The European fashion industry under the epidemic: multiple exhibitions cancelled, luxury goods turned to e-commerce?

The spread of COVID-19 around the world has made the European fashion industry doubly difficult this winter.

As of press time, the Geneva International Watch Exhibition and the Mobile World Congress have been cancelled, and Milan Fashion Week and Paris Fashion Week have lost many brands and media from Asia. According to the data, as of February 28, the stock prices of LVMH, Kering Group, Hermès and Richemont, several major European luxury groups, have fallen by 11.8%, 14.5%, 3.39% and 11% respectively this year.

However, some people in the industry believe that this may be an opportunity for the digital transformation of the European fashion industry. In the view of Wang Chong, a partner at OuXi analytics corporate management consulting (OC&C), in the medium and long term, the epidemic may change consumers' consumption habits and make luxury goods companies rethink their previously weak online channels. However, she also reminded that the establishment of online business is not overnight, from offline to online is from 0 to 1 process, the pace of European luxury companies or should be relatively cautious.

Offline marketing on the front?

Zhang Weiqi is the editor of a fashion new media in Shanghai, and every April and May, she goes to Switzerland to participate in the international exhibition. She had just cancelled her trip to Geneva for a meeting, the international watch show scheduled for Geneva from April 25 to 27 had been cancelled due to the COVID-19 pandemic, and it was uncertain whether the Basel watch show trip, which was held at about the same time, would be cancelled.

Two or three years ago, during the Geneva International Exhibition, everyone began to discuss the topic of "digital transformation of the fashion industry". This year, when the news of the cancellation of the Geneva International Exhibition came, everyone began to discuss the topic of digital transformation again. "Since offline is not working, you can try to go offline." This not only reduces costs, but also may achieve better spread results. Zhang Weiqi said.

Affected by the epidemic, in addition to considering online marketing, European luxury companies may seriously consider e-commerce business. The European Investment Bank has predicted that global luxury sales will fall by an average of 8% in the first quarter as the COVID-19 pandemic spreads.

A survey of 28 luxury company CEOs and CFOs by luxury goods company association Altagamma, Boston Consulting Group and investment firm Bernstein shows that sales in the sector could fall by €100 billion to €130 billion this year, meaning the industry's revenue will fall by 8% to 10%.

At present, in some countries and regions seriously affected by the epidemic, shopping malls have closed, or shortened the original 10-hour opening hours to 6 hours, which has affected the offline stores of luxury companies.

The epidemic becomes an opportunity?

Wang Chong said in an interview with the first financial reporter that the new crown epidemic may accelerate the development of luxury e-commerce business.

She believes that on the demand side, the epidemic may curb consumer demand in the short term, and it may change consumer behavior in the medium and long term. Luxury goods are not necessities, and consumers are having a hard time getting out of the house right now, so now they may not consider the consumption of luxury goods. But this inhibition is short-lived, and for some time to come, consumers in areas where the outbreak is not effectively controlled may look for new ways to buy luxury goods. On the supply side, store closures are currently the biggest problem facing luxury companies. If merchants are looking for new ways to reach consumers, e-commerce is a possible option.

According to the report "Crossing the Trust Gap: China's Luxury E-commerce Breaks Through the Siege" released by OC&C, as early as 2017, major luxury companies began to gradually try to exert their strength online, and by 2019, e-commerce channels have reached 15% of the global luxury sales share.

Wang Chong explained that in fact, before 2017, most luxury jewelry companies were hesitant. Because luxury jewelry companies place a lot of emphasis on brands, they focus on giving consumers a better experience, creating a better shopping environment, and providing better services, which may be difficult to fully satisfy online.

However, Wang Chong also believes that even if the current epidemic makes the luxury fashion industry rethink its "digital transformation", they will also face many difficulties. First of all, it is necessary to determine the problem of genuine and imitation products on the network platform. Secondly, in terms of price, it is necessary to maintain the consistency of offline and online and different online platforms. At the same time, the price of luxury goods is generally high, and it is more difficult for consumers to place orders at the first sight, and they may do research.

"Previously, e-commerce was not a traditional channel for luxury companies, luxury goods are brands that have been built up for hundreds of years, and for them, from offline to online is a process from 0 to 1, so they will still be very cautious." Wang Chong said.