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Reducing Labour Costs &Nbsp; Coach Intends To Substantially Reduce Production In China

2011/5/19 14:53:00 110

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COACH luxury leather bag

A few days ago, the US clothing brand COACH announced that because of China

Labor cost

The rise will shift half of China's capacity to lower production costs and increase sales in China.

Since 2000, COACH has been shut down by factories in Europe and the United States, and more than 90% of the factories have been pferred to factories.

Low labor force

Countries such as China, Indonesia, Thailand and Vietnam began semi mechanized production.

Financial reports show that in 2001,

COACH

The gross profit margin reached 63.5% in 2006, and it soared to 77.7% in 2006. Despite the financial crisis, the gross profit margin of COACH was no less than 70%.

The gross profit margin of LV is only 62%, and the gross margin of GUCCI is around 70%.

"We are being affected by the rapid rise in wages in China's manufacturing sector."

Chairman and CEOLewFrankfort said.

Frankfort said it will reduce COACH's capacity in China from 85% of its global capacity to 40%~50% in the next five years and shift its production capacity to low wage countries such as India, Vietnam and Philippines.

Meanwhile, COACH plans to raise sales to 500 million US dollars in 3 years.

While China is catching up with Japan as the second largest luxury consumer market, COACH is looking to China.

According to the Research Report of Asia Pacific market development company of CLSA Asia Ltd., China's luxury market growth will account for 50% of the global luxury market growth in the next ten years.

In order to enhance its popularity in China and Asia, COACH also announced that it would complete the two listing in Hong Kong by the end of this year.

At present, COACH has 9 stores and 44 stores in Hongkong and the mainland, with sales volume of 100 million US dollars in 2010.

COACH, which is always associated with LV, leaves consumers with the same impression as LV.

"COACH is not a luxury brand, but this mode of operation makes the luxury COACH popular among Chinese consumers."

Brand strategy

Management, Cui Hongbo, senior partner of Lian Zhi Da consulting group.

Lu Qiang, Fawkes holding chairman of luxury brand, pointed out that beside LV, GUCCI and other big brands, there is a brand with a price tag of only 1/3 and a fashionable brand. COACH is easy to attract young white-collar workers.

"The European plot of luxury goods is extremely serious."

Dr Zhou Ting, deputy director of the Daxiang Qi luxury Research Center, pointed out that once the industrial line extends to Asia and other places, although the cost reduction, "but the brand will face the risk of weakening core values."

"Even if some of the processes or parts are completed in China, the big wigglets in these luxury goods will never declare the products made in Asia, and most of the sensitive topics are silent."

Zhou Ting told reporters that COACH will further shift the production line to the surrounding countries with lower production costs, which will bring greater risks to the brand's value.