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Jun
2015

Affordable luxury handbags

In the July /August issue of the Luxury Insights China report, we included a piece explaining the Affordable Luxury sector in China, a growing sub-sector of luxury that has benefited from the slowing of the economy, and the more selective consumer attitude to spending. In this issue, we consider the affordable luxury handbag sector i.e. those bags that in our view are still expensive enough not to be fast fashion, but not so expensive to compete directly within the main luxury market.

According to Bain & Company, leather goods, that includes handbags of all types, represented 13.9% of the luxury market value in China in 2012 that was valued at about 15.9 Billion RMB. The handbag, as elsewhere in the world is a must have for every Chinese woman, and a luxury branded one the most sought after. This new and growing sub-sector of luxury has attracted many handbag brands from around the globe, as they all see the opportunity of the expanding middle class, and their hunger for luxury on a limited budget.

Our definition of an Affordable Luxury handbag brand is one that has product in its range from 3,000 to 7,000 RMB, as this is the price range that the middle classes and white-collar workers can afford to pay. The brands we have considered in this group are listed below.

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Promotion

Michael Kors

The reality TV show Project Runway is very popular among Chinese female white-collar consumers. As a judge in the show, Michael Kors has become a hot topic for a long time. The awareness of the Michael Kors brand also spread rapidly in Chinese social media, its reputation in the US market and the big brand look and style also make the brand popular with Chinese consumers.

Vivienne Westwood

Vivienne Westwood is popular in China because of the designer’s personal charm and recognition. She is considered an amazing designer with unique ideas, and attracts a large number normal office workers who consider that they have a boring life and so they want something new, something exciting, something unusual. She is one of a few women in the designer circle that people know in China, which makes her an idol to many female consumers. These values have made her quite popular on social networks several years before the brand came to China. Netizens choose to discuss her to demonstrate that they are fashionable.

Brand reach

It is noticeable that some affordable luxury brands have adopted a strategy of opening stores in those cities in which the larger mainstream luxury brands have yet to establish themselves, aiming to tap into an immature market and establish their name before others are able to do so, gaining first mover advantage.

The map below demonstrates the phenomenon using Gucci as a benchmark mainstream luxury brand against which the retail locations of the affordable brands below are compared. The size of the circle indicates handbag retail density, grey circles are locations where Gucci sits alongside our affordable brands, light blue cities are those in which only the affordable brands are present and brown circles are cities in which only Gucci has a presence, and the affordable players have yet to open.

Affordable luxury density by city

 

Advertising monitor

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Consumer characteristics

Affordable luxury handbag consumers are mostly young and fashion conscious office workers, or students from affluent families. Most of them are from coastal areas or big fashion inland cities like Chengdu. They advocate showing your personality and rational consumption of luxury goods. To them mainstream luxury is too expensive, and although they can afford it, they would rather buy 2 or 3 affordable luxury bags that they carry on different days, than have one for all occasions.
Typically they adore international design, beautiful colours and relatively simple style, that fit’s their age and trendy tastes, although naturally some consumers also have functional requirements, such as a handbag with a zipper for safety issues. 3,000-10,000 RMB is their monthly salary range, and most are aged between 20 to 40 years old.

Entry level from luxury brands

Not to miss out on this particular consumer group and to establish an initial link with the brand, many of the establish luxury names have introduced entry-level products at the upper price point of affordable luxury handbags. LV, Gucci, Dunhill, Salvatore Ferragamo, Fendi and others have all launched entry level leather handbags at price point below 7k RMB, the LV ‘Neverfull’ is the most popular one among them.

Consumer opinion

Suggestions to others on social media

“I like to look beautiful, but am reluctant to buy either luxury or domestic brands, but I especially like a pure leather bag. Coach is the maximum that I can afford, but I am not sure about the style. However, I did buy two bags and a purse from Coach that I abandoned a few months later.

Before coach, I loved GUESS and FollieFollie, but products from those brands are usually not leather and wear out very quickly, actually they are not good value for money.

