Omicron variant: what luxury needs to know
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Germany yesterday imposed restrictions on the activities of unvaccinated people after scientists last week announced the detection of the Omicron variant of Covid-19. The variant raises the specter of new lockdown restrictions that could impact luxury fashion retailers amid the peak holiday season.
âOur pharmacy team says we should take [the Omicron variant] very seriously, âsays Christian Shulz, analyst at Citi. “Assuming it’s as serious as the reports suggest, the likelihood of blockages increases as we wait for new vaccines.”
How the Omicron variant will affect luxury retail depends on the increase in infections in each of the major markets and the approach of reintroducing restrictions in response. China is now accustomed to top-down lockdowns as strict measures have been applied intermittently throughout the pandemic. The governments of the UK and US have made several efforts to postpone lockdowns and preserve the economy. While the potential for implementing restrictions in Europe remains, according to Lisa Hooker, analyst for PwC, the driving force behind the recovery in luxury over the past year has been US and Chinese consumption.
Luxury has proven its worth so far throughout the pandemic, she says: While the global sector lost 30% of its revenue between February and June 2020, according to PwC data, the growth of big players rebounded at the end of this year, especially leather goods and accessories. And with each subsequent lockdown, the impact has become less noticeable in all markets, with retail shifting towards online and digital engagement from the first lockdown.
Yet when locks or partial locks are adopted in key markets, retailers have seen local pedestrian traffic decrease. International tourism, which was just starting to recover with the opening of the US borders in early November, could become more difficult. And ongoing supply chain disruptions could worsen, as lockdowns in manufacturing and port countries have contributed to delays throughout the pandemic.
Fashion is vulnerable when people stay at home, says Hooker, âThe one area of ââretail that starts to suffer if we get a foreclosure is fashion because we have less reason to buy in-store. “
Eyes on Austria
In mid-November, Austria became the first western European country to return to lockdown, sparking concerns in markets that further waves of infection would not be avoided with vaccinations, boosters or mild restrictions targeting unvaccinated people. The tax assistance lines for companies and their employees in Austria have been reactivated, thus preserving the supply of the economy and the income of households.