COACHING CHANGE
In a world gone mad for high-fashion purses, brand is trying to regain a competitive edge,
Coach Inc. is in the middle of a brand reset.
Poorly performing stores have been closed. Flagships, including the store on Bloor St. W., have been handsomely renovated. Purses sit on shelves, backlit like works of art, and priced at $495.
That’s a relative bargain in a world gone mad for purses — where a pink crocodileskin Hermes Birkin sold for $222,912 (U.S.) at a Christie’s auction in Hong Kong and the latest fashion-insider bag — anything by Mansur Gavriel qualifies — routinely sells out at $1,000 apiece. If you can even get your hands on one. The reset at Coach comes after a long era of overexpansion, especially into the outlet market.
“Certainly in the past few years we may have become a bit overexposed as a brand, a bit too heavily distributed,” says Andre Cohen, the firm’s North American president.
“What we are trying to do right now is reset the brand around its core values of great leather craftsmanship.”
Coach’s brand transformation began in mid-2014, after designer Stuart Vevers, formerly of Givenchy, Louis Vuitton and Mulberry, joined the company as executive creative director. His first collection went up for sale online in 2014.
Vevers has also added clothing to the mix; Coach presented its fourth collection of ready-to-wear at New York Fashion Week in the fall.
Coach is reconnecting the brand to its New York City fashion roots with advertising and media campaigns. It’s moving away from fabric purses branded with logos, back into high-quality leather.
The company is also making acquisitions as it seeks to diversify in midmarket luxury, purchasing women’s footwear maker Stuart Weitzman in early 2015.
“We do see acquisitions of brands within that accessible luxury space as being one of our goals,” says Cohen.
It does so as the market for luxury goods has softened somewhat, both in Asia, which has been a cornerstone of luxury brand growth, and in foreign capitals frequented by Asian travellers.
Formerly bulletproof brands, such as Michael Kors and Burberry, have been struggling with domestic sales. “I think Coach has made amazing strides. Vevers’ vision for the brand works well because it’s a new, more high-fashion approach that still feels rooted in what earned Coach such an ardent following to begin with,” says Meaghan Mahoney Dusil, co-founder and CEO of PurseBlog, which has nearly 500,000 subscribers to its forum, where handbags are avidly discussed and reviewed.
Dusil, 32, says her interest in handbags began when she was a Florida high school student in uniform. She wanted to express her fashion identity. Since she couldn’t do it with clothes, she did it with purses. Her first one was a Coach shoulder pochette.
“I begged my mom for it,” says Dusil, who now has a collection of about 200 purses.
“My handbag collection has really grown with me. Every bag I have, I have kept. I remember the stories about each one,” says Dusil.
She launched her blog10 years ago at the suggestion of her husband, who was studying computer engineering. Dusil and her husband now employ a team of six people.
Dusil says she buys most of her purses with her own money, including two Hermès Birkin bags at about $10,000 (Canadian) each, but she also receives them as gifts from companies.
She regards the purses she buys as investments — certain Hermès, Louis Vuitton and Chanel bags reliably increase in price, in some cases every six months or annually. The Chanel classic flap bag now sells for more than $5,500 in a coveted size, up from about $3,000 a decade ago.
Most major brands increase prices by about 10 per cent a year, says Dusil.
But reliably increasing prices is also increasing expectations and inciting buyer fatigue. The more you pay for a purse, the less likely you are to accept a small imperfection. And in some cases, prices seem to be going up while quality is at the same time on a downswing.
“People are getting a bit fed up of paying more and getting a lower-quality product,” says Dusil.
Mladen Svigir, principal management consultant at Jackman Reinvents, says a brand reset is “definitely possible,” for Coach, although if it is reaching for the highest echelons of luxury, it will be a stretch.
“They’re off to a good start. They really seem to have focused on design, and they’ve gotten a lot of good buzz.” MLADEN SVIGIR MANAGEMENT CONSULTANT ON COACH
Going back to its roots is a good first step for Coach and a technique that has worked for other brands, including Burberry, which drove interest and sales by embracing its British pedigree, Svigir says.
“They’re off to a good start. They really seem to have focused on design, and they’ve gotten a lot of good buzz,” says Svigir.
Equity analysts seem to like what Coach has done so far. RBC analysts Brian Tunick and Bilun Boyner, reporting on the brand’s most recent earnings in October, said they were encouraged by an increase in North American sales and international growth, despite overall weakness in Asia and currency headwinds.
“We are impressed by the progress,” they wrote in a note to investors.
The newly renovated Coach stores are performing better than other stores, says Cohen.
“We were so dominant in the United States for so long that we didn’t have to face much competition. And competition became more acute in the last few years.
“We perhaps weren’t as innovative as we used to be. The onset of a more acute competitive environment forced us to rethink who we are, and to realize that we really are a different brand from our competitors, we just didn’t do a good job of telling it.”
Coach outlet stores, which are owned by Coach, will remain part and parcel of the business, says Cohen.
“While we pride ourselves on being a top-quality brand, we’re not exclusive,” says Cohen. “We don’t want to be a brand for the elite few.”