American Luxury Brand Bullish On Chinese Consumer Demand For Luxury Goods
Lew Frankfort said the worldwide economic slowdown was set to raise further China’s importance to the luxury goods sector, not just as a manufacturing centre but, more significantly, as a growing consumer market.
While Coach announced in January that it would halve its rate of expansion in North America, reducing the number of annual store openings there from 40 to 20, Mr Frankfort said he was likely to accelerate development plans in China.
Speaking at the end of a visit to China, he said: “I am leaving this trip with a view that our numbers might be conservative . . . We see sophisticated [Chinese] consumers shopping and international brands thriving.”
Coach estimates that China will represent 10 per cent of the $25bn global luxury handbag and accessories market by 2010. The US group currently has 17 shops in mainland China, in addition to eight stores in Hong Kong and two in Macao.
Frankfort’s view that the mainland market should play an increasingly important role in luxury brands’ marketing and sales efforts in coming years is shared by executives at a number of other luxury companies. This week, The Telegraph’s Peter Foster reported on positivity among luxury retailers and brand executives in the mainland:
Last week I attended a private talk by a senior Chinese executive from a global luxury goods brand who said the international media had it all wrong [about the health of the Chinese consumer market]. China (and his business) was still growing. The future, he said, was fundamentally bright.
Although, clearly, the economic crisis is still on, and China has immense problems to attend to, as reported last week there are signs that the economic stimulus package is starting to improve manufacturing output and add jobs. And, simultaneously, consumers in the country — those who have the means — are finally starting to shop more. As a result, it is important that western luxury brands strike while they can, taking advantage of the fact that native luxury brands still lack the history and pedigree of their foreign competitors, even though their quality is often comparable. Lew Frankfort, in the FT article, shows he has a keen eye for this fact, and is keen to gain a foothold in China now, in preparation for stiff competition later from native luxury brands.
…Frankfort said he was in no doubt that China would develop its own luxury brands, but insisted that such indigenous products would likely provide competition only “on the margins” for the big western companies because “their positioning will typically be below the positioning of the luxury European brands and Coach”.
He drew a comparison with the Japanese market, where western brands have thrived alongside domestic ones, and where Coach now has about 20 per cent of its sales.
Mr Frankfort added: “I believe that new [Chinese] brands will generally not be able to obtain the perceived status of the imported brands because they won’t have the heritage and authenticity. However, to the extent that they make well-made products that are priced compellingly, they will be successful.”