“The expectations to date are that the luxury market can contract in 2020 for about a third, a decline never seen in the history of the recent luxury industry”, says Luca Solca, analyst at Bernstein. According to the study by the company Bain & Company, published with the Altagamma Foundation, at the end of 2020 the sector will record a loss of 25%-35%, with a turnover of 180-220 billion euros. Interestingly, estimates for February indicated a loss of around 10% but the progressive spread of the Covid-19 pandemic within a few weeks forced all countries to lock down: from Europe to China, to the United States. The closure of the business has stalled production and foreign buyers have begun to cancel orders for products with an impact on the entire supply chain. The system has stopped globally and it is estimated that to return to 2019 levels with 281 billion will have to wait until 2022-2023 with 275-285 billion. Even longer the time for growth, in 2025 alone an increase of between 2% and 3% to 320-330 billion.
In the immediate future, the main problem concerns the sale of the goods, to the point that the possibility of an agreement between the big brands for a collective stop to the production of the spring-summer 2021 collections had been raised. “What I think happens is that no one has been able to present and produce the SS21 pre-collections, so these will not be there” – declares Luca Solca – “In-store the FW20 will remain for an extra couple of months, until January and February 2021, moreover in line with the SS20 that will remain in the store at full price until June and July”. Antonio De Matteis, CEO of the Kiton Group, said: “Lengthening the time is a necessity, not a choice. The summer collection has almost jumped, in Italy only on May 4th the production has been distributed and on May 18th the stores were reopened without having, until the last moment, the specific rules to be applied”.
Kiton, a group specialized in the production of men’s fashion and for some years also women, in 2019 reached a turnover of 135 million, has 60 single-brand stores in the world and 850 employees while the production sites are exclusively in Italy. This allows the company to have a global view of what is happening. “In China we reopened in March, when the lockdown was declared in Italy, for now the signal is very positive because the numbers and consumption are in line with last year” – says De Matteis – “”the backlash in the Asian country we had in the previous months, we were closed from 24 January to mid-March, in conjunction with the Chinese New Year. The United States and Russia, on the other hand, are still in the midst of a pandemic.”
In fact, the first signs of recovery have arrived from China and the data are encouraging with increases in sales in the luxury sector. In Europe it will take longer to restore substantial growth also because sales of luxury brands are linked in part to the presence of foreign tourists. “In addition to an important contraction, there will be a further shift in Chinese demand in China, at least until we return to the normality of intercontinental travel” – notes Solca, analyzing the possible scenarios globally – “an acceleration of digital distribution in step with a descent of wholesale and a push for the integration upstream of production, given the difficulties of the Italian sub-suppliers that the large groups will buy by choosing the best”. It cannot be excluded that the crisis will lead to a series of mergers and acquisitions in favor of the strongest and most structured brands allowing, as Luca Solca points out, a consolidation of the sector “in favor of larger groups and with greater financial availability”.
The closure of companies and the forced stop of the entire textile supply chain have led to an inevitable slowdown and a profound reflection on the current business model. Previously a garment or accessory was considered “luxury” if they lasted over time, if the materials with which they were made could remain unscathed as the seasons and generations passed. Just as fast fashion has been the main accelerator of clothing production transforming the textile industry into one of the most polluting in the world. The pandemic could also affect a shift in values in the luxury sector. According to Solca “sustainability grows in importance for younger consumers” while for De Matteis “there will be more attention in the search for quality, it is a feeling that gives great hope”.