Luxury Brands Are Fleeing The First Tier And Moving To The New Layout Of The Third And Fourth Tier Cities

Recently, American luxury brand coach opened a new store in Baoji, Shaanxi Province, China, and further penetrated into China's sinking market. It is understood that the store is the second store opened by coach in China's fourth tier cities after it entered Daqing City, Heilongjiang Province two years ago. Yann bozec, Asia Pacific president of tapestry group, the parent company of coach, said the store is one of the group's plans to open 30 stores in China's fourth tier cities in the next 12 months, adding 60 stores in China in the past two years.

Tapestry group owns three brands: coach, Kate Spade and Stuart Weitzman. According to the official website information, the three brands have 284 stores in mainland China, including 201 stores mainly coach, 34 Kate Spade and 59 Stuart Weitzman.

According to Yingshang big data, coach has significantly accelerated in the sinking market. At present, there are more than 20 stores in the shopping centers of the third and fourth tier commercial cities. Since this year, it has entered the sinking markets of Xuzhou, Dandong, Jinhua, Jiaxing, Changshu, Xinxiang and Shantou.

Kate Spade and Stuart Weitzman have no sign of sinking temporarily. However, Kate Spade has further access to consumers in the sinking market through digital transformation. In 2021, Kate Spade announced that she had settled down in the trill e-commerce, and opened more than 50 live broadcasting channels in nearly a month for publicity. At the same time, Kate Spade also opened an online sales channel on the applet.

From this point of view, tapestry group's future plans to open stores in China's fourth tier market will mainly fall on the coach brand.

Why does coach choose to expand China's sinking market against the background of the epidemic situation superimposed on the slowdown of global economic development? Yann bozec said that consumers in the third and fourth tier cities have great enthusiasm for coach, and going into this market can help the brand expand its scale.

As we all know, with the continuous improvement of people's living standards in high-speed cities, such as coach and Kate Spade, "light luxury" brands have been unable to meet the needs of these consumer groups for luxury goods. Not only that, the rise of a small number of independent designer brands, with its unique design and "light luxury" pricing, so that consumers in first tier cities have more choices. However, the image and quality of their products have not been well improved for a long time, and can not meet the growing aesthetic needs of consumers, which has become a new dilemma for "coach".

In addition, according to the monitoring of China National Business Information Center, the comprehensive market share of leather goods and bags brands with an average price of 3000-5000 yuan is growing rapidly in China, which is just the core price range of coach, and the market space is optimistic. At this time, high-level cities are facing adverse factors such as diversion, intensified competition and falling out of favor, while the consumption level of low-level cities is constantly improving. Therefore, it is more in line with the future layout of coach with an average price of 3000 yuan or less to escape from the "battlefield" of first tier cities and switch to third and fourth tier cities.

Although the news of tapestry group's "digging gold" in China's sinking market is gratifying, and it is a good opportunity to expand during the epidemic period, the actual performance is also worrying. According to the fourth quarter financial report released by tapestry group in August this year, in the fourth quarter up to July 2, the group's turnover was basically the same as that of the previous year, with an increase of 7% compared with that in 2019 before the epidemic. The annual sales volume rose by 15% and the gross profit margin was close to 70%. However, in the Chinese market, sales fell 32%, officials said, China's performance was mainly affected by the epidemic and the closure of brand stores in key markets. Next, whether coach can reverse the performance trend with the expansion layout of the third and fourth tier cities remains to be tested.