Chanel and Hermès have announced the suspension of production

As the epidemic hits the "heart" of the luxury goods industry, industry giants that have always used "Made in Paris" and "Made in Italy" as quality benchmarks are falling into an unprecedented dilemma.

According to the fashion business news, French luxury brand Chanel issued a statement on wednesday announcing the suspension of production. According to the latest French government instructions, all production bases in France, Switzerland and Italy will be temporarily closed. The restoration date is to be determined.

Another luxury group Hermès has decided to close 42 production bases in France until March 30. Prior to this, Italian luxury brand Gucci has closed 6 factories and all stores in Italy. Of perfume factories started producing hand sanitizers this week.

Some Italian textile and leather product suppliers told Reuters that due to the sharp decline in Chinese consumer demand, orders for luxury brands such as Gucci, Prada and Salvatore Ferragamo have significantly decreased since February, and some luxury brands have even reduced their orders half. Among them, Kering Group's suppliers revealed that Gucci's February handbag order volume was halved to about 450 from 880 to 1,000 in January, and there were no orders in March. LVMH suppliers have also said that orders for Louis Vuitton handbags have fallen by 30%.

It is worth noting that in order to meet the rising demand of Chinese consumers, Hermès has been increasing its investment in its workshops in recent years to increase the production capacity of its small leather goods such as gloves in France. Craftsmen have opened a new training workshop and plan to move their factory in Saint-Réinien, France, to an existing one by 2022, while doubling their workforce.

Chanel also acquired the Degermann tannery last year to improve supply chain efficiency. Degermann Tannery was founded in 1832 and is located 35 km south of Strasbourg in Barr. Its products are mainly sold to Italy, Germany, the United States, China and Switzerland. Previously, the brand also acquired French companies Haas, Colomer Leather, and Italian tannery Samanta.

Leather products are usually cash cows of luxury brands, which have the ability to stabilize the company's financial situation. The most immediate impact of factory shutdowns will be performance. A survey of 28 CEOs and CFOs by the Italian Luxury Goods Association Altagamma in conjunction with the Boston Consulting Group and investment company Bernstein estimated that sales in the industry could be between 30 and 40 billion euros this year. This means that industry revenue will fall by about 15% and losses will be about 10 billion euros.

The survey also estimated that as many as 10 to 15 million products originally scheduled to ship to China may not be sold, forcing the company to transfer products to other regional markets. The luxury down brand Moncler said in a recent conference call with investors that the company has transferred products intended for Greater China to markets such as Europe. Analyst Bryan Garnier said Moncler's mainland China sales of stores still down 80%.

In addition to the helpless closure of factories and stores, the most important vacation shows of luxury brands each year have been postponed or even cancelled. Among them, Chanel's vacation series show originally scheduled to be held in Capri, Italy on May 7th, the high-end handmade workshop series rehearsal show in London on June 4th, and the Beijing show Closed. Gucci, Versace, Prada, Giorgio Armani and other luxury brands have also made the same decision, which means that all businesses in the luxury industry in the first half of the year may be in a semi-stagnation state.

When the line is blocked, the line naturally becomes the exit. Some analysts said that the epidemic may become a digital catalyst for the luxury industry. Taking the four major international fashion weeks just ended as an example, not only Gucci, Louis Vuitton, Dior and Hermès took the form of live shows, Chanel also for the first time reached a cooperation with Tencent Video to broadcast the show, attracting more than 3.5 million people. Watching at the same time has aroused great attention from the industry.

Another industry insider believes that as Chanel and Farfetch, a British luxury goods e-commerce platform, have reached a cooperation and launched the first digital innovation project "Boutique of Tomorrow". E-commerce business.

At the end of last year, Hermès basically completed the global layout of the official website's e-commerce business, but consumers were still unable to buy Birkin or Kelly handbags online.