Italy on lockdown, the fashion industry must prepare for losses

Italy on Sunday followed in the footsteps of China, putting a vast area amid the coronavirus outbreak in lockdown. The company’s wealthy Lombardy region, which includes Milan, Venice and is home to luxury brands Bottega Veneta, Prada, Versace, Giorgio Armani and Dolce & Gabbana, has effectively banned 16 million people from traveling in and out the region in a bid to control the spread of the virus. The ban is expected to be enforced until April 3rd.

Disruption to supply chains and workforces

Much of Italy’s manufacturing and fashion industry is located in the North, although analysts say it is too soon to speculate as to the full economic toll it will have. With many factories, warehouses and brand headquarters based here, supply chains face disruption and workforces curtailed affected by the quarantine.

In Milan, streets were eerily quiet, as were popular public areas like the Duomo. Over the weekend Italy saw a surge in deaths with nearly 8000 persons infected, the highest number outside of China.

Luxury brands and retailers operating in the lockdown area will need to find a balance between business-as-usual and safeguarding the safety of their workforces at various levels, from head office, corporate to their boutique staff.

Many companies, like Diesel and Luxottica, rely on local manufacturing for textiles, leather goods, accessories and footwear. It remains unclear how the lockdown will affect production output, but judging by the stock market crash on Monday, the cost to Italy’s economy will be severe, with a possible recession looming.

Boutiques could close

If China set a precedent, brands may temporarily close stores in response to the government enforcing the isolation of people. A production shortage, however is not yet the main concern. As luxury analyst Mario Ortelli told the Business of Fashion, consumers are “not in the best mood to splurge into luxury products.”

The Camera Nazionale della Moda Italiana, the Milan-based national chamber for fashion, is in talks with authorities to support fashion companies that are struggling, such as deferring tax payments and other financial burdens.

Fashion accounted for 1.3 percent of Italy’s GDP in 2017, FashionUnited’s statistics show. Clothing is the most important category (40.5 percent of total revenues), followed by leather goods (20.9 percent) and eyewear (16.2 percent).

The coronavirus outbreak is likely to be a nightmare for Italy’s 100 billion dollar-plus fashion industry, Carlo Capasa, the head of the National Chamber of Italian Fashion, told Time.com. Despite a strong start to the season, he cautioned emphatically: “For sure, we think the first six months of 2020 are going to be bad.”

Photo credit: Giorgio Armani, Facebook