Global fashion industry facing a nightmare

Global fashion industry facing a  nightmare
Luxury goods makers are anticipating significant losses due to the coronavirus outbreak, while High Street retailers could see new collections delayed by months.

The global fashion industry is worth £2tn ($1.5tn) and it brings the UK more than £30bn a year in revenues.

According to investment bank Jefferies, Chinese consumers make up 80% of growth in the market.

"It s a nightmare," said Flavio Cereda, a managing director at Jeffries.

The power of the Chinese consumer has grown over the last decade and now accounts for 38% of the global fashion industry. In comparison, in 2003, during the Sars epidemic, the Chinese consumer accounted for only about 8% of the market.

And until 23 January, sales forecasts for 2020 were looking good.

But with some Chinese cities now on full or partial lockdown and a spike in new cases - as of Friday, - shopping malls are deserted, workers are at home, and the luxury goods industry is seriously worried.

There have been profit warnings from Burberry, Ralph Lauren, Coach and Kate Spade owner Tapestry, Moncler and Capri Holdings - the parent firm of brands like Versace, Michael Kors and Jimmy Choo.

"We ve never seen a situation like this, where sales go to zero. And it affects everybody, whether you re a big or small brand," Mr Cereda told the BBC.

"We re looking at at least four months of very painful trading figures."

Mr Cereda thinks that there will definitely be a recovery, as there is a lot of "pent up demand" to spend from Chinese consumers, and that spend is crucial to continued growth in the global fashion industry. But his guess is that it could take until the summer for consumer confidence to pick up again.

Image caption Chinese consumers now make up 38% of the global fashion market

"Chinese shoppers have a lot of money to spend nowadays," Maria Marlone, a principal lecturer at Manchester Metropolitan University s Fashion Institute told BBC Radio 5 Live s Wake Up to Money programme .

"So whether they come over to the UK to shop and spend here, or they go up there into their own cities and shop for UK brands over there, it s going to cause a problem, because there s just no product and there s nobody there to retail the product."

"Not only have you got the problem of getting product out of China... you ve also got the closure of UK companies hub offices that are based in China, and they re quite big operations."

At London Fashion Week 2020 over the last few days, Chinese buyers have been missing and they most likely won t be at Milan Fashion Week on 18 February, added Mr Cereda.

High Street retailers will not be spared the impact of the coronovirus outbreak either. Some retailers have stores overseas in mainland China and southeast Asia, but even without an Asian presence, a lot of manufacturing is still carried out in China.

UK retailers are now facing delays to their spring fashion collections of at least four to six weeks, at a conservative estimate, according to retail expert Kate Hardcastle.

Ms Marlone agrees: "If products haven t been on the seas a few weeks ago, there is going to be a delay - they reckon maybe up to two or three months, and if there s going to be that much, then you have to question whether the customers are going to want it at that stage."

"High quality goods like Burberry and John Smedley are still manufactured in the UK, but mid-range quality like M&S have been chucked out to China a few years ago."

Image caption A lot of manufacturing for some retailers is now carried out in China

London-based clothing and fabric manufacturer ApparelTasker says that the closure of Chinese factories and wider uncertainty is benefiting its business.

The firm says that it charges double the amount it would cost to have items manufactured in China.

"Today alone I ve had five or six orders placed with me, based on the uncertainty of China s delivery windows, on the back of the coronavirus. All of it is by London Fashion Week designers," ApparelTasker s founder Zack Sartor told BBC Radio 4 s Today programme .

Ms Hardcastle is worried about the impact delays in product deliveries will have on High Street that is already reeling from a dismal Christmas.

"Spring and summer collections create a spike of interest online and in stores - usually more colourful than the autumn and winter colours before them - they help drive important online dwell time and in-store visits," she said.

Consumers want to buy into trends as soon as they see them, and want products in shops to always look "fresh and new", which will be a struggle if the delivery delays continue.

"Retailers don t have much capacity for further issues - there are still 70-80% discounted stock loitering on websites, even premium fashion sites."
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