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Worldcrunch

Riding Coach: A Cheaper Road To Cracking The Chinese Luxury Market

Article illustrative image Partner logo Accessorizing

BEIJING - While many other luxury brands are facing a sharp decline in their sales in China, the American brand Coach is busy writing a different story.

As a relatively more accessible luxury brand, its prices have always been 50-75% lower than the top luxury brands. Now for the first half of this year, it has become the third best-selling brand in the Chinese market, with a turnover of $300 million and an annualized growth of 60%.

Last week in Shanghai, Leehom Wang, an American-Taiwanese pop star, was present at the launch of Coach’s autumn and winter collection, called LEGACY. It also marked the brand’s renewed emphasis on luxury goods for men.As Jonathan Seliger, Coach’s president and CEO for China, told the Economic Observer, the company is going to promote aggressively both the male and female collections. It expects to achieve a turnover of at least $400 million next year. It also aims to grab 10% of China’s market for high-end handbags and accessories.

Jonathan Seliger has previously worked for Alfred Dunhill and Camus Cognac. He has a strong reputation in China’s luxury sector, especially in market intervention and brand building. He says that Coach has up to now preferred promoting its female line, but that it now has to focus on men’s business.

According to Coach market research, male consumption of luxury goods makes up over 15% of the global luxury market, at around $6 billion. Currently China’s total luxury goods capacity is about $3.9 billion, among which one third is male consumption, and is fast growing.

"In China, quite often it is women who buy our products for men. So we are implementing the model of dual-gender sales and we are also opening more dedicated men’s stores in major cities," Jonathan Seliger said.

Accessible luxury

In recent years, China has become the luxury market’s el dorado. But with the slowing pace of economic growth, many of the high-end marks are facing flagging sales. Burberry’s first quarter results for this year fell to 18% growth in the Asia-Pacific region compared with a 67% growth in the same period last year. As for Prada, its Greater China department showed an increase of 69% in terms of sales revenue in 2010 whereas this figure has now slipped to 40%.

With its innovation and accessible luxury strategy, Coach has given itself a fighting chance. It completed the repurchasing of its retailing business in 2009 and started an overall marketing and packaging of the brand. With the dual effects of the opening of new stores and mixed sales of male and female goods, it achieved sales of over 300 million RMB ($48 million) for the first half of this year, an increase of more than 60% compared with last year.

"We are good and affordable, something which can withstand the risk of the economic downturn. As it has been proved, the consumption of luxury goods tends to be more rational too," says Jonathan Seliger.

Up to now, Coach has set up a total of 96 stores in China, of which 79 are spread out in 36 cities. Meanwhile, it aims to add 30 stores annually to seize the market in China’s second and third-tier cities. In relation to its competitors, one of Coach’s advantages is its multi-channels distribution strategy. Not only it has its own dedicated stores, it also sells through department stores, retail stores and factory outlets.

E-commerce

Apart from expansion in conventional stores, Jonathan Seliger also revealed that the luxury brand was investing heavily in an e-commerce platform to be launched by the end of the year.

Currently, many luxury brands such as Burberry and Armani have all started wading into e-commerce and opening online stores in China. Online luxury shopping companies such as Net-a-porter and YOOX have also entered the Chinese market. Meanwhile popular brands like American Apparel and the top Italian brand Salvatore Ferragamo opted to collaborate with Xiu, China’s largest fashion e-commerce portal. By contrast, Coach China insists on taking the time and the effort-consuming approach of building its own marketing network.

"Consumers demand nothing but excellent product quality, affordable prices and good after-sale service. We believe it will be a successful attempt as long as these three conditions are met," Jonathan Seliger stated.

However, though the prospect for e-commerce is good, the outcome is yet to be known. Jonathan Seliger expressed that he doesn’t expect an instant success, but will only consider it as a complementary route beside the existing distribution channels.

The consensus is that the Chinese market is a battlefield for luxury goods. Global consulting firm McKinsey & Company estimated that between 2010 to 2015 China’s luxury consumption will grow at a pace of 18% annually. The Boston Consulting Group believes that by 2015 China will overtake Japan and the United States as the world’s largest luxury market.  

As Jonathan Seliger put it, regardless of the economic situation, luxury brands will focus their energy on the Chinese market.

In comparison with the 80% of visibility that Coach has in North America, and 60% in Japan, Coach’s visibility in China is currently a mere 16%. It obviously has a long way to go, but that’s precisely where its potential lays.

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About this article source Website: http://eeo.com.cn/

The Economic Observer is a weekly Chinese-language newspaper founded in April 2001. It is one of the top business publications in China. The main editorial office is based in Beijing, China. Inspired by the Financial Times of Britain, the newspaper is printed on peach-colored paper.

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