Cheaper luxury brands gain appeal in China
Corina Su aspires to someday own a handbag or shoes from luxury brands like Louis Vuitton or Gucci. For now, Kate Spade, Michael Kors, or Coach will do.
"We call these the 'American trendy brands'," said Su, a 25-year-old who works in advertising in Shanghai. She prefers Kate Spade's bright colours and bold designs to the more muted styles offered by the big European luxury houses that tout their heritage to justify charging more.
"I might eventually buy an LV or Gucci bag," Su said. "But it will not be until I'm much older, I suspect."
As mainland shoppers like Su get better acquainted with so-called accessible luxury brands, they are discovering a designer wardrobe does not have to cost them months of pay. That is helping US labels such as Coach, whose handbags tend to sell for under US$400. It comes as many European luxury-goods makers raise their prices for some bags to more than 10 times that level in a bid to combat slowing growth.
"Accessible luxury brands have a major opportunity in China," said Luca Solca, an analyst at Exane BNP Paribas in London. "The Chinese market is developing into a middle-class market, looking a bit less elitist and a bit more American."
The likes of Coach, Michael Kors and Tory Burch have been slow to tap growing mainland luxury demand partly because they have narrower distribution in Europe and Asia, said Lucie Greene, editor at LS:N Global, the London-based research unit of The Future Laboratory.
Chinese account for more than US$1 in every four spent on luxury goods worldwide, Bain & Co estimates. As more Chinese travel to the US, sales of American fashion brands are poised to accelerate at home and in China, Greene predicts.
"Part of the allure of luxury brands is a sense of exclusivity and the exotic," she said. "US labels could well be where Chinese consumers turn next for newness."
Coach, which gets about a fifth of North American store sales from tourists, says Chinese are the fastest growing group. Prada, based in Milan, says it is seeing fewer Chinese shoppers in Europe. Chinese visitors to the US surged 25 per cent in the first half last year.
Coach reported an increase in comparable sales in China of at least 10 per cent in the fourth quarter of last year, and Kate Spade saw comparable sales from its China joint venture rise 28 per cent in the third quarter. China revenue at Gucci, by contrast, fell in each of the past two quarters.
