A Ralph Lauren letter jacket in corduroy from the brand a store in Singapore costs around 900 Singapore dollars ($693).
But a vanilla latte in your coffee? A comparative bargain at SG$9.
From Ralph Lauren to Coach, Louis Vuitton, Dior and Prada, clothing and luxury brands are opening stores in Asia to connect with consumers who increasingly value experiences over tangible purchases.
This is especially true for Gen Z, Coach CEO Todd Kahn told “Squawk Box Asia” on Monday.
“Generation Z, everywhere, is really focused on self-expression,” he said. “The cafes [are] it’s really about expanding that self-expression, that idea of community.
Many Gen Zers are happy to share this “self-expression” online, resulting in free word-of-mouth publicity for concepts such as Coach’s “chili crab” soft-serve ice cream, topped with a branded mantou, or fried bun, at its new cafe at Resorts World Sentosa.
The new hook
Sunglasses and key chains may have been gateway purchases to high-end fashion of the past. Today, new consumers can experience luxury for less – by first purchasing handbags made of cake rather than hand-sewn leather.
Coach’s foray into the food business began in Asia, Kahn said, where the company experimented with different food and beverage concepts. The brand is set to open a Coach-branded steakhouse at Singapore’s Jewel Changi Airport in October.
Ultimately, the company’s data shows that cafes are “probably the best format for us,” he said.
Coffee vans located in areas with high foot traffic are profitable on their own, he said. Plus, they sell more merchandise, often because shoppers’ chaperones have a place to rest and relax, allowing shoppers to linger longer, he said.
“When we have a cafe, we’ve seen between 15 and 35 percent better results in the main store,” he said.
Coach has more than 980 stores worldwide and its push into “experiential retail” could result in more than 100 cafes opening globally in the next four years, he said.
Prices up, purchases down
Luxury industry profits nearly tripled between 2019 and 2024, according to McKinsey & Company’s The State of Luxury report released in January. However, much of this growth – around 80% – was due to price increases and not increased demand, he says.
A cappuccino at Prada Caffe, located on the second floor of Singapore’s Ion Orchard mall, costs over S$15 ($12 including tax and service charge).
Source: CNBC
Today, the future of luxury goods companies is less certain, with sales down 2% in 2024, leading to the sector’s first real slowdown in 15 years, excluding the pandemic, according to management consultancy Bain & Company.
“Traditional European luxury has increased 10-fold compared to 15 or 20 years ago,” said Coach’s Kahn.
“I don’t feel good having to tell someone you have to save four months’ salary to buy a handbag,” he said. “Most of our products sell for between $300 and $500, and that’s definitely achievable for a young person.”
Still, Kahn said, Coach’s strategy isn’t just about capturing Gen Z’s attention.
“Soon we’ll be talking about Gen Alpha,” he said.
— CNBC’s Kaela Ling contributed to this report.
