be replaced by growing sales in new and even bigger markets in Asia.

Chinese animal welfare standards are very different from European standards. European producers have very strict regulations and it’s an industry which has to be transparent in order to ward off criticism.

“We respect the fashion industry’s attempts to become more responsible for the products they produce. Animal welfare is of critical importance and the fur produced is farmed to the highest welfare standards.” says Martin.

“With growing concern about the environment and plastics we believe it is more responsible to move back to the use of natural, biodegradable materials. Fur is the natural and responsible choice for designers and consumers.” says Martin.

Ditching fur is quite a lazy way for luxury brands to try to be more ‘sustainable’ and look like they care about the environment. 

“I think that companies and consumers becoming educated and aware of origins of products and materials is a fantastic thing, but the focus needs to be across the board, ensuring standards of human, or animal welfare and environmental impact.” says Bradley.

Many brands are seeing real fur as something they live without and it’s more hassle than it’s worth if the profit and quantities aren’t there. You can pick holes into both sides of the fur debate. While a positive move for many, the decision to no longer use real fur is really a cleverly spun business decision and driven by their continued obsession for huge margins.

Read more expert ChicGeek Comments - here

Published in Fashion
Tuesday, 22 November 2016 15:01

ChicGeek Comment The Future of Luxury Watches

The Future of Luxury WatchesSomething occurred to me the other day with regards to the watch business. Much like the oil industry which continues to pump out millions of barrels of oil, despite the price falling, in order to fend off or weaken the burgeoning fracking industry, (it’s a lost cause, btw, but what other options are there?) the watch industry is doing much the same thing: pumping out large volumes of product at all different price levels trying to keep themselves desirable and relevant.

Left - Are luxury watches sinking for good?

The smartwatch was a catalyst, and while it hasn’t really dented the traditional watch market, it was already under threat from people using their phones to tell the time and the slightly old-fashioned, pompous and alienating approach many Swiss brands/makers have.

Global Blue’s latest data for the third quarter of 2016 show global spending on watches is down -32%. The UK aside, which is experiencing a blip due to the weakness of the pound, Global Blue’s latest year-to-date data shows that the W&J (Watches & Jewellery) category has been hardest hit by the global luxury spending slowdown. 

The reasons they give are: Chinese are buying fewer watches due to the conspicuous consumption crackdown, higher import duties are a major deterrent, as is the dual effect of less attractive product and lack of price differentials. Plus the landscape is dramatically different now that global shoppers are deterred from visiting Europe due to the persistent perception of reduced safety and threat of terrorism.

Like all industries that experience rapid growth it will inevitably lose momentum and stall. They are trying to offer something special, but in volume, which is an oxymoron. They are also not very transparent at helping consumers know what they are buying and paying big bucks for.

They’ve opened huge flagships to showcase their brands in insulation, so as not to be contaminated by any others, but it’s not sustainable. Recently, Mike France, co-founder of internet watch retailer Christopher Ward, said, when talking about mono-brand watch stores, the “Regent Street model cannot be economically viable”. He said: “Ultimately they will die. Some of them will remain, but most of them will die. At the moment stores are flags for the brands; most of them lose a fortune.”

The volumes the industry are churning out are unsustainable too and has taken the 'luxury' halo off the industry. They are in a damned if they do and damned if they don’t situation. 

Lots of consumers are turned off by the prices and are turning towards the ‘pre owned watches’ or 'second hand watches' market for something different or if they still want a status symbol-type brand at a price that they can afford and justify.

I’ve also heard branded/licensed watches in the mid-market are struggling and many brands and fashion companies which don’t specialise in this area are leaving the category all together.

Luxury watches are at a crossroads. Will we look back in a few years and find it funny that people used to wear lumps of mechanical metal on their wrists? Only time will tell.

 

Published in The Fashion Archives

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