People wearing masks in Piazza DuomoCoronavirus outbreak, Milan, Italy - 24 Feb 2020

MILAN The first international health crisis of the digital era continues to grow, with the coronavirus jeopardizing the growth of the global economy and rocking almost every industry, including fashion. And the discovery last weekend of coronavirus cases around Milan further raised the potential for havoc among fashion and luxury brands based in the country or that produce their collections there.

In a country where a sort of media psychosis is creating the first divisions and hostilities between the northern and southern parts of the peninsula — with a series of autonomous measures taken by local and regional governments to limit the circulation of people residing in Lombardy and Veneto, where the two epicenters of the infection are located — the first results of the health crisis are visible in the city of Milan.

Considered the financial capital of Italy, Milan plays a key role in the country’s overall economy — the turnover of the companies operating only in the metropolitan area of Milan accounts for 10 percent of all Italian business. Each year about 400,000 Chinese tourists visit Milan, where they stay for between two and 2.5 days, spending an average daily sum of 1,200 euros.

Reached on Tuesday, Marco Barbieri, general secretary of Confcommercio Milano, Lodi and Monza and Brianza, the association that groups the companies operating in the Lombardy region, offered a clear view of the current situation in the city and its outskirts.

“The first phase of the crisis kicked off about three weeks ago, where a sort of coronavirus psychosis spread in Milan,” explained Barbieri. “It exclusively affected Chinese companies or Italian entities operating import and export activities with the Chinese market.”

According to Barbieri, in this initial phase, the business of the aforementioned companies dropped 15 percent compared to the season’s average level.

“The second phase started last Friday, when the Italian government decided to lock down 10 towns in the Lodi area, one of the two epicenters of the infection,” he continued, noting that, as a result, 450 companies operating in that area had to shut down, creating a huge impact on those businesses.

“The kick off of the third phase coincided with the release on Sunday night of a new ordinance, imposing several measures, including the closing of bars from 6 p.m. to 6 a.m., as well as the shut down of stores in shopping centers over the weekend, where the regular activities of outdoor markets will be also interrupted,” he added.

According to Barbieri, apparel retailers in the Milan area are likely to see a drop in sales of 15 to 20 percent this week due to the coronavirus. The total turnover of bars in the region is expected to be down 20 percent this week, while the business of hotels and tour operators will drop between 35 and 40 percent.

“The next three months will be highly difficult for Italian fashion retailers,” said Francesco Tombolini, president of the Italian Chamber of Buyers. “Shopping tourism accounts for 40 percent of the business of our associates,” he added, putting the focus on the fact that Northern Italy hosts a high concentration of luxury shopping destinations, including Milan and Venice. “To this, we have to add the problem of the local shopping….Honestly, I really believe that right now, considering what’s going on in the country, buying a T-shirt is the least priority of Italian people.”

Due to the critical moment, which he described as the “perfect storm for the retail sector with Italy and China being two of the most affected countries by the coronavirus crisis,” Tombolini said he hopes that wholesalers and fashion brands will co-operate to get through these difficult times.

“In particular, what I hope is that retailers will have the chance to be supported in terms of payments,” said Tombolini, referring to the fact that wholesalers might suffer from a lack of liquidity because of the decline in sales.

In addition, he highlighted another issue which may occur. “How are major online platforms going to react to the situation? Are they going to start a price war? I hope not,” he said. “I hope that there will be a cooperation among the parts. The wholesale is currently considered the weak ring of the chain, but actually everything originates from that: new brands, research…we all need to protect it.”

Reached on Tuesday, Guglielmo Miani, president of Montenapoleone District, an association representing the luxury and fashion stores located in Milan’s Golden Triangle luxury shopping district, declined to comment.

Confcommercio is already collaborating with the Italian government to develop measures to support the companies represented by the association. In particular, the payment of March taxes has already been postponed for the 450 entities located in the Lodi area, one of the two epicenters of the infection, while Confcommercio has requested to also apply labor support measures to companies with less than 15 employees and is working with ABI, the association of Italian banks, to extend the deadlines for companies’ loans.

According to a study conducted by Confcommercio’s research center before last Friday’s developments, the coronavirus crisis was expected to have a 0.3 percent negative impact on Italy’s gross domestic product.

“But considering the recent outcomes, the situation might be worse,” Barbieri said.

“Our category is on its knees,” said Maurizio Naro, president of the Association of Milan’s Hoteliers, referring to the fact that this week 40 percent of the hotel reservations in the city have been canceled. The hotel business in Milan is valued at more than 1 billion euros. “What makes us feel even more worried is that this situation might have an impact in the long term,” he said, adding that several corporate bookings are still confirmed but might be canceled soon due to the possible postponement of important trade shows, including Salone del Mobile, and international conferences.

But even if the coronavirus crisis hit Northern Italy hard, it’s having a dramatic impact also in different areas of the country. For example, Naro cited the situation of Rome, where, because of the cancellation of several events, hotels are losing “hundreds of thousands of euros in reservations.”

Naro also stressed the fact that, moved by mass panic, people, even if scientific experts forecast that the virus will start disappearing with the kickoff of the spring season, are already canceling their summer plans.

One of the categories economically hit by the coronavirus crisis in Milan is that of taxi drivers. According to Claudio Severgnini, president of TAM, an association representing Milanese taxi drivers, business dropped almost 25 percent during the latest Milan Fashion Week, compared to the same season last year and after the latest ordinance released by the government on Sunday, which also required bars to close at 6 p.m. reducing the social life in public places, the number of taxi rides is down 35 percent compared to a regular week in the city.

Severgnini said taxi drivers are currently waiting for official directions about specific measures to take in order to reduce the spread of the virus and protect both drivers and clients.

However, despite the difficulties, Milan, its citizens and entrepreneurs are not throwing in the towel.

“They will never get us. We didn’t close during the bombing [of World War II] and now should we close because of the mass hysteria?” said Carlina Cretella, owner of Milan’s legendary Jamaica bar in the Brera district and a popular haunt over the decades for artists, writers and poets.

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