SHANGHAI — Michael Kors, embarking on his first visit to Mainland China, is just starting to learn more about the energy of this city — and remind himself where he is.
This story first appeared in the May 9, 2014 issue of WWD. Subscribe Today.
“When I arrived, I was so jet-lagged that I fell asleep during the massage, looked out the window and thought that I was in Hong Kong and they changed the skyline. But then I saw the tower and I said: ‘No we’re in Shanghai,’” said the designer.
Kors is in town to host a major “Jet Set” event at Hongqiao International Airport on Friday evening. Set in a private 30,000-square-foot jet hangar, the event will feature a runway show of special one-off pieces and elaborate large-scale video projections. The latter, developed by 3-Legged Dog Art & Technology Center and Bureau Betak, will employ a combination of high-definition video, holographics and special effects to “transport” the audience to three different locales: a city, a beach and a mountain resort. New York-based DJ collective The Misshapes will provide music for the evening.
Proving the importance of the Asian market to the brand’s growth, John Idol, chairman and chief executive officer of Michael Kors Holdings Ltd., described the event as “the biggest endeavor this company has ever embarked upon.”
By Thursday, the second day of his whirlwind trip here, Kors had already managed to take in a few of the city’s key sights — including the iconic Bund waterfront overlooking the futuristic Pearl Tower — and gauge his celebrity status in the country.
“There was definitely some excitement about my late-night walk on the Bund,” he said. “It’s a nice kind of recognized. I don’t have to deal with, you know, paparazzi on scooters and all that jazz. People ask for a selfie, people ask for a picture and they leave it at that.”
Kors said he’s impressed with what he has seen of Shanghai so far. “It has the bustle, the curiosity, the energy of a city like New York, which of course I love. I love people who are curious about what’s new and what’s next and I think this city is very much that,” he observed, adding that he’s hoping to check out a bit of the city’s French Concession and do some ceramics shopping with what little free time he might have Friday ahead of the event.
“As much as I love fast, urban life, it’s always nice to see it counterbalanced with a little bit of heritage, which around the world now…you really have to hunt for it,” he said.
That stroll along the Bund gave Kors insight into the city’s eclectic style sensibility and its “fashion tribes,” similar to those in New York, London or Tokyo.
“Just taking a walk on the Bund, you see everything from the demure to the outrageous…sex goddess to casual to ladylike and I think the city doesn’t have this one fixed way of dressing, which I of course find more interesting as a designer,” he said. Kors added that he sees a similar, individualist theme amongst China’s celebrities and he appreciates both the glamour of actress Carina Lau and the funky street style of model Ming Xi.
“[Chinese women] have fun with color. They have no fear of color, which is fabulous. You know, New York women could take a bit of a cue from women that I’ve seen on the street here,” he said.
Another Chinese woman Kors praised was designer Uma Wang, who worked a stint in his studio as part of an exchange program operated by the Council of Fashion Designers of America. Kors said he loved seeing Kayne West wearing Wang in Vogue with Kim Kardashian.
“I think that she’s got a huge international future and I’m not just saying it because she worked with us,” he said. “Of course, after she left New York, I said to her: ‘Are you going to be open now to more than just black and navy?’ And then the following season she did a whole white section in her show.”
On Thursday evening, the designer hosted an opening party at his new flagship, the brand’s largest store in China. The event drew hundreds of invited guests, as well as hundreds of onlookers with camera phones trained on the “brown” carpet. Miranda Kerr led an international contingent of models and actresses, including Isabeli Fontana, Karmen Pedaru, Gao Yuanyuan as well as the aforementioned Lau and Xi.
Fresh off a plane from Sydney on her first trip to Shanghai, Kerr was hoping to fit in a little sightseeing and shopping between events during her two days in town. “The architecture here in Shanghai is incredible, I’ve never seen anything like it,” she said.
The new store, which opened in January, is located in the city’s Jing An Kerry Centre, a newcomer on the city’s retail scene. The mall opened last year and has seen plenty of activity in recent weeks. Burberry and Abercrombie & Fitch moved in last month, joining the likes of Paul Smith, Emporio Armani, Karl Lagerfeld and Marc by Marc Jacobs. Tory Burch is set to become Kors’ neighbor in the complex.
The 6,000-square-foot Kors flagship features a new design of storefront for the brand, a shimmering two-story facade reminiscent of a sequined gown. Designed by the company’s in-house team and New York-based architectural firm KPF, it is made up of screens of light-reflective facets. The facade will be rolled out to other stores, including a 9,000-square-foot store in Beijing set to open by the end of the year.
The festivities of Kors’ visit will culminate at Friday’s event. The designer put together an entirely new runway show to illustrate his brand’s globe-trotting ethos and exemplify three locales: a big city, a mountain retreat and a beach resort. He said about 95 percent of the pieces were crafted exclusively for the occasion and are not destined for sale. “It’s the evening gown that rolls up into a ball. It’s the fur that you can wear on the plane and sleep in like a blanket. It’s the navy jacket that wears as well with a pair of shorts as it does with a pair of jeans. We really thought about this wardrobe,” he said.
