Ask any multinational CEO in China about their toughest challenge and the answer likely involves human resources -- finding, training and keeping good staff. Despite China's massive population, fast economic growth means there are few experienced staff available for white-collar jobs, ranging from retail sales to management.
The challenge is particularly acute for luxury marketers, whose brand reputations were built on world-class service and attention to detail. Wealthy Chinese shoppers in Shanghai expect the same level of customer service and expertise as in Paris or New York. After all, Armani suits and Chanel dresses cost just as much -- or more -- in Shanghai.
Jonathan Seliger, president and CEO for Coach in China, recently spoke with "Thoughtful China" about the special challenges facing the luxury goods industry in China and how the New York-based purveyor of luxury handbags and accessories for men and women has revamped its operations in China since buying the business back from a local franchisee in 2009. (See the full episode at www.thoughtfulchina.com).
How is the HR challenge tougher for a luxury marketer?
Johnathan Seliger: We inherited a team from our franchisees and all of them were retained within the organization and then we embarked on a pretty aggressive....let's call it a brainwashing program to make sure they were building themselves up to the Coach standards. The team we inherited was 14 stores. By the end of our financial year, we'll be at 80 stores. We're opening about 30 stores a year, not just in Beijing and Shanghai but also in the second and third tier markets.
How did Coach go about training local staff?
Mr. Seliger: The core of our training objectives is to build a central field-service training team. We got a lot of support, not only from New York but also from some of our more mature markets such as Hong Kong as well as Coach Japan, a $800 million business. It's our largest market outside of North America. Even if they are not fluent Chinese speakers, they can still come and engage with the local field service workers who do speak English and then go into the stores to hold what we call Coach College.
When we took the business over from our franchisee, who had a certain compensation model heavy in commission in order to drive the top line of their business, we knew it was important for our teams to start to build relationships with their customers. We needed a more stable team so we rejigged the compensation model so it was more heavy on base salary.
How did you change the compensation model?
Mr. Seliger: About a year and a half ago...we introduced restricted stock units to our store managers. I believe we are the first if not the only American company to offer restricted stock units to store managers in China. [It] wasn't an easy thing to do. We had to get special government approval from [the State Administration of Foreign Exchange]. We needed to jump through quite a few hoops with the local authorities to get this done, but it's had remarkable traction.
We also put in place a management-trainee program. Especially in the second and third tier cities, with such a shallow and competitive talent pool that we have, we knew that we had to bring in young talent and start them off early. Smart, sharp kids, fresh out of school. We bring them right into the organization and train them up from zero really.
How does your approach change as you move into China's lower-tier markets? A lot of times when you're going into a second or third tier city, there is one department store, or there is one shopping mall. You're recruiting as many local people as you can, but you have to be very self-sufficient, take your best talent and expertise and shift that for a period into that city. We have a SWAT team that 's populated by some of our best retailers. When we open a new city, we bring them in for a one-month period to monitor that store and mentor the local retail staff. A lot of them are going to be brand new to the brand and maybe even to our industry, because we can't always recruit from within the luxury retail industry.
Is poaching staff a serious problem?
Mr. Seliger: It's always been an issue. On the retail side, we have preventive measures in place, like the management trainee program where we can grow our own talent. We've got good economic incentives in place with our store managers with the stock grants.
On the corporate side, the more time you spent building people up, developing them and investing in them, the more marketable they are. As long as you're building an organization that shows them a clear development path, the more of a chance you're going to have retain them and truly develop them to go to the next level.