The following article is an excerpt from Forbes, the full article can be found here.
It’s hard to imagine where it will end. Retailers like Apple, Nike and Warby Parker are shuttering their doors to stem the spread of Coronavirus; Amazon’s “Prime” promise of 2-day delivery is laughable on a good day with the company being barraged with orders (and trying to hire 100,000 workers to help); and retailer Patagonia is going one step further by closing their online store until the virus abates. While China’s manufacturing bounces back to life after experiencing significant drops in new Coronavirus cases, with much of the world months behind or more on the virus curve, the question remains whether there will even be orders to fill. It’s all spiraling into what some economists believe could lead to a global recession or worse following the complete financial market meltdown that continues to heat up.
The best – by virtue of having emerged from their outbreak – is China. For the purpose of this article, I’m going to focus on a few key points we’re seeing in both of these markets related to impact that may be headed to the U.S., as well as what recovery may look like.
Whether it is producing luxury goods in the North, or leather and jewelry in the South, Italy’s production has come to a standstill. With a trajectory that doesn’t look like the country will recover anytime soon, the Wall Street Journal’s Sylvers reported that foreign buyers around the world are cancelling orders of Italian textiles and products, impacting the entire clothing supply chain — from companies who produce the fabrics, to those who create the clothes and accessories.
The U.S. textile and apparel industry is a nearly $70 billion sector when measured by value of industry shipments. With more than 340,000 jobs, the U.S. industry manufactures textile raw materials, yarns, fabrics, apparel, home furnishings, and other textile finished products. As we look ahead, it’s likely that the U.S. will be similarly affected with a ripple effect on not only the manufacturing supply chain, but demand for their goods.
According to this piece in Forbes, if China gives us a window into what’s going to happen here, we can expect the luxury market to be among the hardest-hit sectors in the U.S. Luxury industry executives predict the Coronavirus could wipe out between €30 and €40 billion in sales according to the story, citing an ad hoc survey conducted in February by Italian luxury brand consortium Altagamma, in association with Boston Consulting Group and investment firm Bernstein, which predicted the virus would be responsible for “dragging the industry down to levels not seen since 2015.”
A consumer psychologist quoted in the piece predicts that since luxury purchases are such an emotional buy, the luxury industry could benefit quickly. “Once the immediate threat [of the Coronavirus] lifts…luxury consumers will come back stronger in a backlash against all the worry and anxiety they came through.” He notes that this happened after World War II, 9/11, and the most recent Great Recession.
If we follow the trajectory of China, U.S. economic recovery is likely approximately six weeks away. A recent PYMNTS article reported that retail is finally bouncing back in China. Apple has reopened 42 stores in China and malls are also beginning to see more foot traffic. Chow Tai Fook Jewellery Group Ltd., the world’s biggest jeweler by sales, said about 85 percent of its more than 3,600 Chinese stores have resumed operations so far. But it’s definitely a slow progression. According to a March 2020 YouGov survey, 85% of internet users surveyed in China said they still have avoided crowded public places over the past two weeks. We’ll need to watch China for a few more weeks to get a better sense of how long it may take U.S. consumers to return to their favorite stores..
This article in PaymentsSource from February discusses how having cashierless payments enables people to shop without fear of coming into contact with others in China. It also outlines how accepting mobile payments like WeChat Pay in Shanghai, which is what about 90% of 3,000 residents in the store’s immediate vicinity use as their primary payment method, has enabled customers to pay without downloading any special apps. According to the piece, digital payment flows have also helped the Chinese government track transactions as part of the recovery effort. It’s also not a big leap to think about companies that already had technology in place which enables them to digitally test products and gather data on customer preferences, streamline the supply chain and increase speed to market to stay ahead.
As states and countries begin to open up in phases, the need for retailers to connect and understand their audiences has become more important than ever before. ID Plans provides property owners of large retail companies with the digital tools to help them run their businesses more efficiently, allowing said retail companies to deliver the products, pricing, and services that customers hope for and expect.