Chinese Consumers and Fresh Apples

Coach and the Chinese Consumer

by Elaine Schwartz    •    Aug 1, 2012

Reporting their 4th quarter earnings yesterday, Coach, the handbag and accessories retailer, disappointed investors when they said that US department store and factory outlet sales had slowed. They did report, though, that sales of their handbags and accessories were up by 60% in China.

Like 2 halves of a whole picture, Coach’s marketing plan for China and the description of the new Chinese consumer ideally fit together. Coach is targeting a Chinese urban consumer who is increasingly affluent and aspirational–precisely what a McKinsey Report on the 2020 Chinese consumer projects.

Here are some of McKinsey’s numbers:

Chinese Urban Households: Disposable Income/Proportion of Urban Population

Household Type:

Annual disposable income

2010

(total of 226 million households)

2020*

(total of 328 million households)

Affluent

(More than $34,000)

2%

6%

Mainstream

($16,000 to $34,000)

6%

51%

Value

($6,000 to $16,000)

82%

36%

Poor

(Less than $6000)

10%

7%

*estimated

 

Coach says that it will have 125 locations in China by the end of FY2013, that sales in China will be up by 33% to $400 million, and that “tier 2 and tier 3″ cities were exceeding their expectations. Meanwhile, McKinsey says that Chinese consumers will be more affluent, more urban, more mobile, more educated, aspirational and older at each stage of life.

With US economic growth “muted” and China’s annual growth rate predicted to be close to 8%, doesn’t it make sense that US multinationals ranging from Starbucks, the Gap and J. Crew to Coach all have China as a part of their competitive strategy?

To compare an analysis of the Chinese consumer and Coach’s business plans, you can read McKinsey’s “Meet the 2020 Chinese Consumer” here and read the transcript of the Coach 4Q 2012 investor call here. Also, this article from Reuters on the Chinese consumer was enlightening.

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