Nowadays mediocre brands in malls will also cost you over one thousand RMB in which case, Coach leather bags in the U.S. are not expensive after discount, but the style is now the weak point and the buyer needs to be selective.”

A white-collar worker was asked which bag to buy.

“I feel it is not a very good deal to buy bags from LV, because you are a white collar, and your friends or colleagues may know your financial situation. If you buy a bag with a big logo of a luxury brand, others will certainly think that you bought a fake one. . . even if you tell them it is real, they will still be suspicious. My advice is to buy a young fashion leather bag, such as Michael Kors, Kate Spade and Marc by MJ, or ask friends to buy one for you in Europe.”

I want to save up for a luxury bag and use it for years.

“Believe me, if you get the first one, you will definitely buy the second and then the third one, and your bag collection will be bigger and bigger.”

“I cannot understand why people spend five or six thousand RMB buying a fabric bag from Gucci or Prada, I prefer cheaper bags. For leather bags, I like good leather with a simple style and solid colour.”

“My first branded bag was Coach, before which I never considered brand when shopping, if the bag was stylish with a reasonable price I would buy it. Since I bought my first Coach bag, I slid into the abyss of bag desire step by step. Nowadays I dream of having a 40,000RMB Chanel bag all time, I love it so much. But it’s the price that I can’t afford.”

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What they say about brands

Kate Spade

“Kate Spade is described as a simple style that looks fresh, cool and energetic. The designer really understands a girls’ heart. I tend to buy second-tier brands, such as Kate Spade, Longchamp, Agnes b.etc. those brands both good in quality and good value for money. I just love the bright and lively colours that Kate Spade offers.”

“Coach became high-end only after it entered China, and is not good value for money. Kate Spade’s bags are much younger and also the material and quality are not bad. I have one and its good. I think that most of Michael Kors bags are copied designs. According to the budget (3,000-4,000), I recommend Coccinelle, an Italian brand, which has its own characteristics of color and style. The brand has counters in China and the price is around 2,000 through a Daigou. But I have an entry-level LV Neverfull bag and I have to say the bag from big brand is really amazing!”

“I can afford bags such as Prada Saffiano BN2274 or small bags from Chanel, but I wouldn’t be parted from my money. I think the bag should fit a financial situation.”

“Personally I think for the same price level products, Kate Spade is much better than Coach. The cheaper Coach bags are mainly from factory stores, and are old fashioned. You can find stylish Coach bags in a Coach boutique store, but they are not good value for money. Michael Kors is very popular in the US, but it has a nickname ‘Michael Copies’. The advantage of Michael Kors is the beautiful colour they use. If you are over 30, you may consider Tory Burch it’s for mature women.”

Michael Kors

“In the US Michael Kors products are in the same price range as Coach, but when it came to China, Coach became affordable luxury but the style is not stylish. Michael Kors is cheaper here.

I bought a Coach bag in the US when I was studying, that only cost me $150, but it cost 2,000RMB in an outlet in China. “

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Coach

“The cheaper Coach bags are all from a factory store, and they are not stylish at all. Those in the boutique store are really expensive, though my salary is over 10,000RMB per month, I still find it expensive to spend 7,000 to 8,000RMB for a bag.”

“Why do you want to buy Coach when Longchamp or Kate Spade are all more stylish than Coach? If you have several thousand RMB budget, buy Longchamp, or buy Mark Kors or Kate Spade if you can’t afford Longchamp.”

“If you have friends in Europe, you can ask them to go to an outlet to buy a Gucci / Prada (old collection) for you, two or three thousand RMB will be enough. I brought a red rose Gucci canvas bag for my friend once, and it only cost 2,000 RMB.”

“Coach is a good choice for girl’s first bag for daily use. I don’t have bags from big brands, but I have lots of third-tier brands such as Coach, Kate Spade, Longchamp and Furla. For the price of a bag from a big brand you can buy four or five of bags from these brands. You can use different bags every day, they are also durable, and amongst those bags Coach is considered good quality.”


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