Premium purveyors see a slowdown coming due to coronavirus outbreak

From apparel to cigars, supply chain is a major cause for concern

Step inside Japanese chocolatier Royce’ in Mumbai and the sales staff are wearing masks, making the high-end confectioner feel more like a pathology lab. Retailers and resellers of premium and luxury goods alike are feeling the jitters of the interruption in global trade because of the coronavirus pandemic, which has disrupted capital markets, supply chains, weakening the rupee as well as slowing down consumer spending for the well-heeled.

Rolex dealers say that the jump in the Swiss franc to the rupee from Rs 72 to Rs 80 does eat into their profit margins and make the going harder. 
 

Gaurav Bhatia, director of multi-brand Swiss watch reseller Art of Time, an authorised dealer of watches from the Richemont Group, Breitling, and the Swatch group said the slowdown hasn’t been affected by the supply chain issues or China but because of market crashes and the ongoing uncertainty.

For the luxury apparel and accessories business in India that includes labels like Coach, Armani, Burberry, Diesel, Ermenegildo Zegna, Paul & Shark, Gucci, Canali, and many more say that for the most part spring and summer collections have already made their way to the Indian market and store inventory constraint is not an issue. “However, there will be a problem with fall and winter collections for those brands that are rooted in forward fashion markets, such as Italy, and that includes the majority,” an executive in the apparel industry said.

 

“Those with strong cash reserves and balance sheets will stay the course but brands that are even slightly shaky will find it tough going ahead and may have to wind up and that could extend to exits from malls which will mean higher rentals and a difficult cycle for luxury and premium stores,” the executive adds.

Across the country, some malls have already started shutting down. UB City Mall in Bengaluru, the most premier mall in the state, has kept restaurants open but shut stores for at least a full week says one person aware of the mall’s operations. In Mumbai, Palladium Mall is open but footfall on the weekend was scant with barely a dozen people compared to a couple hundred on a normal Saturday. At a Gucci store, the most recent shipments which come from Italy, have been held up in quarantine for over a week and it is not clear when they will be released to the store.

Recently, there was a rumour about the government of Maharashtra ordering a lockdown on malls which would mean a further reduction in sales for companies that are operating their stores there. lockdown in fashion capitals, such as Milan and Venice, where Armani shut stores, will no doubt also have an impact on business going forward in terms of supplies and inventory.

Kaizad Hansotia, founder of premium cigar maker Gurkha Cigars, which retails at five-star hotels and airports in India, said: “Gurkha Cigars has suffered economically due to coronavirus and its effects worldwide. Various ports and airports around the world have been closed to prevent the virus from spreading.”

As a result, despite demand, Gurkha wasn’t able to deliver to many of its customers. Hansotia says he has seen a significant impact at several points of the supply chain. “The US is now systematically closing borders which might impact the ability to get the product out of our factories, though we have seen little spread of the virus in the Caribbean and Central America thus far,” he said. “We will monitor the situation and fulfill orders as soon as the ports and airports open."

Premium electronic reseller Apple has also decided to shut stores where state laws have mandated such closures, and according to one industry insider, there's a good chance that may trickle down to non-mall Apple stores soon. Even as the impact is being felt by different brands and businesses see a variety of reactions and impact, the common denominator is the same. Everyone is waiting and watching to see how the dynamics are going to shape up in the next few weeks.