UPDATE #5 - An Outlook on the European and Chinese Fashion Markets over the next 2 to 3 years
Recently, I have received a lot of emails from designers we are partnered with, and those who would like to partner with us, and also from factories who are seeking to join our project, expressing real worry and even despair, at the current situation in their respective countries - in Italy, France, Portugal and other European countries.
They have said "it's a nightmare.... " and these are "dark times.." in their private letters to me.
I very much apologize, because of my time restrictions, I truly haven't been able to respond to so many incoming letters, I can only use the method of updating our website to share our perspective and my point of view with anyone who is interested in these topics, including those in partnership with us, or just those who may come across our site. Of course, I need to make clear with seriousness, that what I write may not be correct; these are my analyses and predictions, and I do not assume legal responsibility for them, I only hope to share my point of view, with any of those who might take an interest.
Recently, I read an article in the Washington Post, by Bill Gates, in which he very clearly points out that he believes that within the next 3 years, humankind will not be able to really confirm a solution to this virus outbreak (You can read it here: Here are the innovations we need to reopen the economy). Bill Gates has, in the past, had a very accurate track record for his predictions; the predictions he made even 20-30 years ago, for instance, have come true, and as a result, I believe that there is a strong tendency toward accuracy in his forecasts.
If his analysis is right, then what kind of world, will we be facing? In particular, what will we face in the fashion industry?
I have to speak practically, and matter-of-factly, and say that the world, and of course that is inclusive of Europe, will be in very bad shape for quite some time; the reason is that tourism has all but evaporated after this virus hit us, and for quite a significant time, people will as best as they can, seek to avoid unessential travel, because they will be scared to get infected with the virus. This is especially true of Asian populations, in particular, Chinese people, because their cultural habits are more conservative and cautious. As a result, then, the events happening during fashion week will also suffer greatly.
In the past, every year, there would be a huge number of Asian buyers coming to the shows and going to market week; they come to Europe to buy the latest fashions for the next seasons.
They bring these European fashions home to their countries - of course including China, Japan, Hong Kong, Taiwan, Singapore, and other regions and countries in the Asia Pacific. At the same time, there has had an increasing numbers of tourists visiting the key shopping capitals of Europe. France received 90 million tourists last year, Italy received 63 million tourists, for instance, and among those numbers in particular, a large percentage of tourists were coming from Asia, in particular, from China.
These tourists came to Europe and not only took in the sites, and the history, and admired the culture and the local way of life, they tried local foods and delicacies, absorbing all these traditions, and at the same time, they bought such a huge amount of the local fashion. Chinese tourists spent 650 million euros in Italy alone last year, for instance, just to put this in perspective.
But after this virus hit the globe, these tourists, these buyers, their presence in Europe has all but dried up, and this sudden absence will bring to the European fashion industry and tourism industry a very devastating impact; the drop will be so sharp, like suddenly tumbling off a cliff.
This will impact countless number of hotels, including AirBnB, and apartment services; it will also greatly impact the fashion industry, and of course, also the fashion manufacturing industry as well, because these tourists will disappear.
As a result, I believe that even though we are full of confidence toward the future of the European fashion market, but in these 2-3 years following the virus outbreak, if we cannot determine an effective vaccine or treatment, the global economy, of course including the European fashion industry, will have no choice but to deal with this prolonged dark moment.
However, bigger brands should not be impacted as much; because they can still grow through online sales, e-commerce, and sales in physical branches in Asia. The most obvious example is that from March, if we look at the sales figures for big groups like LVMH and Kering, their sales growth has picked back up in China and online.
Here, I want to discuss China in particular. I believe that the resilience of these big brands, this explosive growth over a short time, in particular, the record-breaking one-day sales revenue figure of $2.7 million generated in one of Hermes stores in Guangzhou, China, cannot solely be explained by revenge spending on the part of Chinese consumers craving consumption of these brands after lockdown ended, but rather, it can also be attributed to the fact that these consumers know that in the foreseeable future, at least for quite a long period of time, they will not be going to Europe for travel, and so they can only choose to consume domestically, inside their country. In reality, in China, the price of luxury goods is broadly speaking much higher than the price of those same luxury goods in Europe, because of taxes and other reasons. So in the past, Chinese people would fly to Europe to buy those goods, which were priced much lower than in China, and that part of that difference in price would essentially cover their travel expense to fly to Europe. So instead of shopping in China, they would rather fly to Europe to buy, because they could not only save on the price of the goods but also come for a tourist trip.
