The Trendy Bags That Replaced "Affordable Luxury" Never Called Themselves That

Value for money is a good thing; sameness is not. Being easy to buy is a good thing; making your customer look cheap is a serious mistake.

If you have three or four thousand yuan to spend on a new bag, you have far more to choose from than you did five years ago.

Around 2012, the idea of "light luxury" began to catch on in China — the English term is affordable luxury, luxury you can pay for. The word "luxury" is right there in the name, but it was really a fashion idea: at the start, people bought affordable-luxury brands to own something with a name on it, and to feel the satisfaction that came with it, without spending much more than they could afford.

The leader of the pack needs no introduction. Coach saw this demand earlier than anyone. Back in the 1990s it opened a flagship store on Madison Avenue in New York, selling exactly what office workers wanted: practical, presentable, and far cheaper than the big houses.

Brands built for working women kept arriving after that, and the best known of them now have stores everywhere: Michael Kors, Tory Burch, Kate Spade. Their expansion ran from Europe and America into Asia; their decline is running the same way, starting at home and spreading into Asian markets, China above all. After the breakneck growth of 2012 to 2015, all those stores and efficiency-driven distributor networks have turned into a burden.

Neither the brands nor Wall Street can stomach the slide. Michael Kors trades at about half its peak; Kate Spade at 40% of its high. North America's share of Coach's net profit fell from 64% in 2011 to 58.9% in 2015. This August, Coach said it would pull out of roughly 250 department stores, and Michael Kors cut back the promotions it runs inside them. Department stores were the first thing they ran from.

This has been going on for at least six months. Marc-Olivier Arnold, who heads the Intuition & Solutions unit at RTG Consulting, a firm that works with fashion and luxury companies, told QDaily that discounting can make a brand popular fast, but has now become the problem these brands have to solve: "When every woman on the street is carrying the same heavily discounted Michael Kors or Coach bag, how do you make anyone want this season's expensive one?"

Citi analyst Paul Lejuez summed up Michael Kors's fix this way: "Reducing exposure in the wholesale channel is the right thing to do, but we believe the damage has been done."

The brands did not enlarge that damage by themselves. Apart from a few styles that copy real luxury too closely, there is not much wrong with the products. As for discounting — yes, it leaves you feeling that what you buy today will be worth nothing tomorrow, but that is not what caused the collapse. If it were, outlet malls would belong on the list of culprits too: the places that clear the big brands' old stock keep moving closer to city centers to be near shoppers, where they now compete with the stores selling this season's goods. The Business of Fashion, citing Paul Lejuez's estimate, reported that outlets accounted for 70% of Coach's retail sales in 2013 — which tells you how tangled Coach's problems are.

None of that is the root of it. The root is that affordable luxury, by dropping the price of entry again and again, spent its brand value in advance. Meanwhile shoppers have so many comparable options that they can walk away without a second thought and pick something from the crowd of small labels — and taken together, those small labels add up to a very large competitor.

Every shopper we interviewed said some affordable-luxury styles had been done to death. Karen, who has bought Coach, said: "Before Coach changed designers, it was every auntie's favorite bag for the grocery run." May, a graduate student, said that during an internship at an ad agency she noticed her colleagues all carried name brands, but "there was no way I could ask my parents for that much money for a really expensive bag — honestly these were the only options." Sophia, a fashion blogger who works in the industry, said: "I want to look a bit different, so if one of a brand's styles turns into a hit, I'll probably drop it."

Shoppers find out what is in fashion easily, and they find out what is finished about as fast — maybe faster, because nobody wants to look behind the times.

As commerce always shows, choice trains the shopper, and the shopper then calls forth more choice.

In China, hit bags now arrive one after another. Furla's "jelly bag" (the Furla Candy) and Longchamp's "dumpling bag" (Le Pliage) were popular long ago; in 2014 the Mansur Gavriel bucket bag was impossible to get; in 2015 the BAO BAO Issey Miyake was on every street.

What they share is that one product carries the whole brand into view, and a brand that rides the wave gains more still. In the first quarter of this year, Furla's sales in China rose 45% — and that counts only its stores in China, not what Chinese shoppers buy abroad. Longchamp's global revenue rose 10% in 2015, and China became its biggest market after France, with sales there up 30%.

None of these brands would volunteer a label like "affordable luxury." What they talk about is the state of mind behind it — which, ironically, is the same one that drove people to Coach years ago. The wish to get your money's worth never goes out of date.

Look at the hits and you find them priced around US$500, the same bracket affordable luxury once occupied. The earliest hits have cooled, too; the styles still running either keep issuing limited editions or have no large-scale channel at all, so you have to buy through scattered daigou agents.

