Why Coach is Succeeding in China

on December 10 2012 | in Fashion Retail | by | with No Comments

coach

Despite heavy competition and amid an economic slowdown, Coach became the third best-selling brand in the Chinese market this year. While several other luxury brands have slowed, Coach boasts a turnover of $300 million in the first half of this year and expects this number to exceed $400 million by next year. With an annualized sales growth of 60% in China, Coach hopes to get 10% of China’s high-end handbags and accessories market.

Currently at 96 stores on the Mainland, Coach plans to add 30 new stores annually, particularly in second and third-tier cities. Coach’s success in China can be attributed to three key factors: its strategic market position, its focus on the men’s category, and its multi-channel distribution strategy.

Accessible Luxury Market Position
Coach positions itself as an accessible luxury brand, which means its prices are 50-75% lower than, and thus avoids direct competition with the top luxury brands. “We are good and affordable, something which can withstand the risk of the economic downturn. As it has been proved, the consumption of luxury good tends to be more rational too,” explains Jonathan Seliger, Coach’s President and CEO for China. Furthermore, the accessible luxury strategy captures the large emerging Chinese middle class consumers and also provides a broader reach into the second and third-tier cities.

Focus on Men’s Category
The current Chinese luxury market is valued at about $3.9 billion. Roughly one-third of this comes from the men’s market and this segment is growing fast. But it’s not just the Chinese men who are doing the buying. “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,” says Seliger. Coach launched its autumn and winter collection, LEGACY, in Shanghai this past October. Among those present was Leehom Wang, an American-Taiwanese pop star and the newest ambassador for its men’s accessory line.

Leehom Wang for Coach Men

Multi-Channel Distribution Strategy
Another competitive advantage is its multi-channel distribution strategy. Unlike most of its competitors, Coach sells products through department stores and factory outlets in addition to dedicated retail stores. Recently, Coach also extended its reach to e-commerce. While brands such as Salvatore Ferragamo have collaborated with Xiu, China’s largest fashion e-commerce platform, Coach China has invested heavily in building its own online store.  Seliger is hopeful, although its e-commerce initiatives are still in its early stages. “Consumers demand nothing but excellent product quality, affordable prices, and good after-sale services. We believe it will be a successful attempt as long as these three conditions are met.”

 


[world crunch]
photo credit: coach

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