Coronavirus, vulnerabilities and international retail reactions

coronavirus
Michele Caprini
29 Jan 2020

In China, the number of Wuhan's coronavirus infections exceeded that of 2002-2003 linked to Severe Acute Respiratory Syndrome (Sars). This, according to official World Health Organization estimates. In the Greater China - including Hong Kong, Macao and Taiwan - confirmed cases are close to 6,000, with about 10,000 suspected cases.

 

Kickbacks

The impact on international retail, especially for luxury goods and catering, happened as predicted. The confirmation of the transmission from man to man of the new strain of coronavirus in China has led to financial repercussions with losses on the stock exchange. Luxury goods and catering are among the main evidence of the crisis.

The Hong Kong stock exchange fell by 3.03. In Europe, LVMH Moët Hennessy - Louis Vuitton SE shares fell by 2.49% in the first trades, while those of Kering SA and Compagnie Financière Richemont SA fell by more than 3%. In addition, there was a significant drop in the Asian markets for all the tourism and cosmetics brands.

It is worth mentioning the close dependence between the luxury sector and tourism, bearing in mind the costs incurred by Chinese travellers during their stays abroad. With greater or lesser emphasis, market analysts highlight the risks for commercial areas with high density such as shopping malls and restaurants.

Starbucks has announced the temporary closure of more than 2,000 stores in the country, with the resulting impact on its annual results. In recent days, a similar decision was taken by McDonald's, which closed its restaurants in Wuhan, Ezhou, Huanggang, Qianjiang and Xiantao. Despite the Lunar New Year celebrations, Disney has closed the large entertainment park and resort in Shanghai indefinitely.

Measures taken in response to the need for epidemic prevention and control were combined with the decisions of several major transport companies. British Airways suspended all flights to and from China. Lion Air, the largest airline in Southeast Asia, has decided to suspend all flights to and from China from February first.

The importance of presence

Many players in the luxury market have decided to react to the situation with a generous contribution. On 27 January, LVMH announced a donation of 16 million RMB (almost 2.3 million dollars) to the Chinese Red Cross Foundation.

The main competitor, Kering, also sent a donation of 7.5 million RMB ($1.1 million) to the Red Cross in Hubei Province, one of the most affected by coronavirus infection. In the meantime, L'Oréal and Estée Lauder have also taken similar initiatives.

The brand Perfect Diary published a safety guide for its customers on its WeChat account. According to Dao Nguyen, leader of Essenzia, an important marketing company in the beauty industry, the participation in the emergency created by coronavirus will have an important impact in the relationship of brands with their audience.

Awareness and sensitivity are more necessary than ever, after the luxury brands managed to contain the decline in sales after the protests in Hong Kong. The lack of presence and communication in the coronavirus emergency could have severe consequences in the relationship with Chinese customers as well as on the entire international scene.