Are China’s 1st & 2nd City Girls Abandoning Michael Kors and Coach?
In 2010, Coach opened its first flagship store in Shanghai, China. In the same year, Tory Burch opened 10 stores. One year later, Michael Kors and Furla entered the China market. This was the beginning of the boom era for entry lux brands in China. According to a MiKinsey report published in 2017 about entry luxury in China (中国轻奢市场面面观), the consumption of entry luxury took up 36% of the entire luxury consumption and its growth speed surpassed many other top true luxury brands.
But, entry luxury’s golden age quickly vanished. By 2017 this growth had started to decline.
Why is Entry Luxury Not as Popular as Before?
Low Price
The main consumer group of luxury products has shifted to post-90s and post-00s. Compared with previous generations, price has become the most important element when millennials and Gen Z are judging a luxury product.
When you say the word “luxury” 44% of post-00s’ first response is expensive, followed by brand images and quality of products. This means that young people expect luxury products to be expensive and they are more willing to spend more money on luxury products.
Besides, the majority of post-90s are sponsored by their parents when purchasing luxury products. According to McKinsey, households that have income which is above the average tend to give over 4,000 RMB to their kids every month. What can 4,000 RMB do?
Before prices went up, a classic LV tote bag was less than 10k RMB, and the viral Burberry mini canvas and leather pocket bag was 9,400 RMB, so this means that, if post-90s want to purchase those, they just have to pay the extra 5,000 RMB by themselves.
A marketing term called the Sweet Spot, meaning if a product is over 5k RMB, then consumers tend to think about it for quite a while before making the purchasing decision. Because they think if it is over 5k, then the product would be seen as an investment. The majority of Michael Kor’s products are about 3k to 4k RMB, with a slightly lower price, however, young people don’t think it is a luxury bag. As other luxury brands such as LV and Chanel are frequently raising their prices, Michael Kors and Coach offering lower priced items doesn’t benefit their brand image.
Brand Image
If you browse outlets or wholesale platforms, you will spot Michael Kors or Coach. So even though their stores might be located in trendy shopping areas, their brand image is damaged.
What makes things worse is that, main consumers of Michael Kors or Coach at outlets are the old generation. When girls see this, honestly they are not willing to carry the same bag as them.
On Double 11 or some important shopping festivals, Michael Kors or Coach’s prices can reach 1,000 RMB. While this attracts more consumers from third or fourth tier cities, consumers in first or second tier cities don’t like to join the sales. Even for a girl who grows up in third or fourth tier cities and works in first tier cities for 1-2 years, she won’t be happy to pick up a Michael Kors or Coach bag.
But in fact, brands like Michael Kors have a high-end line. But because of its brand image, consumers won’t bother to learn about the brand, not to mention become aware of its high-end line.
In the famous and trendy Taikoo shopping area in Guangzhou, Coach’s store was moved from the second floor to the basement floor. And at the Michael Kors store in Jing An Kerry Centre in Shanghai, one out of four items are being discounted.
The Future of Entry Lux in China
While lower prices aren’t benefiting the image of these entry lux brands, they aren’t necessarily hurting them, but what is hurting their image is the frequent discounting.
I don’t think entry luxury will die in the future. On the contrary, because of its lower prices, it will attract more consumers from lower tier cities. To try and win back consumers in first or second tier cities, these entry lux brands need to stop frequently discounting.
It is also worth noticing that, for young consumers, especially university students or people who just start their career, they can’t afford luxury, instead, they are either turning to niche luxury brands that have a lower price point or buying second-hand luxury. Some niche luxury brands they choose are By Far, New York brand Apede Mod, Los Angeles brands such as Cult Gaia and Simon Miller. Even if products from these brands are the same price point as products from those mainstream entry lux brands, carrying a bag from one of these brands demonstrates that you know the trendiest new brands. What’s more, its far less likely you’ll see someone else with the same bag as you.
Other than international niche luxury brands, Chinese entry lux brands are also getting lots of attention from consumers, such as A.CLOUD, WARM.STUDIO (吉良吉吉) and ABBOTT Vintage.
Read more: 都市精致女孩，正在抛弃MK、Coach们？