Some brands limit supply on purpose, and pitch different selling points on different channels.

Mansur Gavriel and Manu Atelier are the clearest cases. The Mansur Gavriel bucket bag was out of stock for long stretches; on December 9, 2014, the brand told its Instagram followers that the new season was finally going up on the website, and within the hour 95% of it was gone — only one sign of how wanted it was.

The brand was founded in 2013 by designers nobody had heard of. It first put bags on sale that June; by July they had sold out and left a long waiting list behind. Social media did it: in June, the fashion blogger Garance Doré, who then had 250,000 followers on Twitter, was the first to recommend Mansur Gavriel's black bucket bag, the Flamma. By New York Fashion Week in September, editors and celebrities were being photographed with bucket bags, and once those pictures spread online the shortage deepened.

Manu Atelier, from Turkey, has much the same story. Merve Manastir and Beste Manastir started the brand in February 2014; in June, Eva Chen, formerly editor-in-chief of the fashion magazine Lucky, posted a photo of a Manu Atelier bag on Instagram and praised it, and shoppers noticed at once.

Mansur Gavriel's marketing rules look simple enough:

1. Keep the number of products small, and sell a limited quantity through only a few high-end boutiques and department stores. Even the official site carries a limited stock;

2. Announce new stock on social media first, so that anyone hoping to grab a bag watches the brand's accounts closely;

3. Use Instagram to tell "the story of the product" — the photos are mostly the bags and unknown models, the text is sparse, the colors are bright;

4. Post only new-stock news on Twitter and Facebook, and concentrate on Instagram, the platform built for pictures.

Mansur Gavriel does not publish sales figures, but it turned a profit in its third quarter. Manu Atelier has sold well throughout, with US$800,000 in retail sales and close to US$400,000 in operating revenue by the end of 2015.

It is worth noting that while most traditional fashion brands still treat the internet as one more channel, many of these small new labels already see it as many channels at once. Which platforms a brand shows up on says plenty about where it places itself and who it thinks is buying.

Chinese buying power, meanwhile, is impossible to miss. Beste, one of Manu Atelier's founders, once said: "Customers from China, and from Turkey as well, pretty much bought out our stock at Vakko" — the well-known Turkish department store that was then the brand's only physical outlet.

That has a lot to do with how thin the shopping experience is in China's own stores. Young Chinese consumers have moved ahead of what the market offers them; what they want often is not on the shelves at home, so the internet becomes the best tool they have.

Chen Zhan, senior research director at the market research firm Kantar TNS, told QDaily that the widening choice inside a single product category is one of the shifts under way: "Attention moves very fast now. Take Xiaohongshu — it's a kind of fashion landmark, and everything it recommends comes with a reason and a story, like where a brand's inspiration came from, so people feel there is something new to pick. Buying from overseas shows everyone new products and new designs. Social media keeps feeding people news, too."

Brands pouring into China, the flood of information on social media, the growing pile of things people have already bought — all of it has taught Chinese consumers a great deal about fashion and luxury.

Da Zhenzi, a daigou agent for ten years, told QDaily that her customers are almost all salaried women between 26 and 36, and that they are not what they were: "More and more of them can afford expensive things now, they're less fussy than when they first met these brands, and they no longer treat foreign labels as sacred." Chen Zhan puts it this way: "Chinese consumers know more and more about brands — which label, what price, what actually counts as luxury, what tier it sits in. The lines are very clear to them."

China's cross-border e-commerce spending was estimated at 259 billion yuan in 2015, 6% of all its e-commerce spending. In high-end fashion, though, the part played by Tmall and Taobao, China's best-known platforms, is best described as delicate: their traffic makes them a channel no one can ignore, yet the counterfeits and the swarm of competing daigou agents wear down a brand's appeal.

The affordable-luxury names felt all of this, of course. In 2014 Coach's CEO, Victor Luis, announced a change of direction: the brand no longer wanted to be "accessible luxury," but "modern luxury." Stuart Vevers arrived from Loewe as design director, and the results so far look good.

Yang Baoyan, Coach's president and CEO for Greater China, told QDaily that the company wants to change three things: the product, the store, and the marketing. Coach is no longer rushing to open stores; it has cut back discounting in its own shops, closed 74 retail stores worldwide in fiscal 2015, and remodeled many others into "modern luxury" concept stores, which now make up about 40% of its mainland locations.

Michael Kors is still struggling. CEO John Idol said the company understands that seeing its products marked down everywhere has made shoppers question what the brand is worth, and that it will stop taking part in department-store sales events. He added: "We have to correct the mistakes we made in the past. They have hurt us badly."

Cover image: esquirehk, fashionnetwork and popsugar.com