From factories to fairs, the epidemic has put the entire value chain of the fashion business in check, and its impact is still uncertain.
Chaos theory says that “when China sneezes the rest of the world catches a cold”. The coronavirus epidemic, which began in the province of Wuhan in China and already claimed more than a thousand deaths in the country, has unleashed a global storm that greatly impacts the fashion business. Its effect extends across the entire value chain: China is the largest factory in the sector, the second largest consumer market, the main tourist issuing country in the world and one of the largest markets for fairs, both as a destination and place of origin of its visitors.
How much will the coronavirus cost precisely is difficult to estimate. The largest companies in the sector have already warned of a potential impact on their account, considering only the cost of maintaining large part of their stores in the country.
But worries extend much earlier in the value chain, until provisioning. China accounts for 54% of total textile and clothing production and 23% of global exports, according to Euromonitor International.
According to the consultant, fashion is the sector that is most at risk, along with consumer good and technology. The spring-summer collections, which has already begun to enter stores, has been the first to be affected: what has not been able to be dispatched by ship in China time will have to be accomplished by plane, with the consequent increase in costs.
Companies such as Nike, Capri, Burberry or Estée Lauder have already begun to signal the impact of the crisis on their sales. Capri, owner of Michael Kors, Jimmy Choo and Versace has said that he expects that the closing of stores and the fall of traffic in the country will mean about one hundred million dollars less revenue in this year. Ralph Lauren is another of the few companies that has quantified the impact, putting it at seventy million dollars.
Inditex, which presents its annual results next month, has not quantified it, but Credit Suisse has estimated an impact on sales of 2.8% in the first quarter of this year. China represents 8% of the group’s sales, compared to 6% of H&M. For the Swedish group, investment bank analysts anticipate an impact of 1% in the first and second quarter.
The crisis has disrupted the fair calendar, with cancellations, delays, and falling visitors
As for Euromonitor, they anticipate that part of the consumption is likely to be transferred to the online channel, which could dampen the fall. Still, the company anticipates that retail sales in China leave behind increases of between 5% and 6% in recent years to a shy growth of between 2% and 3% in the first quarter of 2020.
The impact on the Chinese economy, the company says, will be concentrated in the first quarter, and the country will recover the rest of the year. However, “the risk of a longer expansion of the epidemic increases the likelihood of a greater slowdown, up to 4.7% to 5.4% in 2020”. Bloomberg lowers the forecast to 4.5% in a “content scenario”, which would mean the smallest decline since data began to be published in 1992.
On the global economy, the impact will be 0.4 percentage points in the first quarter, according to Bloomberg and none of the major powers will be greater than 0.5 points. The most affected region? Hong Kong, where there could be a deviation of up to 1.7 points.
The world economy will decrease by 0.4% this year due to the impact of the coronavirus
Another of the potential impacts of the coronavirus is on tourism. Chinas is the main tourist issuing country in the world and its citizens are one of the engines of travel retail, key to fashion.
In 2019, Chinese tourists made 150 million trips abroad and spent 130,000 million dollars outside their borders, according to data from the country’s government collected by the Financial Times .
Currently, fourteen countries have limited or banned flights from mainland China. According to the University of Oxford, only the United States will stop receiving 1.6 million visitors from the country this year. The impact will be greater in countries such as Greece, France and, especially, Thailand, which depends more on tourists from this country.
Finally, the epidemic has also put the international trade fair business in check. The most famous cancellation has been that of the Mobile World Congress, in Barcelona, with a still uncertain impact on the city’s economy.
But in fashion, cancellations and delays have been going on for a month. Even at the fairs that have been held, such as Première Vision, in Paris, where a third of the exhibitors come from Asia.
Messe Frankfurt has also decided to postpone the celebration of its three fairs
“Surely we will see a decrease in the number of visitors from China, since they cannot fly to Paris due to restrictions; In addition, other companies from other European countries have avoided traveling during these days,” explained Gilles Lasbordes, director of the fair, to Modaes.es.
Messe Frankfurt has also decided to postpone the celebration of its three textile fairs in Shanghai: Intertextile Shanghai Apparel Fabrics, Yarn Expo and Intertextil Shanghai Homes Texitles, scheduled for March.
The Chinese edition of Ispo, specialized in sports and scheduled for February 12 in Beijing, has also been canceled to “protect the health and safety of our exhibitors, visitors and the general public.” Chic Shanghai and Denimsandjeans Japan, scheduled in Tokyo for early March, have also been postponed.
The crisis has also disrupted the fair calendar outside of China: the US NW Materials Show, specializing in footwear components and scheduled for early February at the Oregon Convention Center, has been postponed.