For years Coach had one hit after another with covetable accessories that captivated cool girls everywhere.
Or as Todd Kahn, president, chief administrative officer and secretary of Coach, put it: “In 2007, in our space, Coach was playing for the Yankees.”
In short, the company thought it had the category in the bag.
But while Coach was celebrating its success, other companies were eyeing an opportunity. A category with no sizes, little seasonality, long running styles and high margins? Frankly, it’s surprising Kate Spade, Michael Kors, Furla and the like didn’t make a move sooner. But when they finally did, Coach lost share, quickly.
By 2013, the company decided it had to take major steps to pull out of its slump. At last week’s American Apparel and Footwear Association Executive Summit, Kahn outlined how Coach rebuilt its bench and came out swinging.
And it started with a few very tough decisions. Should they burnish the brand, dust off the design, shift the stores, say goodbye to the sales or makeover the marketing? The answer, terrifyingly enough, was yes. Coach had to do it all. And it had to happen simultaneously.
“You can’t do one. It doesn’t work,” Kahn said, adding that it was going to play out on a very public stage. “We had to recognize we’re going to do it as a public company.”
The company set out on its three-year plan in June 2014, and the strategy serves as a case study for any company facing challenges.
Building a multibillion-dollar fashion brand successfully creates one problem: popularity often eventually breeds contempt. Once your product is everywhere, being carried by everyone, it quickly loses cache among the it crowd that elevated it in the first place. That’s especially true of a highly visible, very personal product like a purse.
“When you’re an identifiable brand that relies on a signature product, every consumer is your billboard. With handbags, the consumer is really influenced by what she sees,” Kahn said, adding cool girls make cool products look even more desirable—and the converse is also true. “You have to change the product to change perceptions.”
Stuart Vevers was recruited from Loewe, to evolve the brand and product. Taking the company codes, which include the signature C, the horse and carriage motif, and the glove tanned leather, he was able to create a collection that spoke of the brand heritage while speaking to a new customer.
“It’s not your mother’s Coach, but it’s all leather and some of the same silhouettes,” Kahn said of the new-and-improved offering. “We took the best of Coach and reinvented it.” As an example, he pointed to the Saddlebag, which has been in the line for 40 years, but the latest iteration is lighter weight, lined, and features contrast stitching.
Also, you’ve heard of diffusion lines? Well Coach went in the opposite direction with Coach 1941. Named for the brand’s launch date, it was designed to satisfy better department stores like Saks and Neimans that were afraid their customers weren’t willing to give the new Coach a chance. “Coach 1941 accounts for 40 percent of full price,” Kahn said. “We’ve seen the Coach customer become more elevated with this product. The AUR is $600, creating a space between accessible luxury and the European very high-end designers.”
With fresh product, the company was ready to take the new look to the largest stage: Fashion Week. The Spring 2016 show was the brand’s first ever. “It got hundreds of millions of impressions,” Kahn said. “It started to make us relevant again for a fashion consumer.”
When it came to ads, the company realized that while its competitors told compelling stories about their target consumer, the Coach girl lacked a strong narrative. The ads had typically featured a solo woman or a solo bag—not exactly compelling imagery. The new Coach imagery features fashionable young people hanging together in the ultimate girl squad. Plus, there’s the Selena Gomez effect. The new spokesperson for the brand will bring her authenticity, cuteness and design skills to the role.
Before the company overhaul, Coach stores didn’t have sales. What they did have was a constant parade of Friends & Family promotions. That bit of semantics made company execs feel they were insulated from the markdown mania undermining so many fashion brands. Of course that was a fiction. Though the promotions were driving top line sales, they were eroding the bottom line—not to mention the unintended consequences.
“Sales kill brands,” Kahn said. With the turnaround, the company decided to turn its back on markdowns, a decision that had huge implications for the company, which had become a department store staple. “Department stores don’t markdown unless they’re supported. We took down the store count dramatically.”
The redesign of the stores started with a retrenchment. Recognizing that the company had been on a store opening frenzy, the first step was to close 105 doors—many of which probably never should have existed in the first place.
“When you’re growing at double digits you open stores—just because you can,” Kahn admitted.
With a more focused fleet, it was time to rethink the layout and message these shops were sending. A quick look around the mall showed Coach’s once original look was now omnipresent. Out went the open, bright layouts. In came the rich warm millwork. The sentiment is now more luxurious and less accessible.
This elevated presentation has paid off with as much as a 20 percent boost to sales in locations post renovation, proving, as Kahn said, “environment can change perception.”
Taken as a whole, the company’s overhaul touched every part of the business, which Kahn said was necessary to create change. “Sometimes in the industry, we talk about innovation but I say I don’t think we know what that means. A colorway is not an innovation,” he said. “You need to innovate to the extent that the consumer will recognize it.” And apparently, Coach customers have. The company now ranks (in dollars) as the No. 3 accessories brand in the world.
A look at how companies that failed to react and adapt to changing times have allowed new brands that are better tapped into the zeitgeist to steal share.Read more
Print PDFPrint PDFWhen times are tough, companies are more willing to test new ideas and Target, Warby Parker and Amazon are pushing the boundaries of traditional retail. Target gets in bed with Casper After failed attempts at an acquisition, Target has instead invested in Casper...Read more
J.Crew has been shifting in its seat trying to adjust to a new normal of shrinking sales and growing debt, but nothing has quite yet paid off, so the company is cutting its prices.Read more
It’s official. Coach, Inc. is snapping up shares of handbag brand Kate Spade.Read more
This week, consumers called for better children's apparel, retailers turned internally to remedy their financial woes and apparel incubators improved China's manufacturing sector.Read more
Whether and how much consumers care about sustainability may be an ongoing question the industry wants an answer for, but one thing that’s clear is that though some consumers do care, sustainability isn’t the first thing they think of.Read more
Gymboree tapped former Tilly's executive Daniel Griesemer as its new CEO, JC Penney appointed Marci Grebstein as its new EVP and Wolford creative director Grit Seymour is leaving the company.Read more