Retail in Asia


Despite luxury market slump, Tapestry pushes into China

Although Baoji, an industrial city in northwest China, may not seem like a luxury goods market, it will soon be home to a Coach store, according to the company’s Asia Pacific president Yann Bozec. Coach parent Tapestry Inc plans to open a further 30 stores in China in the next 12 months.

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Due to its willingness to enter lower-tier cities where most Western competitors are reluctant to, as well as its timing, in a current period of severe Chinese luxury sales slump, Tapestry’s China expansion is unusual. Over the past two years, Tapestry has opened 60 stores in China.

During a time when many higher-end labels have moved further upmarket and Chinese consumers have become more cost-conscious, Tapestry, one of the largest luxury retailers in China, is capitalizing on its position as a purveyor of “accessible luxury.”

Chinese metropolises such as Beijing and Shanghai as well as second-tier cities like Wuhan and Xi’an are home to luxury brands like Louis Vuitton, Gucci and Burberry. Despite their cachet of exclusivity, brands have shunned cities on the lower end of tier rankings – based on metrics such as economic output, consumer behavior and population size.

Where a Louis Vuitton bag or a Gucci dress can sell for thousands of dollars, Tapestry’s prices are lower. Coach sells bags below USD 1,000, while Kate Spade sells dresses around a hundred dollars.

Previously, Tapestry opened a Coach store in Daqing, an oil capital in the northeast. Baoji is Tapestry’s second fourth-tier city. The 30 new stores will also be opened in other tier-four cities this year, according to Tapestry.

As a result of China’s border closures, luxury spending from abroad was diverted to China. Bain & Co data show the domestic market will double in revenue by 2021 to 471 billion yuan (USD 65 billion). Savills also reports 55 percent of luxury store openings happened in China last year.

Consumer sentiment is being hit hard by China’s zero-COVID policy, frequent lockdowns, a slowing global economy, as well as regulatory crackdowns on sectors that have led to spikes in youth unemployment.

China sales, which account for around a fifth of Tapestry’s overall sales, fell 32 percent for the quarter ended July 2.

While Tapestry hopes to boost global revenue to USD 8 billion in fiscal 2025 from USD 6.7 billion in the year just ended, they declined to comment on investment figures for China, the company’s main growth market.

Ralph Lauren, one of Tapestry’s closest competitors, says it will continue with its plans to open 150 stores in Greater China by the end of next April, up from 135 now, with a focus on tier-one cities, outlined in 2018. The majority of luxury brands, however, have gone quiet about opening new stores in China compared to the past two years.

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Analysts see Tapestry’s pursuit of more stores as an opportunity to solidify its lead in brand penetration in China. Currently, the company operates 360 stores in 80 cities in China, with many more to come.