Burberry today warned that demand for its luxury goods was being hit by the coronavirus outbreak in China as shoppers stay at home. Meanwhile, leading Chinese retailer JD.com says it was surprised by the speed at which customers turned online for their everyday shopping essentials. Wider supply chains also look to be affected as a result of the Chinese slowdown.
UK multichannel retailer said in a trading update that 24 of its 64 shops in mainland China were currently closed, while the remaining shops had cut their opening hours. The number of people visiting shops in the country has fallen, with stores in Hong Kong also affected. Chinese tourists are also expected to spend less in Europe and elsewhere around the world, in the light of ongoing travel restrictions although that part of the business has been “less impacted to date”.
The retailer said it was acting to mitigate the effects of the outbreak on its business but that the benefits to its current year figures would be “limited given the proximity to our March year end”.
Marco Gobbetti, Burberry chief executive, said: “The outbreak of the coronavirus in mainland China is having a material negative effect on luxury demand.
“While we cannot currently predict how long this situation will last, we remain confident in our strategy. In the meantime, we are taking mitigating actions and every precaution to help ensure the safety and wellbeing of our employees. We are extremely grateful for the incredible effort of our teams and our immediate thoughts are with the people directly impacted by this global health emergency.”
Burberry said that it would continue to plan for growth in the expectation that luxury demand would recover, and that it was confident in its strategy and its recent brand repositioning. “We will continue to focus on newness and fashion, and on inspiring and engaging our customers globally.”
Leading Chinese retailer JD.comglobal.jd.com, meanwhile, said online demand for everyday essentials had shot up during the coronavirus outbreak. The retailer said it had sold more than five times as much rice and almost five times as much flour between January 24 and February 2 as it did at the same time last year. It had already boosted its stock ahead of the Chinese New Year celebrations but said that the virus meant more and more customers were now buying their everyday items online. “What was unexpected,” it said in a statement, “was how very quickly things would change for people in both the epidemic epicentre of Wuhan and around China.”
It has responded by working with brand partners to ensure that there were plenty of goods in stock, and it has used JD Logistics to pick up deliveries that brands and suppliers were not able to make. Between January 1 and January 24, 1.9m bags of rice and grains were delivered to JD warehouses from Chinese rice brand Shiyuedaotian – and in the four days from January 26 alone the brand delivered 500,000 bags. Demand for cooking oil and antibacterial liquid soap have also risen sharply.
These changing shopping patterns appear to be the first effect of the coronavirus outbreak on retailers. But it’s also likely that goods imported from China will be affected by the sudden economic slowdown – South Korean car manufacturer Hyundai is pausing work at three factories as a result of supply chain disruption from China given the extended Chinese New Year holiday and restrictions on travel, while other car businesses also report supply chain issues.
Image courtesy of Burberry