In keeping with the company’s heavy emphasis on all things digital, Kors launched a dedicated Jet Set app on the WeChat platform. The app allowed users to participate in a sweepstakes for a chance to attend the Shanghai event. During the festivities, it will also serve as an interactive news feed and provide live images.
Compared with other luxury players, Michael Kors has a relatively small but fast-growing presence in Asia. The company counts about 40 stores in Greater China and 40 in Japan, and Idol said the plan is to increase that number to 100 in each country over the next three to five years.
Kors does not disclose sales information for China since the business is separate from Michael Kors Holdings. The Chinese operation is controlled by a privately held company owned by Lawrence Stroll, Silas Chou, Idol and Kors himself, and operates as a licensee to Michael Kors Holdings. But Idol said it would be reasonable to estimate that each store does about $1 million to $2 million in sales a year.
“The brand is really starting to resonate with the consumer, so even though we’re in early days still of our development, we’re starting to get some very good traction and we’re seeing that in comp-store sales,” Idol said of the Asia business.
The executive said because the company is still new to China, it has felt “little to no effect” of the broader luxury goods market slowdown taking place in the country, in part due to a crackdown on gifting and corruption.
“While I think there’s a certain evolution that’s happening in the marketplace, especially related to gifting and some of the other things that are frowned upon now in the political environment, I think what’s happening is actually healthy for what is the real business in the Chinese market,” he said. “There’s wealth being created here at unprecedented levels every year.”
Idol declined to give any forward-looking statements about business conditions as the company is in a blackout period ahead of releasing its full-year results later this month. In February, when releasing third-quarter numbers, Kors said it expects full-year sales to grow about 45 percent to come in between $3.18 billion and $3.19 billion.
Idol said he believes consumers in Asia are discovering the brand through social media and Internet searches for fashion and accessories and only secondarily learning more about Kors as a person and a celebrity made famous by his role as a judge on “Project Runway.” The executive said Asian consumers are also learning more about the brand by traveling, especially to Europe and Hong Kong, more so than to America, although that could change in the future.
“Not everyone knows we’re an American company. [The brand is] a little less iconic than some other people who you might know,” he said, referring to other brands sold in China.
Although the company is putting a heavy emphasis on using social media and technology to reach out to customers, it still lacks a global e-commerce platform. The firm is taking its U.S. e-commerce business in-house come September — currently Neiman Marcus operates it — and Idol said Kors will look at launching e-commerce in Europe next year and in China the following year. The executive said the company will consider all of its options in China, including partnerships with players like TMall, but ultimately Kors will probably opt to launch its own site directly.
“I think the majority of consumers want the real thing. They don’t want to get it secondhand through some third thing because they don’t know if it’s real or not in the end,” Idol said.
Kors prides itself on being a democratic brand with a wide range of price points and that strategy carries over to the Chinese market as well — although the products carry stiff markups in some cases. For example, a large Hamilton handbag in saffiano leather from the more accessibly priced Michael Michael Kors line sells for 4,700 yuan, or about $763, compared to $358 in the U.S. Idol said the company and other luxury players have to compensate for staggeringly high rents, hefty import taxes and other high costs of doing business in Asia.
James Button, senior manager at Shanghai-based consultancy SmithStreet, said he thinks Kors and similarly priced brands such as Tory Burch and Longchamp stand to gain in China when “consumers are looking for something a little bit different and are trying to build a unique style. That’s where Coach’s position hurts them a little bit, because they’re so prevalent, they’re very common in Shanghai.”
But Button also warned that Kors’ positioning in China could prove tricky in the longer term.
“One of the biggest challenges the brand is facing is that the brand means different things in different cities. So, in Shanghai, it’s absolutely a fashion brand. You have a very global consumer base, a lot of students coming back from overseas; people understand it’s an affordable luxury brand. When you get into some of the less developed tier-two cities where Michael Kors has been opening up, the perception is very different. Coach is very well established [in those markets as well]; people view it and Michael Kors as a luxury brand…the downside is that, in the long run, consumers will become more aware of what pure luxury is and might move away from the brand,” Button said.
Idol dismissed that assessment and said Chinese consumers’ perceptions of the brand are the same, whether they are in Beijing or Kunming. Consumers are able to discern between the more affordable Michael Michael Kors line and the pricier Michael Kors Collection, and the company wants to serve consumers at various income levels, he argued.
“You have a middle class today that says: ‘I want to have luxury but I want to sometimes have it at a place where it is more appropriate for me,’” he said, adding that this trend within Asia is part of a broader global shift in spending priorities. “Their values are slightly changing about what they want to spend money on and how much money they want to spend in each category.”