Industry Anxiety Rises As Threatening Virus Spreads Through Asia

The mysterious pneumonia virus in Hong Kong and southern China has begun to wreak havoc on the area's textile and apparel industries.

The spread of the mysterious pneumonia virus in Hong Kong and southern China has begun to wreak havoc on the areas’ vital textile and apparel industries, while American industry executives grow increasingly nervous about traveling to the region.

This story first appeared in the March 31, 2003 issue of WWD.  Subscribe Today.

The World Health Organization advised travelers to avoid the region unless absolutely necessary and many countries issued travel advisories to their citizens. As of Friday, the outbreak of atypical pneumonia, or Severe Acute Respiratory Syndrome, has infected 319 and killed 10 in Hong Kong. In China, which was originally reluctant to admit any instances of the disease, officials have reported 800 cases and at least 34 deaths.

According to the WHO Web site, a cumulative total of 1,550 cases and 54 deaths had been reported from 13 countries through Saturday.

While most American executives contacted Friday played down the outbreak and insisted it is business-as-usual thus far, they admitted some travel plans have been disrupted. The disruption will only increase if the illness continues to spread. The nervousness over the virus in the U.S. only increased Friday when health authorities in New York revealed there now are five cases in the city. However, all of the people affected had recently traveled from the Far East.

The impact of the illness on the textile and apparel industries was most evident at last week’s Interstoff Asia, where overseas attendance was down by 30 to 40 percent, according to organizers. Nine exhibitors canceled their trips to the fair without giving notice.

Designers and industry executives have pulled out of other events in the region as well. Shanghai was dealt a blow when it had to cancel high-profile fashion shows featuring such international brands as Vivienne Tam, Vivienne Westwood, Salvatore Ferragamo, Lanvin and Givenchy. The designers of each of those collections were expected to attend the Shanghai International Fashion Culture Fair, but most found that their insurers would not cover the trip.

Representatives from U.S. skin care brand Mario Badescu decided not to attend the opening of its first counter in Asia this week. The event, at Seibu in Pacific Place in Hong Kong, will still go ahead. Similarly, shoe designer Christian Louboutin, citing scheduling conflicts, canceled a trip to Hong Kong, where he was slated to appear at the territory’s high-end On Pedder store. But Stuart Weitzman, another of On Pedder’s star footwear designers, did attend a party in his honor at specialty store Lane Crawford last week.

In terms of cultural events, the Rolling Stones canceled two planned concerts in Hong Kong, as did crooner Andy Williams, who promised to reschedule in an open letter to his fans. The Rugby Sevens, an annual sporting events that draws 40,000 fans, was slated to go forward — albeit with replacement teams for three overseas ones that backed out of the tournament.

In a city accustomed to high-society parties and glittery soirees, last-minute cancellations have become the norm and surgical masks have become must-have accessories. Hong Kong’s commissioner for Tourism, Eva Cheng told legislators here that the number of tourists flying into Hong Kong had fallen 30 percent since the outbreak, while the number of tourists arriving by land had fallen more than 10 percent. Economists are predicting that the tourism industry could lose about $250 million. Those observing the retail sector have yet to revise their forecasts in the hopes that the city’s die-hard shoppers will delay, but not eliminate purchases.

Apparel and textile executives in the U.S. said late last week that they are closely monitoring the outbreak, given the region’s major importance to the sector as a production center. There has been no immediate impact on the U.S. industry from the illness, partially because April is not a heavy travel month to the Far East for industry executives. However, if the outbreak continues to spread and lasts for several months, it could be yet another blow to an industry already coping with disruption caused by the U.S. war in Iraq.

Anne Klein designer Charles Nolan said he and several staff members canceled a trip to Hong Kong that was planned this week over concerns of their own contagion, but also because their colleagues in Asia were equally concerned. The company asked the production staff of its Hong Kong office to send embroidery and fabric samples, which are mostly used for the production of the better-priced AK Anne Klein collection, which will delay its production by about a week, Nolan estimated.

“The way their offices work there is not like the U.S., where everyone goes out to appointments,” he said. “In Hong Kong, everyone comes together to meet in one place, and they didn’t want to bring a lot of outside people into the office. They were nervous about bringing outsiders in.”

“Our sourcing executives are limiting their trips to Asia in April while we continue to monitor this situation,” said Kellwood Co.’s vice president of strategic sourcing John Windham. “There has been no deviation of sourcing strategy as the result of this bizarre occurrence. Like most other companies in the area, we have requested our staff in Hong Kong to wear masks in the office.”

Peter Boneparth, president and chief executive officer of Jones Apparel Group said: “The SARS issue that has developed in China is of serious concern to us. We are monitoring it closely and limiting travel as appropriate.”

