Shuttered boutiques, cancelled fashion shows and postponed product launches are the order of the day for luxury brands in China since the spread of the coronavirus began in January. Confined to their homes, the Chinese no longer have the heart to spend fortunes on luxury goods, and major luxury players are seeing their sales plummet as a result—a serious setback given that the Chinese account for nearly 35% of the global luxury market’s total spend and some 90% of global sales growth.
On Hong Kong’s Canton Road, where Louis Vuitton’s boutique saw its highest sales globally just a few months ago, long queues are a thing of the past. "On the avenue, brands have gone from welcoming 1,200 people per day to a maximum of 40," remarks an Asia-Pacific director from Kering Group. LVMH, meanwhile, has had to close some of its stores in Mainland China and Hong Kong and Burberry has abandoned forecasts for 2020 due to the uncertainties linked to the epidemic.
But retail sales aren’t the only ones to be impacted by Covid-19. The second coronavirus effect is already being felt at the production level: from textiles, snap fasteners and the clasp of a necklace to packaging components, brands are on the brink of a shortage of essential made-in-China accessories due to prolonged factory shutdowns. "We produce cardboard packaging featuring printed patterns for French luxury chocolate and macaroon brands and our factory in Dongguan (southern China) has just been allowed to reopen after a series of health inspections. However, production is idling as our qualified personnel from Wuhan have not yet been allowed to return," explains Joël Leduc, associate director of Pack & Cie.
A US-based packaging supplier in the prestige cosmetics realm tells Luxe Packaging Insight that 40-50% of its production staff in its China factories are still unable to return to work, making for a "significant slowdown in production", according to the executive.
With 70% of Chinese consumers’ luxury spend taking place outside of China, the current travel restrictions are also severely affecting brands outside the country, and notably in the travel-retail channel.