Coach’s Gateway to Growth in China

Only a day after acquiring direct control of its stores in Greater China, Coach unveiled a sprawling new flagship in the Central District here.

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HONG KONG — Only a day after acquiring direct control of its stores in Greater China, Coach unveiled a sprawling new flagship in the Central District here.

This story first appeared in the May 30, 2008 issue of WWD.  Subscribe Today.

The 9,400-square-foot store on bustling Queen’s Road Central exhibits the scale of Coach’s ambitions in the all-important Chinese market for luxury goods. “We’re looking over the next five years for our sales [in Greater China] to grow to at least $250 million from approximately $30 million at retail today,” said Lew Frankfort, Coach’s chairman and chief executive officer, adding the company plans to open at least 50 stores in the Greater China market over the next five years.

Coach currently has 15 points of sale in China, one store in Macau and eight in Hong Kong, including the new flagship.

The two-level Queen’s Road Central store has been designed with both local shoppers and Mainland Chinese tourists in mind.

“One of the most exciting things is having a store that really encompasses what Coach is all about, with all the different categories. It shows what the brand is today and what it will be in the future,” said Reed Krakoff, president and creative director of Coach, during an exclusive walk-through with WWD. He noted the flagship has room to showcase every category of Coach products.

“The challenge was to create an environment that was open and inviting that also had drama and a strong point of view,” said Krakoff, who designed the store with the Coach Architecture Group. Its look is modeled after the brand’s Legacy concept store on Bleecker Street in New York.

Frankfort said he expects the store to bring in $8.5 million in its first year of operation. “At least $8.5 [million]. We plan conservatively,” said Frankfort, who believes that opening a flagship in Hong Kong is important.

“Hong Kong is the gateway to Greater China and most Mainland Chinese travel through Hong Kong during the course of their international travels. In addition, Hong Kong is a global city and we believe that as part of our global thrust to develop the Greater China market, having a flagship…like [this one] is essential,” the ceo said.

For the 150,000 pedestrians who traverse Queen’s Road Central each day, the store is an eye-catching new landmark, not least because of its towering facade. Rising four stories and covering 7,100 square feet, the backlit steel-and-glass frontage features two of the company’s best-known logos.

“The facade was one of the most exciting projects,” said Krakoff. “We wanted to create something that was timeless, something that felt like it would last for a long time. We created a pattern of our signature logo and also used our horse and carriage logo from our archives — it was a way to combine both old and new. Both are hallmarks of the brand and it serves us well as a billboard for the Coach brand.”

The interiors are no less dramatic. Inspired by pre-World War II apartments in New York, the store features tray ceilings and glossy white walls complete with baseboards, paneling and crown molding. Nickel silver accents, oxidized mirrors and sleek lacquer shelves along the perimeter showcase a range of products, including handbags, small leather goods, footwear, jewelry, eyewear, watches and outerwear. “We tried to create a clean, crisp environment with a feminine, residential feel, even though it has a lot of functions as a retail space,” explained Krakoff.

The ground floor has two major focal points. The first is a custom-built lacquer campaign table laden with Coach accessories, handbags, footwear and jewelry. The table also serves to highlight the Perry Pleated Satchel, a new limited edition bag in ostrich or python, designed exclusively for the new flagship.

“Fashion is important here, they want what’s new, special and exclusive,” said Krakoff of Hong Kong shoppers.

The second major feature of the ground floor is the marble staircase that leads to the upstairs selling area. The floor is subtly divided into distinct selling areas via the floors — white Carrera marble with insets of solid walnut herringbone planks.

On the second level, men’s products have a dedicated space, which is likely to expand in the near future. “We’ve really just started to explore men’s. We’re just beginning to understand the category and its opportunities,” said Krakoff, pointing out the current collection for men, which includes travel bags, small leather goods and outerwear.

Adjacent to this area are shelves displaying younger, more casual handbags, leading to evening bags, a case dedicated to watches and a pedestal table that features Coach’s fragrances. “This is the first time the fragrances are in Hong Kong. Now it’s only available in Japan, Hong Kong and the U.S.,” noted Krakoff.

Tucked away in the farthest corner is footwear. “We’ve really designed this to be a shoe salon — a place where people can spend time,” said Krakoff. The space features an oversize velvet-covered banquette where customers can relax and try on footwear in relative privacy. The shoes are displayed on brightly hued wedges and cubes that add a touch of whimsy as well as a punch of color.

Frankfort said the company is satisfied with the location of the flagship, which is farther west than most of Central’s major shops. “It’s one of the busiest intersections in Hong Kong. In other markets we’ve often pioneered locations where we felt the market was moving to and it’s worked out well for us,” he said.

While the ceo declined to say how much was invested in the Hong Kong project, he said the company has its eyes on the future. “[Brand awareness] is extremely low today — unaided in China it’s about 4 percent. We think the opportunity is unlimited,” said Frankfort.

On Wednesday, Coach said it had acquired all of its “domestic” Greater China business from ImagineX, which had distributed the brand and operated Coach stores in China, Hong Kong and Macau for several years. Frankfort said that deciding to directly operate the company’s stores here was a way “to gain control over our destiny in this vital market where the opportunities are boundless.”

He also pointed out that ImagineX will still be involved in some back-end services, such as human resources, logistics and accounting, but that Coach itself would be in control, determining store locations and driving expansion. “Our performance speaks for itself and we’re confident that we’ll be able to secure appropriate locations,” he said, adding, “As brand owners, we believe that we’re the best stewards to capitalize on the enormous opportunities available. The brand is in our DNA and it’s easier for us to do it directly,’ he said.

In the meantime, the company is splashing out to celebrate the opening of its new flagship with lots of Manhattan touches. On the eve of the grand opening, Krakoff hosted a private dinner in the store featuring a menu designed by celebrity chef Rocco di Spirito and tonight some 1,200 guests are expected to attend a bash featuring performances by John Mayer, dance troupe Jabbawockeez and DJ AM.

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