Coronavirus to hit China’s GDP (-1%) and affect luxury plans

Coronavirus brucia un punto di PIL della Cina e i piani del lusso

Morgan Stanley have provided such financial forecast: Coronavirus is about to hit China’s gross domestic product, which will drop by 1%. Owing to the virus outbreak, Chinese economy is likely to slow down considerably, so much so that “all import-export relations with Western countries, or almost all of them, will come to a stop”, commented Libero Quotidiano. Even though this is just an assumption, for the time being, Coronavirus immediate effects are already evident and tangible: “At present Chinese are not travelling abroad. In addition, they are buying much less in their home country as well – remarked Luca Solca, financial analyst at Bernstein, while speaking to Il Sole 24 Ore -. Due to the present emergency, the feel-good factor, which is of paramount importance in the luxury shopping, has obviously disappeared”.

Milan suffers from Coronavirus effects

Fear is bound to spread around, as De André, an Italian singer, used to sing. Although in Milan there is no Coronavirus outbreak, some detrimental effects are evident anyway. In fact, the Italian city is one of the favourite tourism destinations to Chinese top spenders: as reported by Confcommercio, here Chinese buyers spend 300 million euros a month on shopping, restaurants and hotels. “Earnings have been decreasing by 40%, compared to the period before Coronavirus”, announced to the press Beppe Sala, mayor of the city, while hinting at the same data.

Milan stays alert

Milan is also home to the most important fairs and exhibitions in the fashion industry. Following Lineapelle, TheOneMilano, the fur and prêt-à-porter fair, will regularly take place as well: they scheduled the exhibition on February 20-23. “While scheduling the event – they announced – we shall painstakingly comply with the guidelines issued by the World Health Organization, the Ministry of Health and the Superior Institute of Health. Likewise, we shall abide by regulations in force”.

Due to Coronavirus, China’s GDP drops by 1%

The high-end business highly relies on the Chinese market. Due to the virus outbreak, sales might slump all of a sudden: that scares brands a great deal. As emphasized by Il Sole 24 Ore, we can only compare this situation with the Sars one, which dates back to 2003. At that time, retail sales growth dropped from +9% down to +4%. According to Barclays, larger distribution extensiveness could soften detrimental effects, while Credit Suisse spotlight the importance of e-commerce in fashion sales: as it accounts for 35% of overall revenues, it could therefore offset the downturn in store retail sales. “Actually, transports and logistics will also slow down – remarked Flavio Cereda, from Jefferies, while speaking to the economic-financial newspaper –. Personally, I do not believe that online purchases will manage to offset declining store sales. Luxury shopping is bound to slow down, therefore affecting its business performance, in the first half of the year, at least. This is going to be the perfect storm to luxury industry, whose business still relies heavily on one single nation”.

In the picture (Shutterstock), the Chengdou shopping district on days of fear

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