The luxury retail brand Coach has seen the highs and lows of trading in Asia’s biggest market. Yang Bao Yan, the Greater China president says flexibility, innovation, and responsive marketing are behind the company’s recent roaring comeback.
“For us, it is the best time now. Whether the Chinese economy will have a slight slowdown or not, we will focus on those factors which can be controlled, looking for development opportunities.” Yang Bao Yan, the Greater China president and chief executive of US high-end retail brand, Coach.
In the fourth quarter of fiscal 2016, Coach’s net sales increased by 15%, reaching USD $1.15 billion. This means the company has achieved sustained growth three quarters in a row, with a 7% increase in annual sales. This is against a backdrop where China’s luxury market remains ongoing, with the performance of American luxury fashion brand Michael Kors and Kate Spade also beginning to slump. But Coach is making a “rebound.”
The Chinese market was once the fastest growing regional markets for Coach. As of July 31, 2012, the company’s double driving force of new store expansion and double-digit sales growth saw them take more than $USD 300 million US dollars in sales in the Chinese market, an increase of more than 60%. For 2013, the increase was still as high as 40%, “At that time, what we wanted the most was where to open a new shop tomorrow,” said Yang Baoyan.
A falling market
But by 2014, Coach’s overall performance began to decline. North American same-store-sales fell 15% year by year and Chinese market growth also slowed. In addition to changes in overall patterns of consumption, excessive growth is considered to be the cause for Coach experiencing this performance slump.
In the same year, Coach decided to change things drastically in their product, store environment, and marketing strategy and Yang Bao Yan became the Greater China CEO, facing a changing brand and a changing market.
On the one hand, there are many uncertainties in China’s economic development. On the other, as more and more international brands and local design brands get into the market, and with the increase of shopping channels such as Hai Tao and shopping on someone’s behalf, some consumers are becoming increasingly mature and turn their preference to some unique low-profile brands. This brings demands for quality, alongside personality.
“In the past, more Chinese consumers tended to use luxury products to package themselves, and now consumers experience self-discovery through shopping,” Yang Bao Yan said. “For a while, in the Chinese market, having a major logo was popular, perhaps because people want people to feel you can afford a luxury,” he adds, explaining that consumers now tend to buy a branded product with a more subtle presentation.
An updated look
In the new Coach bag, you can hardly see the logo, but you can still easily identify it by the buckle, edge wrapping, and labels. And after the adjustment to the company’s product line, mid-ranged products have the most sales. “Perhaps the high-end bag sales are not the most significant, but, as their own characteristics have caught the attention of the outside world, including fashion magazines, it has attracted more passengers to the stores, even though the guests may eventually buy the relatively cheaper bags,” a Coach insider explained.
It is also worth noting that the frequent discounts offered in the North American market affected local Coach sales in China. “People were waiting to buy at a discount,” or through channels such as buying on behalf of someone else. After the transition, Coach reduced the frequency of these sales in North American stores, while closing some poorly managed outlets.
And this was not just the case in North America, last year the flagship store in Central in Hong Kong was closed. This year the pattern is more varied, with 24 new stores opening while ten that are not performing as well being shut down. Some existing stores are also being renovated; currently, around 40% of outlets in mainland China have had a makeover embracing changes such as wider door space to welcome people in.
Coach has also recognised social media as an important marketing platform. After the Coach official WeChat Platform went online in 2012, it has taken the number one ranking for luxury accessories brands. Last year the platform also added online stores, allowing people to purchase directly.
“We are full of curiosity for the digital business channel, and will continue to seek new opportunities.” Yang Bao Yan said noting that nowhere else sees the same speed of digital development as China. For the brand, the digital channel is not just a sales channel, but also a way to display the brand in the region.
Seeing Coach’s sales results this year, Yang Bao Yan is frankly excited about the “rebound achievement,” and full of this sense of accomplishment says this brand transformation will continue to move forward. He “will not say that after reaching a particular point, our brand transformation task is completed,” adding that you should not be “proud in victory, be elegant even in loss and not be discouraged.”
“The first is to keep true to oneself, the second to innovate constantly. Each of us should keep our own values, but also seek change and innovation,” says the luxury brand’s man in China.