Displaying items by tag: Shanghai

Wednesday, 04 November 2020 13:23

ChicGeek Comment How Will Fashion Wake?

how will fashion wake post covidHibernation, coma, mothballed; however you want to label it, fashion would have been in a very deep sleep before all of this is over. Even if we’re being optimistic, and life returns to a sense of normality in the spring, it would have been nearly a full year of disruption. Fashion would continue to be affected well into 2021, without fashion and trade shows in at that time to show AW22 and and we would be not fully back to normal until spring 2022 at the earliest, when the fashion cycle would have resumed.

Left - Sleeping Beauty woke up to something good, but what about fashion?

In the classic fairytale, when the princess was cursed to sleep for a hundred years she was awakened by a handsome prince, but what will be waiting for ‘fashion’ and what state or style will it be in?

Let’s recap where we were at the beginning of this disaster. All the Kering brands - Saint Laurent, Gucci, Balenciaga - were flying. Gucci was slowing but still steaming ahead and was hopeful on becoming the world’s largest luxury brand. Bottega Veneta was gaining momentum and hype was translating into sales.

At LVMH, Louis Vuitton was still the major cash cow, Dior seemed to be doing well in sales rather than critical success and Celine was doing a stealth commercialism which, I’m sure, was being reflected in sales and exactly what Slimane was hired for and what he did previously at Saint Laurent. The main style was a mix of Gucci’s dress-up maximalism and embellishment and contemporary sportswear based on fugly chunky trainers and overpriced loungewear.

So, what can we predict for the future?

It might be worth casting an eye back in history. We’re told by the Bank of England boffins that this will be biggest recession in 300 years. Based on the bank's own best estimate and historical data, the coronavirus crisis could push the British economy into the fastest and deepest recession not seen since the huge economic slump of 1706 and the Great Frost of 1709. This was a baroque period at the beginning of Georgian Britain when fashion designers became more recognisable and fashion magazines appeared for the first time. While we’re too far away to know the minutiae of hemline changes, but it was certainly the beginning of a new era of British style and design.

The most popular comparison has been with Spanish Flu in 1918-19. After that came the Roaring Twenties, one of the most modern and dynamic decades of the 20th century. After WWII we got Christian Dior’s New Look. And while it was a feminine look back, it propelled fashion forward into the next decade and was hugely influential.

China luxury fashion gdp

The troubles of the 1970s gave us punk and the recession of the early 90s was reflected in American Grunge.

The most recent 2008 financial crash was all about the rise of China, and, undoubtedly, the growth in billon dollar brands and the associated logos and status.

Right - GDP growth of the world's three biggest economies - USA, Japan & China

While this is all simplistic, it offers some form of hope.

During the 20th century many economists cited the 'Hemline Theory'. It being the current fashion’s skirt length are a predictor of stock market direction. According to the theory, if short skirts are growing in popularity, it means the markets are going to go up.

Probably lucky everybody is wearing tracksuits right now.

And then there’s the ‘Lipstick Effect’, which is when consumers still spend money on small indulgences during recessions, economic downturns. For this reason, companies that benefit from the lipstick effect tend to be resilient even during economic downturns.

Market research firm Kline found evidence for the lipstick effect through four recessions from 1973 to 2001. Though during the financial crisis of 2008 lipstick sales dipped disproving this theory. Add a face mask and it doesn’t look like lipstick sales will be picking up anytime soon...

So, where does that leave any predictions post-COVID?

Here goes:

1) China will dominate even more. GDP Annual Growth Rate in China averaged 9.23 percent from 1989 until 2020. China’s gross domestic product expanded by 4.9 percent over the third quarter of 2020 on rising trade and consumption. According to the Wall Street Journal, it is “putting China’s economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy.” Brands are using China and Asia to currently support their businesses and as such more products will be tailored to these markets. China will fuel the growth in ‘Power Brands’ owned by the big groups and events like the Christian Dior, Designer of Dreams exhibition opening in Shanghai, following its success in Paris and London, will help to further educate and create this branding magic within this market.

2) Fashion will be more woke when it wakes, but the progress we were making on greening fashion will slow as many firms fight for survival and any expensive new initiatives will be put on the back burner. This is a fight for survival so we’ll see inexpensive greenwashing.

3) We’ll see a whole raft of new start-ups in the middle of next year, to launch later on that year, or in 2022. Many will be kitchen table brands with a strong and individual personality behind them.

4) Local will continue to be a focus and we’ll see more ‘luxury’ Bond Street type brands consider smaller stores in affluent neighbourhoods and design them in a less international and generic style and more of the locale.

5) They’ll be a slower reaction to the bad quality of most ‘luxury’ fashion, which will further fuel ‘fast fashion’.

On a purely aesthetic level, will people continue to want the escapist approach from brands like Gucci and what we saw during the glam 1970s downturn, or will we see a more austere and minimal look mirroring the rise in unemployment and shrinking of people’s disposable incomes? Well just have to see. Whatever happens it can't be too literal or obvious. The consumer is more sophisticated than that.

