Luxury Enterprises Need To Work Hard In Five Ways To Deal With The Epidemic.

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BCG Milan's managing director and partner Filippo Bianchi and BCG Milan responsible person Guia Ricci said in an interview that the sales of luxury goods in 2020 will drop by 25 to 45% under the influence of the epidemic.

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Filippo Bianchi and Guia Ricci explained: "considering that there are still many uncertainties, many stores are still closed, taking into account two different recovery prospects: fast and slow. Such a presupposition is based on our understanding of the Chinese market, and China is slowly recovering from the pre epidemic level. "

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According to category:

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The low price and the high percentage of online sales will recover faster, with sales falling between 20 and 30%.

The decrease in leather goods and footwear is expected to be between 30 and 40%.

Clothing and jewellery have been greatly affected, because the demand is very small during the epidemic period, and the expected decline is 35 to 45%.

Zhong Biao's recession will be more serious, falling by 40 to 50%, partly because (Zhong Biao) is mainly sold through multi brand retailers.

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In March this year, Italy Luxury Association Fo Ndazione Altagamma, investment management company Bernstein (Bernstein) and Boston consulting company (BCG) cooperate to complete the research report. Under the outbreak of the outbreak, the total sales volume of luxury goods in the world will lose 30 billion to 40 billion euros, and the total profit of the industry will fall by 15% (about 10 billion euros). 43% of respondents said that the epidemic will affect the brand's sales in the next 3 to 6 months.

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Filippo Bianchi and Guia Ricci believe that there will be no major changes in luxury consumption after the outbreak. In terms of volume, consumers will buy more luxury goods and buy other luxuries. Initially, the epidemic will affect buying habits to some extent, but there will be no disruptive changes. Before reaching the new state, the situation will remain for a long time.

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Filippo Bianchi and Guia Ricci point out that wholesale channels and small workshops are weak links in the textile / apparel supply chain. "In the future, most brands will be self employed for their own supply chain systems. Generally speaking, the whole industry will develop in a polarized way, the stronger the stronger, the weaker the weaker. More mergers and acquisitions are expected.

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Filippo Bianchi and Guia Ricci point out that in the coming weeks, inventory level, distribution network, business area, production and digitalization capabilities are five major challenges that the company needs to solve.

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They believe that the emergence of the epidemic has accelerated the evolution of the luxury industry, but the overall trend has taken shape before the outbreak. The luxury industry needs to prioritize the challenges from five aspects.

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I. inventory management

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Filippo Bianchi and Guia Ricci pointed out that in the late stage of the epidemic, luxury brands first need to solve the inventory problem. "We expect that the current 2020 spring and summer series will sell at 30 to 40%, while the usual sales rate is 60 to 65%. Therefore, before the beginning of the end of the season, the brand will backlog a lot of unsold goods, which do not want to sell cheap, and can not be destroyed. They need to quickly learn how to manage multiple quarterly inventories so as to re launch the same products in the next quarter. "

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Two, the new balance of distribution network.

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Filippo Bianchi and Guia Ricci point out that the second problem that luxury brands need to solve is distribution channel and weight allocation. On the one hand, the rapid development of e-commerce channels during the epidemic is still the focus of future development, and the proportion of electricity supplier sales to total sales will further improve. On the other hand, the impact of multi brand retailers is even greater. "Department stores' passenger traffic has declined before the outbreak, and some department stores are facing complex financial problems. In addition, after the end of home quarantine, consumers will have a sense of fear about the crowded environment of department stores. Multi brand retailers are not only facing this situation, but also with inventory backlog, sales and profits plummeting.

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Three, business district "new division"

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Filippo Bianchi and Guia Ricci believe that after the outbreak, new commercial divisions will be formed. "Up to now, Asian consumers, especially Chinese consumers, have purchased 30 to 40% of the world's luxury goods, while Chinese consumers have purchased 50% of their luxury goods overseas, mainly in Europe. Tourism retail will become one of the longest distribution channels in the recovery period. The reshuffle of luxury consumption is accelerated mainly to China, but this has a negative impact on retail sales outside China. "

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Four, restart the supply chain.

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For the entire luxury industry, the most urgent task in the post epidemic period is to resume production. Filippo Bianchi and Guia Ricci show: "usually, the current period is the prototype and sample production period of the 2021 spring summer series. If the workshop and craftsmen can not start production again in the past 2~3 weeks, the brand will lose six months of sales. Ultimately, not just a company, but the whole industry may become more vulnerable. "

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Five, accelerate the transformation of digitalization.

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Filippo Bianchi and Guia Ricci point out that the so-called digital transformation is not merely to expand the electricity supplier, but to accelerate the digitalization at all levels. From commodity development links, prototype production processes to business activities. These processes will be more virtualized to reduce sample production and offline promotional activities. "This is an important opportunity to make production faster, more flexible and cheaper."

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In another report, BCG pointed out that a luxury brand has tracked the trend of Korea and China during the epidemic, noting that the online search volume of product category of brand is increasing, which indicates a "sales revival" and the sales growth of the brand in a few days. That is to say, brands can develop suitable solutions for other important markets. "This case highlights the ability to use AI analysis to gain more direct advantages through the use of precision assessment and the importance of big data."

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With regard to how these luxury companies meet these challenges, Filippo Bianchi and Guia Ricci offer the following advice: "we must set up a multi-functional team to make decisions quickly and flexibly. It was unexpected before the outbreak. Luxury brands must know what is most useful and what is most valuable, while ensuring that internal organizations are full of vitality.