Retail in Asia

Headline

Coach’s strong presence in China to help the company in the future

Store of Coach in Serrano Street in the Salamanca District of Madrid, Coach is a brand originating from New York dedicated to handbags and leather accessories of high quality, Spain. (Photo by Cristina Arias/Cover/Getty Images)

While many fashion brands are looking to North America as they feel the effects of a slowdown in China’s luxury market, accessible luxury brand Coach is seeing the opposite phenomenon, with double digit growth seen in the nine months of their FY 2016. Coach has been an aggressive early mover and a pioneer in the affordable luxury segment in China, profiting in this region despite many other International luxury brands taking measures, such as dropping prices, to spur their sales.

Coach acquired the domestic retail businesses from its distributors in Hong Kong, Macau, and mainland China (Greater China) in Fiscal 2009. Coach has since gone from strength to strength, expanding aggressively in the region, and being rewarded by the achievement of strong growth. The company has been relatively immune to the anti-corruption crackdown that has hurt other Western brands, due to its comparatively less expensive products.

Coach has also been adept at the use of its digital marketing, building strong connections with Chinese consumers, and keeping them updated with the new store openings and the latest collections. The company also uses brand ambassadors such as Chinese-American actor and pop star Wang Lee-Hom.

Chinese consumers have become a great force in the global luxury market. China is poised to become the second largest luxury market by 2019, according to Euromonitor, and the Chinese, the biggest spenders on luxury goods worldwide, now account for 30%-50% of global luxury sales, with 80% of their purchases made abroad.

Luxury brands rode the China wave until the slowdown in the economy and the anti-corruption campaign brought the industry growth to a halt. A devalued Yuan has diverted the spending from the U.S. to Europe, South Korea, and Japan.

While online is still in a nascent stage, it is growing rapidly. Accounted for just 5% of the Chinese domestic luxury sales, online luxury sales grew 20% in 2015, outpacing the overall market by nearly three times.

After a disappointing start on Tmall that fizzled out within a month of its opening, Coach reopened its Tmall store in September 2015. And with the luxury market set to grow at high rates in the future, growing by ~52% over the next five years, Coach is placed in an excellent position to take advantage of the luxury spending by Chinese consumers.

(Source: Forbes )