How Coach is Regaining Value in the Luxury Market
Coach Inc. was at a crisis point. The luxury accessory company which specializes in handmade leather goods had saturated the market and over exposed the brand within the company’s multi distribution channels. The famous “C” pattern had gone from a trendy fashion accessory to a symbol of a cheap department store find. A similar example of loss of brand image and value is Burberry, whose famous plaid pattern had been ripped off by counterfeit manufacturers. Although, unlike Burberry, Coach had determined its fate internally through the company’s own strategic decisions.
Luxury is defined by exclusivity and lack of accessibility. This is arguably the most important aspect of the luxury market. If this is gone, the consumer attributes a lesser value for the brand and its products and is therefore unwilling to buy into a company’s brand identity . That is why distribution and pricing are critical in having a successful brand image and value proposition within the luxury market.
As of 2014, Coach had 277 Coach-operated concession shop-in-shops within department stores, retail stores and outlet stores internationally. This is excluding Coach retail and outlet stores which exceeded 500 just in North America. (Coach 10K, 2014).
There was extensive discounting within the concession shop-in-shops and outlet stores.
By implementing this distribution and pricing strategy, Coach gave brand access to everyone from young and old to rich and poor. Coach no longer had a specific buyer persona, rather, everyone was included in the company’s buyer persona. Pushing the product out on so many distribution levels was effective in the near term in increasing sales volume and cash flow, but diluted its brand image. If Coach did not change its positioning in the market or rebrand itself, it would become another passing trend.
So what did Coach do? In Coach’s 2014 Annual Report the company had realized its mistakes and outlined a way to reinvent themselves through what the company called the “Transformation Plan” (10k, 2014). In this plan, Coach revealed major financial initiatives and operational strategies to reposition the brand that were to be executed in the beginning of 2015.
Coach demonstrated its commitment to this effort by investing in capital improvements for Coach’s retail store and wholesale locations and spending $50 million in incremental advertising costs to promote the company’s new strategy (10K, 2014). To further control the company’s brand image, Coach decided to close seventy underperforming stores within North America and select stores internationally (10k, 2014). It also outlined that it would be introducing higher priced items while cutting back on discounting and quarterly sale promotions.
However, in order to implement operational strategies to rebrand and reposition, Coach needed to focus on its roots. For any company competing in the luxury market, it is very helpful that a brand has heritage which can be relied on in order to give a company credibility.
Coach was founded in New York City in 1941, which provided the company with a good foundation on which to differentiate itself. The most successful mainstream luxury accessories come from places such as France and Italy because of their well-defined brand mystique, not from the United States. Coach saw the gap in the market and decided to use its unique heritage to regain value.
For the first time in its history, Coach introduced a clothing line and had its first runway show in September 2015. The company is targeting influencers such as Chloe Grace Moretz and Kendall Jenner to gain interest from trendy consumers and to create awareness of new higher priced products.. The “Transformation Plan” expresses its hopes that Coach will become a “global lifestyle brand”, so reaching out to people with global access is crucial to Coach’s success (10K, 2014). This has helped the company’s social media presence which has grown drastically. Coach now has 1.5 million followers on Instagram, one of the most important forms of social media for fashion and brand image.
It may take time to fully change the way consumers perceive the Coach brand, but the company has laid a strong foundation for future success. Coach has captured Americana in a way that no other luxury fashion company has done before. Utilizing symbols such as the varsity jacket and tapping into southwestern wear has produced some very cool clothing and accessories.
References
Coach 10K (2014). Coach, Inc. Retrieved November 3, 2016, from http://quote.morningstar.com/stock-filing/Annual-Report/2014/6/28/t.aspx?t=:COH&ft=10-K&d=46da7134c72015a046656860f8f11110