Fashion is too big now to follow the dictatorial approach of hemlines and lipsticks theories of the previous century. But, what is positive is the desire for consumption. That hasn't gone anyway. While remaining, big brands will try and monopolise for a while, we’ll see fast growing start-ups, from the most unexpected of places, give them a run for their money in a less competitive landscape which will have plenty of scope for growth due to brands disappearing.

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Published in Comment
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
Wednesday, 26 June 2019 17:11

ChicGeekComment Fashion’s Flying Shame

Swedish flying shame flygskam Greta ThunbergKicking off the recent round of SS20 men’s fashion weeks the luxury Italian giant, Prada, opted to show its men’s collection in Shanghai rather than Milan and Saint Laurent chose Malibu, California instead of Paris. The light-tactic Eiffel Tower was replaced by palm trees and Keanu Reeves - very Point Break - as the male models took to a catwalk that followed the lapping waves of the Pacific ocean.

These trips to far flung destinations, under the pretence of targeting that geographical audience, had become something of a signature of women’s Cruise shows over the past few years. A distraction from the rather boring clothes, brands such as Louis Vuitton, Dior and Chanel scoured the globe for the most glamourous and social media friendly backdrops and flew the fash-pack on one giant jolly in-between the usually rigid calendar of traditional global fashion weeks. 

Left - Greta Thunberg, 2019's environmental superhero

Taking a brand and its audience to locations not usually set up for fashion’s extravagance is expensive and indulgent, not to mention costly to the environment. These people won’t be travelling economy. Add everybody from the brand, the models, the buyers and the press and the numbers start to drastically stack up and those carbon emissions multiple. 

It seems to go against everything fashion is trying to be at the moment. Fashion is trying to show its less wasteful side and is jumping on the sustainable ‘we-really-care-you-know’ bandwagon and it will be interesting how they will be able to justify these types of extravagant shows in the future. Admittedly, there’s always been travel in fashion, and getting people to see things in one place is an important part of fashion, but it’s this travel for travel’s sake that seems to feel out of step.

The Scandinavians have lead the way on this and Sweden’s ‘flygskam’, or flight shame, movement first came to prominence in the summer of 2017 when the singer-songwriter Staffan Lindberg wrote an article co-signed by five of his famous friends, in which they announced their decision to give up flying. Among the famous Swedes opting for other forms of transport were ski commentator Björn Ferry, who said last year he would only travel to competitions by train, opera-singer Malena Ernman (the mother of climate activist Greta Thunberg), and Heidi Andersson, the eleven-times world champion arm-wrestler. Finland has spawned its own version of the expression, calling it ‘lentohapea’. 

When the 16-year old Greta Thunberg joined London’s ‘Extinction Rebellion’ protest this Spring she took the train. She also travelled by rail to the World Economic Forum in Davos and the climate summit in Katowice, Poland.

This Swedish trend is having an impact. Passenger numbers at Sweden’s 10 busiest airports fell 8% from January to April this year, following a 3% fall in 2018, according to Swedavia, which operates them. 

A survey by the World Wildlife Fund found 23% of Swedes have abstained from traveling by air in the past year to reduce their climate impact, up 6 percentage points from a year earlier. New words entering the Swedish language include ‘tagskryt’ (train bragging) and ‘smygflyga,’ or fly in secret, to describe those not quite over their budget airline addiction.

People are choosing to take the train for environmental reasons. The stats are clear with trains drastically reducing the levels of CO2 emissions. The average CO2 emissions of 285 grams per air kilometre, compare with 158 for cars and 14 for trains.

Researchers at Chalmers University of Technology in Gothenburg, in 2018, found that Swedes' per capita emissions from flying between 1990 and 2017 were five times the global average. Emissions from Swedes' international air travel have soared 61 per cent since 1990, the study said. 

The number of journeys on Sweden’s national rail network increased by 5% last year and 8% in the first quarter of this year, according to Swedish Railways. Sales of Interrail tickets to Swedes increased by 45% in 2018 – and are expected to rise again this year.  Passenger numbers at state train operator SJ jumped to a record 32 million in 2018 due to “the big interest in climate-smart travel,” they said.

Consumers are demanding that companies and brands lead by example. Klarna, the giant Swedish payment provider, has decided to have its global kick-off in Berlin for the year with all attendees travelling by train. 

The budget airlines will be watching this trend, seeing whether it spreads beyond Scandinavia, is not it is lip service and whether younger people will really give up those cheap get aways for staycations or longer train journeys.

Fashion brands will start to acknowledge this trend and reduce unnecessary travel. I predict brands will start to do more things virtually and online. 

While, in the UK, the Eurostar has made travelling by train cool - they’ve just added their third daily departure to Amsterdam - the rest of the British rolling stock is more hit and miss to say the least. While many people are trying to stop Britain’s second high-speed rail line, HS2, it could be the environmental argument that pushes it through to the end.

Time is money and with planes being faster, more direct and often cheaper, it’s going to take a seismic shift and a mental rethink to get everybody to feel the flying shame and get onboard - quite literally - with this new trend.

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

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