Thomas Burns, president of Ballinger Gold, said the illness isn’t impacting the company’s production and delivery capabilities in the Far East, but it is restricting travel to Hong Kong because of the outbreak. Bernard Holtzman, president and ceo of Harvé Benard, which works in 16 factories in China, agreed that prudence was probably the best course of action with the illness.

“For the moment, it’s not affecting our business, but I’m hearing from our office in Hong Kong that it’s more serious than they’re letting on,” Holtzman said. “That if someone is sick in an office and it’s suspected that it’s that, they’re shutting down the office because it’s highly communicable. If it’s not mandatory to go, then I think you shouldn’t go at this moment. It’s highly communicable and the death rate is quite large.”

Holtzman said the next time his company has to go to Asia is in one to two months, but he will monitor the situation closer to the date. “It has not affected us; nobody is sick in our factories. So it’s business as usual,” he said. “But nothing stops, so if we can’t go, the technology will enable us to do our jobs without going.”

At Wilmington, Del.-based DuPont Textiles & Interiors, no decision has been made to ban travel to the region, though executives are urging staffers to consult with DuPont employees in Hong Kong and China before traveling.

“We have many people in China and Hong Kong and so we are concerned. We are closely watching this,” said Bill Ghitis, president of Global Apparel at DTI. “Before anyone travels to the region, we are asking them to connect with our folks there and to check the latest. We’re trying to be flexible.”

He added that even if an employee considers a trip to be critical, “we are asking them to consult with our local employees” about safety conditions and to see if there is a way to get the job done with local staffers.

Ghitis acknowledged that the outbreak was a particular concern since “China for us is a strategic focus, especially for apparel. We’ve invested in China for the Chinese market, in terms of assets, people and infrastructure for many, many years.”

Rod Birkins, director of sourcing at Plano, Texas-based J.C. Penney Co. Inc., said the illness hasn’t impacted the company’s operations in Asia thus far. However, he said that “we actually put a suspension of travel on globally because of the war in Iraq,” but added late Thursday that Penney’s was about to resume allowing its employees to travel internationally. Birkins said that the news of the outbreak came at a time when Penney’s sourcing official wouldn’t have been doing a lot of traveling. “We’re about three weeks away before our travel starts up again.”

At New York converter Pressman-Gutman, which imports extensively from China, president Jim Gutman said, “I would certainly not send my people or go myself at this point…There’s no reason to expose people to unnecessary health risks for the sake of business.”

Pressman-Gutman’s Chinese operations are typically focused on Shanghai, which is in the northeast of the country and far from the southern province of Guang Zhou that appears to be the locus of the outbreak. However, Gutman said he wouldn’t even send his employees to Shanghai at the moment.

“One always has to be concerned about how much information the Chinese are giving you about medical problems,” he said. Indeed, the outbreak reportedly began in China about three months before the Chinese government acknowledged its occurrence to the World Health Organization. The Chinese government has also reportedly limited the access of world health authorities to the region where the outbreak began.

While Gutman said his company hasn’t had to cancel any trips yet, he added, “One of my people just got back. He was there about a month ago, before this became apparent. He wasn’t in Guang Zhou, and I guess he’s fine. Fortunately, it hasn’t been an issue.”

Peter Ascher of Ascher Studios Inc., a New York-based print converter, said he canceled his trip to China earlier this month the day before he was supposed to leave. Though he primarily works with mills in South Korea — an area unaffected by the virus, he said — he was going to China to visit potential partners and attend trade shows.

“I’m rather angry at the Chinese for not disclosing what they knew about the disease,” said Ascher. “It’s been going on since November but they didn’t tell anybody about it. China is not an important part of our business right now, but I like to keep in tune with what’s going on in our business. I’m not terribly bothered about it from a business point of view, but terribly bothered about it from a health point of view.”

A firm believer in visiting foreign countries to gather design inspiration and build relationships with foreign factories, Ascher said it was the first time he has ever canceled a trip.

While the outbreak may leave many American businessmen considering canceling trips to China, it’s a much larger concern for those who live there.

“It’s scary,” admitted consultant George E. Williams, of Shanghai-based G.E. Williams & Associates LLC, who was travelling in New York Thursday. His family lives in Shanghai, and he said that he and his wife had agreed to pull their children out of school until they see how widespread the outbreak becomes.

He said he was particularly concerned that the Chinese authorities are sharing very little information with their citizens on the spread of the disease, making it easier for him to track its progress while he’s on the road.

“The unfortunate part of it is the control of information in China,” he said. “Here in New York, I know they’re closing schools in Hong Kong, but I call my wife in Shanghai and she says they’re saying not to worry about anything.”