The COVID-19 virus, named by the World Health Organization (WHO) is causing a change of strategy in China's fashion and luxury industry, which has also granted several million Euros in aid to Hubei Province. The crisis came in the midst of the Chinese New Year - a period in which Chinese customers usually spend around €130 billion.
The COVID-19 epidemic, in addition to the heavy human toll and serious socio-economic repercussions, both in China and around the world, is causing a strategic shift in the headquarters of the fashion and luxury goods giants, who are now faced with a dilemma. How to stay close to Chinese customers when stores are closed? How to communicate in times of crisis, when the Beijing and Shanghai Fashion Weeks, scheduled between March 25th and 31st, 2020 have been cancelled and postponed? Is it necessary to communicate, distribute promotional content or refrain from doing so?
"A crisis like this one poses a real challenge to brands. But it's also the time for them to defend their values and make them known," says an editorialist in Jing Daily. "The Chinese authorities and consumers will be interested in the reaction of companies, especially foreign ones, following the crisis," says a report by The Economist Intelligence. In short: those who have helped will be thanked. Message received in the fashion and luxury sectors. While waiting for the end of the crisis, the giants of the sector, in the name of "bonds of friendship with the Chinese people" expressed their solidarity with the victims of the Coronavirus (COVID-19) in January and announced the granting of donations for the province of Hubei, the epicentre of the epidemic.
The Richemont conglomerate has donated 1.3 million Euros (10 million RMB) to the Chinese Red Cross and Paris-based Kering announced a donation of $1.1 million (7.5 million RMB) to the Chinese Red Cross. The French group LVMH released $2.3 million (16 million RMB), saying it was also helping to gather medical supplies in France and Europe ready to be sent to China - as Beijing has announced an urgent need for medical equipment resupply. For its' part, Hermès made a donation of 5 million RMB (765,000 Euros) to the China Soong Ling Medical Foundation.
The beauty groups L'Oréal and Estée Lauder pledged $720,000 (RMB 5 million) and $300,000 (RMB 2 million) respectively to help China fight the virus. As for the Japanese group Shiseido, it expressed its' "condolences to the victims" and launched the "Relay of Love Project", specifying that it would donate 1% of its' sales in Asia between February and July 2020 to medical and aid organizations in Hubei. All this is positive news welcomed in China on the social networks.
"The current crisis also reveals, paradoxically, China's newfound strength and the level of dependence of brands on the Chinese consumer," says a study by the McKinsey forecasting firm.
A large number of Chinese fashion brands have reacted very quickly, favouring proximity to their fan base. The Perfect Diary group distributed a "health and safety guide" while other retailers offered their customers colorful and creative breathing masks. Safety not only for customers but also for their local teams. As of February 7th, 24 of the 64 Burberry stores in China were closed - in those that remained open, sales were down 80%. "We are taking every precaution for the health and well-being of our employees," said Marco Gibetti, Group CEO in China. The same goes for Gucci, Tiffany & Co as well as Versace, which has closed 29 stores in China in recent weeks, while at the same time launching, along with other brands, a project called "I believe" to help spread messages of hope and positivity.
The priority for the moment, and for many of the sector's brands, is to focus on their online offering, using their direct networks. This is what the Japanese brand Uniqlo or Guerlain is doing: China became its' leading market in 2019. Or Fenty, the brand of the singer Rihanna. The same goes for groups like Richemont or Burberry, for which China accounts for 40% of worldwide sales. As for Tmall - China's leading online business-to-consumer network - it has become, inevitably in recent weeks, the new Eldorado. Several fashion, luxury and beauty groups, such as L'Oréal and Estée Lauder, sensing that the current crisis in China will boost the digitalisation of the economy, have also already decided to increase their investments in research and innovation and in new emerging technologies.