Coach Inc. is affirming its presence in China and growing aggressively throughout the Far East.
The $3.2 billion American accessories giant will open a 7,000-square-foot flagship in Shanghai in April. The New York-based firm, which has 343 full-price boutiques and 118 factory outlet stores in North America, and about 160 locations in Japan, has accelerated its original plan for China and is opening 15 locations this year. By June 30, the end of the firm’s fiscal year, there will be 43 units throughout Mainland China and its special administrative districts of Hong Kong and Macau.
“We really believed from the beginning that China could become the third critical leg of Coach’s business,” said Ian Bickley, president of Coach International. “With the investment we’ve made, we think we’re extremely well positioned to explode in the China marketplace.”
Bickley said given China’s population and economic growth, the premium handbag and accessories market there will clearly exceed the size of the market in Japan. Coach estimates that by 2013, Hong Kong, Macau and Mainland China together will represent nearly 20 percent of the global market, up from 8 percent today. In 2009, the firm’s fiscal net sales in the U.S. were $2.3 billion, representing 72 percent of total revenue, while Japanese sales were $670 million, for 21 percent of total revenue. Other international sales amounted to $241 million at 7 percent of total revenue.
Coach’s Shanghai flagship will be located on Huai Hai Middle Road, by the intersection of Song Shan Road, which is quickly becoming a hub for luxury retail, with other tenants including Cartier and Tiffany & Co opening this spring.
In 2008, Coach completed an agreement to acquire the Coach domestic retail businesses in Hong Kong, Macau and Mainland China from its former distributor, ImagineX Group. At that time, Bickley stated Coach’s goal was to become one of the top three imported handbag and accessories brands, with sales over $250 million and a market share of at least 10 percent by 2013, up from $30 million and 3 percent at the time.
Bickley put major emphasis on the Shanghai flagship, saying it would help get Chinese consumers acclimated to the brand, which is also advertising in print media and outdoors. The two-story store, designed by the Coach Architecture Group, features exclusive elements such as internally illuminated panels and the brand’s horse and carriage logo prominently on the facade. The interior will feature individual rooms with cove ceilings, wall moldings and white Carrera marble floors inlaid with black cabochon. There will also be signature silk draperies, artwork and custom seating in the store.
To commemorate the opening, there will be a series of individually numbered bags, exclusive to that shop.
“Whenever we’re going into new markets overseas, the flagship is the nucleus that conveys ideas to consumers all over the world,” Bickley added. “Consumers who come into our flagship stores are more likely to try the brand for the first time…their impression of the brand is more advanced, more positive.”
In 2002, Coach opened its modernist window-filled Ginza flagship, its first in Japan, and in 2008 debuted the Hong Kong flagship. According to research conducted by Coach, the Chinese consumer’s buying habits differ greatly from those in Japan or the U.S.
“They are more open-minded about brands [than the Japanese],” said Bickley of the Chinese customer. “She appreciates Coach as a relevant brand and not using Coach as a stepping stone into European luxury brands.” Bickley said the research showed that Chinese consumers rated Coach high on style, sophistication, quality and value, and that the repurchase intend is 94 percent, higher than the U.S.