Samsonite learns to capture Chinese market with ecommerce
With its hordes of newly minted middle class travellers, China should be a gold mine for worldwide luggage market leader, Samsonite. But, this was not always the case. In the first half of 2016, Samsonite saw sales fall by 5.2% in the country. Luckily, Samsonite figured it out – and the second half of 2016 saw double-digit growth for the company.
Just over a month into 2017, and Samsonite is up by almost 13%!
Source: Yahoo Finance
The transformative factor in Samsonite’s Chinese performance was simple: ecommerce. Samsonite’s CEO Ramesh Tainwala, said “the first half was difficult,” for Samsonite, because “it took us time to understand how ecommerce works.”
The shift to purchase luggage online is not particularly new, but the industry has been somewhat protected from it, as many travellers buy their bags at the airport itself. This is particularly true of Samsonite, which has developed a business model that relies, in part, on it being the ‘go-to’ luggage retailer in airport spaces.
However, Chinese consumers have adopted ecommerce far faster – and to a far greater degree – than their western counterparts. China may credibly be seen as a symbol of ecommerce’s potential in the west – the country’s online transactions last year exceeded $3 trillion. That’s larger than the entire economy of the United Kingdom – which is itself the fifth largest economy in the world.
Despite Samsonite’s success in the second half of last year, the company still has misgivings about ecommerce’s effect on pricing. Tainwala said: “we have to explain to the ecommerce players that they are offering enough advantages to consumers through convenience, through range shopping,” and added “we don’t want to grow ecommerce at the cost of our current model.”
However the company approaches the ecommerce revolution going forward, it can’t be denied: in the second half of last year, they got it very, very, right.
Dominion holds Samsonite in its Global Trends Luxury Fund.
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