But now, because of fear of getting infected by the virus, many people will choose not to fly to Europe anymore. They choose to buy in their own countries or regions, even if those products are going to be so much more expensive than the luxury products being sold in Europe. This is, I believe, one of the main reasons we have seen this huge burst of sales being generated at the domestic locations of luxury brands in China in these last few weeks.
The result, is that the smaller brands in Europe who relied on fashion shows, and showrooms to get their products into the Far East and China markets, are going to be impacted because they don't have a direct way to access this market, nor do they have economic strength.
We believe that this kind of situation will persist for a long period of time.
For us, this has actually brought about a huge chance, and this environment is very favorable to us, because vast numbers of consumers who normally would have traveled to Europe for tourism and fashion shopping every year in the past, because they now fear infection from the virus, they will choose to buy domestically, giving what was already the biggest fashion market in the world, an even greater increase in spending power. From our position, we can provide these huge numbers of consumers who have no way of coming physically to Europe, the chance to reach their arms out and touch hundreds of unique European brands , each season, we will bombard them with tens of thousands of unique yet high quality styles, each with their own personality, story and authentic point of view. We will put forth our greatest effort, to provide to these consumers an absolutely premium quality fashion experience.
This will make up for the regret and the longing that they feel, since they cannot personally travel to Europe. We believe that very soon, we will be the only platform in Asia, especially in China, at least for now, that has the ability to offer hundreds of millions of consumers the chance to simultaneously buy from fashion brands hailing from France, Italy, England, Spain, Portugal and other countries, offering tens of thousands of styles each season, from clothing, to bags and shoes, all with distinct personality, classic European design and at very competitive prices. We will simultaneously show consumers both online and offline the artistry of these excellent small and medium-sized brands for consumers to enjoy, select and purchase.
We believe that the Asian and Chinese consumers who passionately love European fashion brands will give these brands a frenzied and warm embrace and support.
At the same time, I would like to say to the hundreds of brands who visit this site each day, that no matter if you enter the China market on your own, or with us, or with another partner, right now, is the best time to be doing so. The China and Far East market is the battlefield of the future, and it's also the virgin territory to be developed for any new brand. You should not wait for the European market to recover, because the fact is that no one knows, under these circumstances, how long this situation will persist.
We also hope that more brands, and more people in the fashion industry, no matter if they work with us or not, will enter the China market together, because the more brands that enter, the more it will stir up the desire to consume in the market.
This is as I have often shared here, that any small to medium brand, going into China alone without very strong financial support, will capture the attention of the market with much difficulty, but a large number, a huge number of brands entering into the market, will be like a garden overflowing with flora, it will excite the consumer to no end, and it will buoy this market to new heights, causing it to be even more enthusiastic in its demand for unique, classic and high-quality fashion brands from Europe, and these brands will become more and more influential. I hope that every small to medium sized brand, can face this fast-growing fashion market, and with great passion, enthusiasm, and drive, with full ownership of your own creativity, join this vast market as one of that blooming flora. Once again, I sincerely hope that any brand, no matter if you are working with us, or working with another company, or even venturing on your own to the biggest fashion market in the world, and including ourselves, we will each have the opportunity to improve and win success in this massive market.
A lot of the letters I have received from our partner brands recently has also filled me with confidence, they anticipate, and they promise, to put forth and unleash, their full creative force, and invest in new ideas for this market in China, and the surrounding region, and they are putting a big focus on creating for our region and making it a main focal point for them. I am particularly moved by a letter I received from one of our partner brands, created by a very talented French designer. He is waiting for a heart transplant, and is very weak. Unfortunately, he has also had problems with his kidneys and has recently started dialysis treatment. But nonetheless, in his letter to me yesterday, he expressed that he was continuing on with his trademark application, despite having received a refusal from the trademark bureau for a previous application. He has still decided to change some aspects of the brand name, and re-send the application once more with amendments. I was deeply touched by his love and passion for his own career and his trust in us. After I read his letter, I was completely beside myself, I was deeply, deeply moved by him, and we sincerely felt the heaviness of our great responsibility, and I have come to understand, that on my shoulders bears the hope and unimaginable trust of all the brands that have signed with us. This also greatly inspires us to work harder and move forward with more confidence. We will devote great enthusiasm and fully dedicate ourselves, with an attitude of hard work, never slacking, to push forward, and I believe we will definitely achieve success, and we can help each brand who is partnered with us, have the chance to make their hopes and dreams a reality.
We believe that we will definitely reach the shores of our success.
The above analysis is just my personal opinion; when any reader of ours may make their own judgment about what I have written, I believe they should consult experts, before forming their own view on the market.