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"Better a diamond with a flaw than a pebble without." - Confucius

COVID-19 has brought about quite a situation globally, in no time. In this article we do not intend to provide a thorough analysis, but rather pull together opinions about the outlook of the luxury sector and interesting initiatives from key industry players. Please follow the situation as it evolves.

Acknowledging the crisis and handling it have taken various routes country-by-country due to the difference in political will, preparedness, social maturity and economic considerations. Effective protection will certainly consists of a set of measures that know no borders let it be physical, social or regarding the flow of information.

Many research companies, agencies (one example, focusing on DACH region) and consultancy firms have been analysing the situation from various angles. Although some industries have seen an increase by necessity, such as pharmaceuticals, others have been practically pushed to the edge, like tourism, auto manufacturing or the airline industry. Being far from necessities and exposed greatly to retail and tourism, the luxury sector has been hit hard too. In late March BCG believed, that the sector would bottom in March-April with -80% of 2019 sales figures (depending on geo) and will bounce back – this I have hopes for, but also doubts. What is certain is that a number of global and local luxury companies have switched to a crisis operation mode and taken initiatives to resolve the immediate challenges, increasing their resilience and planning how to scale up again as the economy starts picking up according to the various scenarios for COVD-19 evolvement.  

Edelman – a global communications firm – just published the special edition of their ‘Trust Barometer’. The company has conducted a 12-market study with 12000 interviewees on the critical role brands are expected (and have to) to play during the current pandemic. As they put it:

‘This global crisis will fundamentally change how we think, behave, and consume. There is no rapid return to normal. The new world will have trust at its core, with the brand mandate expanded to solve problems for all, protect all, care for all, collaborate with all and innovate in the public interest. At this moment of deepest global crisis, the public wants brands to step up, keep us safe, guide us and help us. Brands that act in the interest of their employees, stakeholders and society at large will reinforce their expertise, leadership and trust and immeasurably strengthen the bond they have with consumers. This is a moment when brands can prove that they put people, not profits, first. Respond with compassion and make a difference; this is the true test for purpose-driven leaders. The people are counting on us to deliver.’

It is not easy to find the best way to genuinely help. The masks and other protective gowns and equipment for instance have to meet strict health safety requirements in order to be truly useful for medical workers. However with transparency and awareness of protective qualities these items may still aid the fight against the virus. Many companies have offered significant financial donations for civil and research organisations to support ongoing programs.

Below we list some of these recent activities initiated by the groups.

LVMH

The Group – the no. 1 on Deloitte’s Top 100 Luxury Companies List last year – owns a variety of brands. The Perfumes & Cosmetics production units manufacture and distribute large quantities of hydro-alcoholic gel free of charge. Bvlgari has launched massive production of hand sanitizer gel, working with its partner ICR Cosmetics. 

The fashion brands of the group – like Dior, Fendi and recently Louis Vuitton – have pledged to help address the surgical mask shortage France is currently facing. 

LVMH also has managed to secure an order with a Chinese industrial supplier for a delivery of 10 million masks to France in the coming days (seven million surgical masks and three million FFP2 masks). The order will be repeated for at least four weeks in similar quantities (approximately 40 million masks). In order to secure this order during an extremely tense period, Bernard Arnault – the chairman and chief executive of LVMH – arranged for LVMH to finance the whole of the first week of deliveries, amounting to five million euros.  

Kering Group

Kering and its brands (Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen, Brioni, Boucheron, Pomellato, DoDo, Qeelin, Ulysse Nardin, Girard-Perregaux and Kering Eyewear) provide the French health service with 3 million surgical masks, which the Group will purchase and import from China. 

Also, the French workshops of Kering’s Houses Balenciaga and Yves Saint Laurent are preparing to manufacture masks while complying with the strictest health protection measures for their staff members, with production getting underway as soon as the manufacturing process and materials have been approved by the relevant authorities. 

The Group supports the research of COVID-19 too – it has made a financial donation to the Institut Pasteur. Furthermore it made a donation to the Hubei Red Cross Foundation and Italian hospitals. 

More recently, Gucci responded to a call to fashion companies from the Regione Toscana for surgical masks and medical overalls, and could be able to donate 1,100,000 surgical masks and 55,000 medical overalls in the coming weeks.

In early April Kering announced that its Houses will collectively donate USD 1 million to the CDC Foundation.

Private companies and other groups

Privately-owned fashion group Chanel has pledged EUR 1.2 million to the emergency fund created by Fondation de l’AP-HP (the public hospital system of Paris), the Fondation Georges Pompidou and the SAMU (French emergency services). Chanel has donated more than 50,000 face masks to a number of hospitals, firefighters and the police force. 

Baselworld2015_DSC_0068_
Chanel booth at Baselworld in 2015

Burberry Group PLC delivers surgical and non-surgical masks, gowns to medical staff and patients, and is helping to fund emergency vaccine research at the Oxford University. 

The Chief Creative Officer of Versace, Donatella Versace and her daughter Allegra Versace Beck have donated EUR 200,000 to a Milan hospital to support their fight against the coronavirus.  Giorgio Armani made a donation of EUR 1.25 million; the Luigi Sacco and San Raffaele hospitals and the Istituto dei Tumori in Milan, the Istituto Lazzaro Spallanzani in Rome and the Protezione Civile, the Italian civil defence will benefit from the donation. 

The Zegna family, together with the Group’s top management donated EUR 3 million to the Civil Protection in Italy. They have also converted a part of their production facilities in Italy and Switzerland to manufacture medical masks for its employees and cater to the broader needs in Italy and Switzerland.

Richemont has also decided to make available its Italian leather-goods production capabilities, notably those of its Maison Serapian Milano, as well as its network of partners, to produce protective masks with the support of its Pelletteria teams in Florence and Varese: 1 million masks will be donated to the most affected regions in Italy. They will be made available to the medical staff and all of those who are combating the pandemic in Italy.

The luxury car sector is also driving help in the fight against the virus – Rolls-Royce Motor Cars is offering a fleet of limousines to deliver groceries and medical supplies, Land Rover has come to the aid of the Red Cross, and world champion Mercedes has joined British-based F1 teams in developing ventilator equipment

Graff Foundation – the foundation of Graff Diamonds – released that it will donate USD 1 million to the COVID-19 Solidarity Response Fund in support of WHO, which is leading and coordinating the global efforts to detect and respond to the pandemic.

Controversy

According to the Financial Times, LVMH and Kering have both applied for the French government’s assistance scheme for businesses impacted by the coronavirus pandemic and they announced the staff would be furloughed. After the public reaction (LVMH closed a record year EUR 53.7 billion revenue in 2019) and other private companies announcements urging them not to lean on the aid (like Chanel 28 March and Hermès 1 April), both LVMH and Kering have backtracked last week.

 

Sources: Bain, Boston Consulting Group, Edelman, McKinsey, Financial Times and press releases.

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