This week in the news, rag & bone opens its first Hong Kong store, Swiss luxury watch prices could spike after the Swiss National Bank’s decision, China’s outlook for 2015 is rocky, Haagen-Dazs will target China’s coffee drinkers, and 2015 could be a difficult year for automakers in China.
New York-based fashion brand Rag & Bone has opened its first store in Hong Kong in IFC Mall. The 1,200 square foot store on the second floor of the mall combines industrial elements and steal framing juxtaposed with softer elements such as solid-wood doors and dark-stained wood floors to give the store a New York vibe. The store will stock the company’s men’s and women’s collections, Rag & Bone Jeans, accessories, and footwear. Rag & Bone, which was founded by David Neville and Marcus Wainwright in 2002, has retail stores in New York, London, Los Angeles, Tokyo, and Seoul with distribution in 57 countries. Neville and Wainright won the Council of Fashion Designers of America’s emerging talent award in 2007.
With the Swiss National Bank’s decision to abolish its minimum exchange rate policy, Chinese consumers will soon be paying a lot more for luxury Swiss watches. Even before SNB’s decision, Richemont had announced a weaker-than-expected quarter for the three months ending December 31st. In Asia, the company’s largest market, which accounts for over a third of its sales, watch and jewelry sales were down 5 percent. To offset the bank’s decision, Swatch and Richemont are considering raising their prices in Europe up to 10 percent, and Rolex and Patek Philippe are considering raising prices in Japan to counter the falling yen against the Swiss franc. With currency-related price adjustments in both Europe and Japan, similar decisions may be coming to China.
A rocky year is in store for the Chinese market as the country experiences greater competition, lower economic growth, and major shifts in consumer behavior. Though most businesses in China are expected to hold to their current strategies, 2015 will present them with a host of new challenges and opportunities. Disposable income has been on the rise among China’s consumers for the past few years, but is expected to drop precipitously in 2015. We will most likely see “the lowest annual income growth in China for at least a decade, with knock-on implications across the economy,” according to Gordon Orr of McKinsey & Company. Workers’ expectations of continued income growth will lead them to price themselves out of the market.
The introduction of the “rainbow latte,” a mix of Haagen-Dazs ice cream and Illy coffee, served in uniquely designed hand-blown glass cups, is the culmination of several years of planning by the ice cream chain. The company also plans to open stand-alone Haagen-Dazs coffee shops to diversify beyond the ice cream market. The company’s choice to serve the “rainbow latte” as its first coffee offering is a conscious shift in its marketing strategy in China in order to attract young coffee drinkers in their late twenties and early thirties, according to the company. Though Haagen-Dazs had billed itself in China as the Rolls-Royce of ice cream, it is overhauling its strategy to connect with young consumers’ affinity for unique experiences over luxury.
Last year, the country’s sales of passenger cars grew only 9.9 percent year-on-year, a considerable decrease from the 16 percent growth the industry experienced in 2013. Though domestic brands are bearing the brunt of the slowdown, foreign automakers have been struggling as well. Government regulations on car ownership have been increasing in the more mature auto markets of China’s larger coastal cities, such as Shenzhen. Intended to reduce traffic, these restrictions have cut into automakers’ business considerably. But the government’s commitment to to “transform China into a consumption-led economy” and higher consumer income levels are expected to drive the annual growth rate back up to high single digits or low double digits later this year.
image source: rag-bone.com