Unfazed by the recent slump in Chinese luxury sales, American fashion house Coach is deepening its push into China’s third and fourth-tier cities. At present, the luxury brand is looking to open 30 new stores in the coming 12 months. Its soon-to-open branch in Baoji City, Shaanxi Province, will mark Coach’s second store to open in a fourth-tier city after its Daqing City branch in Heilongjiang Province.
In terms of business strategy, Coach parent Tapestry’s aim is to capitalise on its position as a seller of “accessible luxury”, especially at a time when many higher-end brands have moved further upmarket and Chinese consumers have become more cost-conscious following the pandemic. Moreover, with lower price points than the average luxury brand, success may be in the bag for Coach.
According to online consumption data collected by Secoo, first and second-tier cities represent 56% of China’s luxury goods consumption. However, with the rise of e-commerce, lower-tier cities have shown strong growth in spending and purchasing power, making it a viable market for luxury.
“A lot of our existing customers are already from tier-three, tier-four cities, so we believe there is a cluster there that will get us scale. We never want to be exclusive or selective, we want to be close to where our customers are,” said Yann Bozec, the company’s Asia Pacific president.
So far, in its plan for expansion, the company has opened 360 stores across 80 cities in China. Looking forward, Coach intends to introduce a “livestreaming studio” in some stores to allow customers to broadcast their shopping experience to social media followers.
All in all, Tapestry’s venture into lower-tier cities reflects the company’s optimism about the long-term growth potential of the Chinese luxury market. Whereas most Western competitors are largely reluctant to tread into China’s lower-tier cities, Tapestry’s Coach views it as a gold mine waiting to be brought to light.
