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- Italy’s retail industry is amongst the hardest-hit sectors by the coronavirus pandemic in Europe.
- As businesses reopened on May 18, luxury fashion and retail brands in Italy are coping with piled up inventories of outdated stock, uncertainty about tourism, and financial anguish.
- Experts gave us their insights on which Italian brands were the hardest-hit by the lockdown, how its retail industry has been impacted, and what its future prospects look like.
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After the country’s traumatic 67-day coronavirus lockdown, Italy reopened its economy for business on May 18, and has given the green-light to international travel to and from the country starting on June 3.
While life is expected somewhat to normalize this summer in the tourist-reliant European country, its retail sector is confronting a huge question mark.
Business Insider asked some experts on how Italy’s luxury fashion and retail sector has been impacted and what it will look like going forward.
Realities surrounding hardest-hit Italian retailers
The retail gloom includes out-of-fashion stock, uncertainties about the revival of tourism, and financial woes. But there is hope for those unafraid to revamp their business models and make a comeback.
When Italian businesses restarted on May 18, one-third of retailers were unable to reopen. Those that did faced piled up inventories of Fall-Winter collections, including clothes with long sleeves, high neck jumpers, and wooly fabrics, according to Francesca Venturi, founder at Rome-based luxury fashion consultancy Elevate.
Venturi pointed out that a reduced consumption of “Made in Italy” products by key markets like China, Korea, and Japan affected a long list of fashion and luxury brands including Prada, Dolce & Gabbana, Versace, and Armani.
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High-margin established luxury brands with e-commerce practices did stay afloat during the pandemic, she said, but it was smaller, family-run artisan enterprises within the fashion sector that suffered the most.
Worst hit were the more than 1,600 companies in the artisanal sector (leather, textile, and garment) in Italy’s north-western Piedmont region, bordering Switzerland and France, she said.
Piedmont, along with Veneto and Lombardy, experienced the most alarming coronavirus outbreaks in Italy.
Impact on offline retailers
After imposing the lockdown on March 9, the Italian government promised to support two million furloughed workers with wages.
The job retention scheme has been extended to October. This could indicate that offline retailers now reopening fear sales will be weak and unable to sustain pre-coronavirus employment, said Aneesha Sherman, a European general retail analyst at research firm Bernstein.
At the outset of reopening, most retailers will wait it out to observe what initial demand looks like before taking employees off furlough, she said.
Meanwhile, tourist-dependent Italian retailers are anxious for international travel to commence as they expect an inflow of tourists will fuel sales.
On the other hand, online apparel retail captured 80-90% of the market share as online traffic improved through April with a stronger pick-up expected in May, Sherman said.
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Government’s “significant commitments in words, and very little in practice”
Consumption of non-essentials is expected to be under significant pressure in Italy (and Southern Europe in general), according to Luca Solca, a global luxury-goods analyst at Bernstein.
Out of 400 billion euros ($438 billion) guaranteed in loans by Prime Minister Giuseppe Conte to struggling companies, only about 3% were handed out.
“Italy is one of the weakest areas of the eurozone, showing hardly any macro-economic growth in the past 20 years. With Covid-19, the Italian government has made very significant commitments in words, and very little in practice,” Solca said.
Change in brand interactions between Italian retailers and consumers
According to Venturi, interactions between the retailer and end-consumer will be “cut to the bone,” as government regulations still call for social distancing measures.
Entry restrictions, hand sanitizers, and Plexiglass barriers protecting the cashier have become the new normal for retailers, and face masks and disposable gloves will be obligatory for consumers wanting to try on clothes.
Venturi suggested a more “caring, honest, and empathetic” focus on brand interactions will ultimately build trust and a sense of community in the long-run. But the vibrancy and creativity of Italian retail will be lost in the short term.