Samsonite International can see China’s market potential with an increasing number of Chinese traveling more, but the luggage maker is still wary of the need to navigate the unique mainland business environment.
Chief Executive Officer Ramesh Tainwala said today’s Chinese people have more confidence in traveling abroad and can secure visas more easily now. However, a higher demand in outbound travel did not translate into better sales performance for Samsonite in the first half of last year.
Samsonite’s net sales in China reached US$124 million, accounting for about a quarter of the group’s sales, for the first half of 2016, according to its interim report. This was a 5.2% drop compared with the same time last year, and still a 0.4% drop excluding change in currency rate.
“The first half was difficult,” Tainwala said, as the group has found customers switching to e-commerce from traditional sales channels.“It has taken us time to understand how e-commerce works,” he said. He felt excited about the challenges ahead as sales saw double-digit growth in the second half. The company will announce its full-year earnings on 16 March.
E-commerce transactions exceeded 21.8 trillion yuan (around US$3 trillion) in 2015, according to a report published by the Xinhua state news agency. Alibaba Group Holding’s Taobao and JD.com are two giants in the Chinese e-commerce markets.
“We don’t want to grow e-commerce at the cost of our current model,” said Tainwala, insisting that Samsonite would not tolerate price arbitrage from e-commerce platforms.
“We have to explain to the e-commerce players that they are offering enough advantages to consumers through convenience, through range shopping,” Tainwala said. Now buyers could have more choices sitting at home while Samsonite can take the opportunity and tap into customers living in the third or even fourth-tier cities in China.
Samsonite also initially suffered from Beijing’s anti-corruption campaign. People were even worried about redeeming Samsonite luggage with their credit card bonus points after the brand was included on a negative list as luxury. The situation changed after Samsonite was reclassified as a brand of a functional product.