Samsonite has begun promoting its less expensive products in China to attract middle-class Chinese customers.
In addition to placing mid-priced items in store windows, Samsonite will train its employees to promote its mid-market products, reports The Financial Times.
“Earlier you wanted to display the highest-priced goods at the front of the store so the consumer feels good about your brand and comes in to shop,” said Samsonite CEO Ramesh Tainwala. “Now you want to display the mid-price of your offering so the customer is not getting scared.”
Spencer Leung, a consumer goods analyst at UBS Hong Kong, said, “From a profit and loss perspective, you have to tap up the middle market but it will be quite difficult in the medium term.” He added, “In the past, roughly 50-60 per cent of luxury goods sales went directly or indirectly to the government. Once consumption from the government is not there, you can image that private-sector demand has to double just to absorb the loss.”
Further affecting Samsonite in the Chinese market is the company’s decreasing reliance on department stores for sales, as the luxury crackdown has made customers more hesitant to make high-end purchases in such an environment.
Three years ago, department stores accounted for approximately two-thirds of the company’s sales in China. This year, that figure may be as low as one-third of China sales, according to Mr. Tainwala.
At its lowest, sales growth in China was in the low double-digits, but thanks to the new sales strategy, net sales in China grew 32 percent in the first quarter of this year.
Globally, Asia accounted for 41 percent of Samsonite’s sales, which reached $567 million in the first quarter, up 11 percent compared to the same period in 2014.
Despite the optimism for the mainland market, which should be buoyed by China’s booming domestic tourism market, Mr. Tainwala says he is concerned by the Hong Kong market. Like many luxury companies, Samsonite has seen its Hong Kong business dive, due to a combination of factors, including the luxury crackdown, visa restrictions, and last year’s protests.
“Those crazy days of the past are not going to come back, whatever the Hong Kong government does,” he said.
image credit: samsonite