Coach is done with accessible luxury

Fashion has met many Coaches.

The New York-based leather goods brand was the shoulder bag for the masses, the wristlet for every American tween, the high-fashion hopeful, rising demand and declining sentiment. But for his next act, Coach Dr. Frankenstein of fashion and kill the monster that created it: accessible luxury, fashion’s midway between ultra-cheap and luxury.

“This idea of ​​accessible luxury, or redefining access to luxury, has done us a disservice,” said CEO Todd Khan. “It’s put us in a box we don’t live in anymore.”

On Coach’s investor day Friday, the brand is introducing a new term, “expressive luxury,” as part of a broader repositioning that aims to lure Gen-Z and lean away from the downward connotations of “accessible” and more into “luxury.” . ”

The repositioning builds on the turnaround Coach started ten years ago after getting into a discount dash with accessible luxury carpenters like Michael Kors. To change the luck then, the label commissioned ex-Loewe, ex-Louis Vuitton import Stuart Vevers to advocate for Coach as a lifestyle brand with a high-fashion temperament. He launched ready-to-wear and concepts like Rexy the dinosaur, but nothing seemed to stick. Sales stalled and executives went through a revolving door.

Coach started to see some momentum internationally in 2019, but sales in North America continued to deteriorate. The pandemic has wiped out any progress and then some. In mid-2020, when Todd Kahn – a 14-year veteran of the brand – was named interim CEO of the brand, shares in Tapestry, Coach’s parent company, were at their lowest point since the 2009 financial crisis. needed a lifeline.

“I felt a bit like Winston Churchill on the eve of World War II,” Kahn said.

Looks like Coach’s efforts are starting to pay off. In the most recent fiscal year, the brand’s total sales recovered to above pre-pandemic levels, up 16 percent year-over-year to $4.9 billion. It managed to increase the average price of its handbags by 30 percent compared to 2019. A report from BoF Insights found that Coach was the first brand most American shoppers thought of when buying a bag, and it was listed in the top 10 high net worth individuals in the US and China. Coach has acquired nearly 8 million new customers in North America in the past two years.

Coach was one of the first among mid-luxury U.S. brands to acknowledge it was devalued, and Michael Kors and Ralph Lauren are now aiming for the same kind of brand enhancement, said BMO Capital Markets managing director and senior analyst Simeon Siegal. They are all racing to bolster their high-end status, which will help them weather a recession that will likely hit lower-income customers harder than rich ones.

“The most difficult question in fashion is finding the right balance between exclusivity and distribution,” says Siegel. “It’s figuring out how to sell a lot without losing the ability to set the price.”

Power restored

Beginning in the early 2010s, Coach began to regain pricing power. It cut costs, reduced inventory and moved back to department stores, building a fleet of retail outlets where it could sell cheaper bags to a mass consumer without relying on extreme discounts. Sales increased gradually, but inconspicuously.

During the pandemic, Coach debuted a plan to improve data and digital. It established an e-commerce arm, increasing online sales from 8 percent of total sales in 2020 to about 30 percent now, Kahn said. It began to look at its client clearly, rather than ambitiously. Kahn acknowledged that during a 2020 earnings call, “At certain times we have focused too much on the customer we wanted and not on who our customer really is.”

The target customer shops through various channels, buying a $200 bag one day and an $800 bag the next, Kahn said. Instead of offering full-price items on Fifth Avenue and hidden discounts in the suburbs, they intermingle online — to a degree. Customers could purchase basic products at coachoutlet.com for under $500, and embellished limited edition versions at Coach.com for more.

Coach also started getting the release cadence and product right. Noticing the popularity of his Tabby bag in 2019, he released a puffy update in 2021, instead of phasing it out to outlets and focusing on a new shape. Coach has since updated the Tabby with a soft version and different colorways in different price ranges – from $195 to $4,500.

It’s done the same with other popular bags. This month, the brand released a graffiti-covered Rogue as part of a collaboration with artists Mint + Serf. Last month, it turned the silhouette into a cartoon, with leather eyes and shaved eyebrows to create “Coachies.”

“It’s actually a much stronger formula for success than constantly bringing new things and destroying great bags prematurely,” says Kahn.

Call it a comeback?

Coach has gotten some help from his rivals in finding a wider audience for his full-price merchandise. According to Jefferies, luxury brands have increased prices by an average of 10.7 percent in 2021 and by 10.3 percent this year. The price of certain Chanel bags has doubled since 2019. Coach’s bags, which are still typically under $1,000, appeal to high-end luxury consumers at the entry-level.

“The white space between us and them has grown more than ever in our history,” Khan said.

The rise of resale could make things more difficult, said Michael Binetti, director and senior equity analyst at Credit Suisse. What’s stopping a consumer from buying a used Gucci bag for $1000 instead of a new Coach bag for the same price?

Where Coach has gone for a more streamlined approach to merchandising, it has adopted the opposite strategy when it comes to ambassadors: an attempt to make people see Coach as more than a price tag, and create a virtuous halo around the product. Since tapping Selena Gomez in 2016, Coach now counts more than 40 global influencers, musicians, actors and other celebrities on his list.

They are often photographed by the fashion-forward Juergen Teller, or appear in wacky campaigns like Coach’s Season 2, where Megan Thee Stallion, Jennifer Lopez and K-Pop’s Dawn channeled nostalgia in TV ads and pop culture moments alongside more niche names like Tavi Gevinson and Hari. Neph.

A wide range of ambassadors is key to broadening Coach’s audience, Khan said. The brand will tap into new spokespersons, but the marketing will focus more on storytelling and pushing Coach as the key to expressing personal style.

“Just like in 2000, when Coach coined the term accessible luxury and entered a golden age, this is the next golden age for Coach of expressive luxury,” said Kahn.

Increasing the footprint

To continue to grow, Coach will need to find a way to sell more products to more customers while maintaining control over brand perception, Siegel said.

The brand has been catching up on digital, with a growing e-commerce platform and fun, influencer-flooded social media presence – even success on TikTok, aided by the 7,500 influencers with more than 10,000 followers who have heard about Coach at least once. have posted this year, according to data company Tribe Dynamics. Major creators like Alyssa McKay promoted the label’s outlet offering: #CoachOutlet generated nearly $4.9 million in earned media value, according to Tribe Dynamics.

Elsewhere, Coach continues to bolster his image with celebrities, recently unveiling custom looks for Lil Nas X and campaigns featuring the Haim sisters, Megan Thee Stallion and Japanese actor Dean Fujioka. Whether it has convinced buyers that it is worth a rising regular price remains up in the air.

On top of that, the world is in the midst of a Covid hangover, Siegel said. Doing business in China, a key driver for Coach, becomes even more difficult. During the pandemic, demand for handbags skyrocketed but is not yet regulated, Siegel said. That could make it difficult for Coach to get the stock right and avoid falling into the death toll from discounts.

“I don’t know if we already know what the new normal is…the question will be who can maintain their brand equity at the price points,” Siegel said.

Coach thinks by rewriting and shifting the accessibility story that plagued him to fit what he sees as Gen-Z’s evolving conception of luxury, to create lasting power. A promising sign: Coach overtook both Michael Kors and Louis Vuitton as teen’s favorite handbag brand in Piper Sandler’s Spring 2022 survey.

“We dug up our target — and I use the word dig up very deliberately because it was always there,” Kahn said.

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