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.
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.
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.
Long perceived as a country chasing Western tech, China's business and technological innovations are now influencing the rest of the world. Still lagging on some fronts, the future is now up for grabs.
BEIJING — China's tech tycoons have fallen out of favor: Jack Ma (Alibaba), Colin Huang (Pinduoduo), Richard Liu (Tencent) and Zhang Yiming (ByteDance) have all been pressured by Beijing to leave their jobs or step back from a public role. Their time may be coming to an end, but the legacy remains exceptional. Under their reign, China has become a veritable window to the global future of technology.
TikTok is the perfect example. Launched in 2016, the video messaging app has been downloaded over two billion times worldwide. It has passed the 100-million active user mark in the United States. Thanks to TikTok's success, ByteDance, its parent company, has reached an exceptional level of influence on the internet.
For a long time, the West viewed China's digital ecosystem as a cheap imitation of Silicon Valley. The European and American media described the giants of the Asian superpower as the "Chinese Google" or "Chinese Amazon." But the tables have turned.
No Western equivalent to WeChat
The Asian superpower has forged cutting-edge business models that do not exist elsewhere. It is impossible to find a Western equivalent to the WeChat super-app (1.2 billion users), which is used for shopping as much as for making a medical appointment or obtaining credit.
The flow of innovation is now changing direction.
The roles have actually reversed: In a recent article, Les Echos describes the California-based social network IRL, as a "WeChat of the Western world."
Grégory Boutté, digital and customer relations director at the multinational luxury group Kering, explains, "The Chinese digital ecosystem is incredibly different, and its speed of evolution is impressive. Above all, the flow of innovation is now changing direction."
This is illustrated by the recent creation of "live shopping" events in France, which are hosted by celebrities and taken from a concept already popular in China.
10,000 new startups per day
There is an explosion of this phenomenon in the digital sphere. Rachel Daydou, Partner & China General Manager of the consulting firm Fabernovel in Shanghai, says, "With Libra, Facebook is trying to create a financial entity based on social media, just as WeChat did with WeChat Pay. Facebook Shop looks suspiciously like WeChat's mini-programs. Amazon Live is inspired by Taobao Live and YouTube Shopping by Douyin, the Chinese equivalent of TikTok."
In China, it is possible to go to fully robotized restaurants or to give a panhandler some change via mobile payment. Your wallet is destined to be obsolete because your phone can read restaurant menus and pay for your meal via a QR Code.
The country uses shared mobile chargers the way Europeans use bicycles, and is already testing electric car battery swap stations to avoid 30 minutes of recharging time.
Michael David, chief omnichannel director at LVMH, says, "The Chinese ecosystem is permanently bubbling with innovation. About 10,000 start-ups are created every day in the country."
China is also the most advanced country in the electric car market. With 370 models at the end of 2020, it had an offering that was almost twice as large as Europe's, according to the International Energy Agency.
China's super-app WeChat
The whole market runs on tech
Luca de Meo, CEO of French automaker Renault, said in June that China is "ahead of Europe in many areas, whether it's electric cars, connectivity or autonomous driving. You have to be there to know what's going on."
As a market, China is also a source of technological inspiration for Western companies, a world leader in e-commerce, solar, mobile payments, digital currency and facial recognition. It has the largest 5G network, with more than one million antennas up and running, compared to 400,000 in Europe.
Self-driving cars offer an interesting point of divergence between China and the West.
Just take the number of connected devices (1.1 billion), the time spent on mobile (six hours per day) and, above all, the magnitude of data collected to deploy and improve artificial intelligence algorithms faster than in Europe or the United States.
The groundbreaking field of self-driving cars offers an interesting point of divergence between China and the West. Artificial intelligence guru Kai-Fu Lee explains that China believes that we should teach the highway to speak to the car, imagining new services and rethinking cities to avoid cars crossing pedestrians, while the West does not intend to go that far.
Still lagging in some key sectors
There are areas where China is still struggling, such as semiconductors. Despite a production increase of nearly 50% per year, the country produces less than 40% of the chips it consumes, according to official data. This dependence threatens its ambitions in artificial intelligence, telecoms and autonomous vehicles. Chinese manufacturers work with an engraving fineness of 28 nm or more, far from those of Intel, Samsung or TSMC. They are unable to produce processors for high-performance PCs.
China's aerospace industry is also lagging behind the West. There are also no Chinese players among the top 20 life science companies on the stock market and there are doubts surrounding the efficacy of Sinovac and Sinopharm's COVID-19 vaccines. As of 2019, the country files more patents per year than the U.S., but far fewer are converted into marketable products.
Beijing knows its weaknesses and is working to eliminate them. Adopted in March, the nation's 14th five-year plan calls for a 7% annual increase in R&D spending between now and 2025, compared with 12% under the previous plan. Big data aside, that is basic math anyone can understand.
- Good And Evil Uses Of Facial Recognition Around The Globe ... ›
- Can Artificial Intelligence Solve China's Demographic Crisis ... ›
- Billionaire Surveillance: China Tracks Its Tech Moguls - Worldcrunch ›