By  on February 22, 2008

HONG KONG — Coach Inc. is putting the finishing touches on a major flagship here, set to be the company's second largest in Asia.

The 9,500-square-foot store will span two floors and represents an expansion of Central's luxury retail neighborhood. The location, on the corner of Queen's Road Central and D'Aguilar Street, is further west than its nearest retail neighbors: H&M, Nike and Esprit. It is also blocks away from The Landmark, the district's best-known luxury shopping mall.

Balbina Wong, deputy chairman and chief executive officer of Imaginex Group, which operates Coach stores in Greater China, believes the location, close to the city's most popular entertainment areas, is a sound choice. "The shops are all getting bigger and there is no space in Central anymore," said Wong. "We're happy with this corner location — it's close to Soho and Lan Kwai Fong, but is still part of Central."

The store is slated to open in May, just before the Olympics get under way in Beijing. Wong said the store will cater to tourists and locals alike. "Hong Kong is dependant on tourism, so this is for tourists from Mainland China and Southeast Asia, but it's also for the locals," she said, noting the brand is positioned in Asia the same way it is in the U.S.

"This is accessible luxury, with a great fashion sense," said Wong. "And the fashion part is very important because we get new merchandise every four weeks," she said, adding, "It's accessories that are so easily accessible for a lot of people. The business may be cooling a bit in the West, but it hasn't even reached most of China yet."

The new flagship will be the eighth Coach shop in Hong Kong. Imaginex also operates 14 Coach stores in Mainland China. "We're expanding rapidly in China and going into second-tier cities," said Wong. "China has more than 100 cities with a population of a million or more people, so there is plenty of room to grow. We hope that in five years we will have 50 to 60 stores in China, which is absolutely possible. Some cities already have two or three Coach stores and they can certainly have more."Coach is not the only brand Imaginex is rolling out in China. The group represents 23 international fashion, beauty and lifestyle brands in the Greater China region, including Salvatore Ferragamo, DKNY, Marc by Marc Jacobs, Boss Hugo Boss, BCBG Max Azria, Diesel and Versace Jeans Couture.

"Right now we have 350 points of sale in Greater China and by the end of the year we should have 450," said Wong.

She added that by 2009, Imaginex expects to have 500 points of sale in the region, which includes Hong Kong, Taiwan, Macau and Mainland China. "American brands have a definite opportunity here," said Wong, who noted DKNY, Marc by Marc Jacobs and BCBG Max Azria are very successful in part because they are diffusion lines.

"Diffusion lines offer a better price point yet still have the design edge. You can reach a wider market," she said. "I put myself into a matrix. I have top luxury brands, middle brands and very causal brands — so we cover mid-, mid-high and high price points. With that you have a lot more power when looking for locations."

Wong admitted that finding the right locations in China is one of her most difficult tasks, despite the continual crop of new shopping malls in the country. "Malls are huge in China. They are each several hundred thousand square feet and adjacencies are important. So we fight for every one of our brands," said Wong.

Imaginex, which is projecting a turnover of $500 million in 2008, is privately owned by Peter Woo, the chairman of Wharf Holdings. One of its sister companies, also run by Wong, is Walton Brown, which owns and operates real estate ventures in China, including the Maison Mode department stores and vast outlet shopping malls. Walton Brown already operates a 1.2 million-square-foot outlet just outside Shanghai, with another set to open near Chengdu. "The [first outlet] has been a huge success, not just with the local Shanghainese, but also with Chinese tourists. They come by the busload on a tour. There are a lot of people who don't want to pay first price and these outlets offer lower prices but still designer labels," said Wong.Wong, who began her career as a cosmetics saleswoman, was previously president of Lane Crawford, also a Wharf holding. She said China's need and desire for luxury goods all come down to status. "This is what Japan was like 20 years ago. It's the same as the Middle East or Russia. I really think the luxury business will not slow here. The growth in China far exceeds Russia or India. Right now only about 2 percent of the population can afford luxury goods, but three to four years ago it was 1 percent and by the year 2010, it will be 5 percent," said Wong. "China is already the third largest consumer of luxury goods, but in five to eight years it will exceed Japan and in 10 years it will be the size of the U.S., if not bigger. It's quite incredible just how much disposable income the younger generation has."

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