Coach: Leading The New Direction Of Luxury

Coach is not only regarded as a pioneer brand of the concept of "affordable luxury", but also challenges the status and market share of European old luxury brands with the quality of big brands and the relative price of being close to the people. From 2001 to 2007, coach's sales grew at a compound annual rate of more than 20%, and in 2007, sales exceeded $2.6 billion. With the rapid expansion of scale, the profitability of coach has also been greatly improved. The operating profit margin of 2007 fiscal year reached 49.1%, far higher than that of other competitors. However, how to balance the relationship between brand image and commercial interests, increase revenue and increase market share while ensuring that the brand's luxury brand name will not fade, is a major test facing coach. Compared with luxury brands such as LV or Hermes which have a history of more than 100 years, coach, born in 1941, can only be regarded as a "small generation". Moreover, compared with other European brands, it seems to lack the inherent advantage of "aristocratic blood relationship". However, the "luxury brand" and "luxury brand" in Europe can not only be regarded as the "vanguard brand" and "luxury brand" in Europe. Although some people are not sure about its "luxury" name, and even some people even scoff at it, it is an indisputable fact that coach, which was publicly listed in October 2000, has risen 268.43% from $8.30 to $30.58 in the past five years up to December 31, 2007. Although the U.S. retail industry has shown a downward trend due to the subprime crisis, coach's sales in the first quarter of fiscal year 2008 (July 1-September 30, 2007) also increased by 28% compared with the same period last year. In 2007 (July 1, 2006 - June 30, 2007), sales revenue increased by 28.37%, more than $2.6 billion, compared with only $700 million in 2001. With the rapid growth of coach brand itself, the "new luxury doctrine" represented by coach is gradually swallowing up the territory of the "old luxury doctrine" which advocated "aristocracy" in the past, making the "boutique culture" more widely penetrate into the mass consumer class. From "boxing gloves" to luxury goods, in less than 60 years of development history, coach has experienced two major transformations, and finally become the most growing brand in today's luxury manufacturing industry. In 1941, a small leather factory was founded by coach. In the 1960s, it transformed into a handbag for the first time. After coach was acquired by Sara Lee in 1985, its sales rose rapidly from $19 million to $500 million. After the first period of rapid development, coach became one of the major brands of leather goods and handbags in the United States, and opened the international market. However, the good times are not long. Since the 1990s, brands such as LV, Gucci and Prada have begun to revive, launching a large number of fashionable handbags, occupying a large part of the market share. When the leather and leather of the coach gradually lost its favor, the lawyer's briefcase was still in production. In 1995, Frank Ford took over the brand. Under his leadership, coach's handbag uses new materials and designs to recreate the fashionable and feminine image of coach. Compared with real leather, the handbag made of pattern woven fabric can greatly save the cost and improve the company's profit margin. It was also from this period that coach began to position itself as "accessible luxury goods", also known as "affordable luxury goods". On the one hand, it created a high-end image, on the other hand, it plundered people's hearts with relatively friendly prices. In the United States, it adopted the mode of joint development of retail stores and factories (also known as discount stores), which quickly reversed the previous unfavorable situation and attracted more attention A large number of customers. In recent years, its product line has also changed from single to diversified, from handbags to shoes, scarves and watches. The proportion of income from accessories such as wallets and cosmetic bags in the total sales revenue has increased from 13% in 2002 to about 23% at present. In November 2006, coach launched the jewelry collection for the first time, and in March 2007, it launched the perfume series in cooperation with Estee Lauder. Like all other luxury brands, we should strengthen the customer's brand stickiness with rich product choices. In 2000, coach was independent from its parent company and listed on the NYSE in October. The successful positioning of "high-end image, people-friendly price" and "affordable luxury" has been recognized by the financial market. From the opening price of $2.50 to the closing price of $30.58 at the end of 2007, coach's share price has risen by 1123% in more than seven years. In the last five years, its share price has not only outperformed the S & P 500, but also outperformed luxury brands such as LVMH and Tiffany over the same period. The compound growth rate of coach's sales in the year of 2007 exceeded 20%. By the end of June 2007, coach's annual sales exceeded $2.6 billion, with revenue slightly less than Gucci's $3 billion, but higher than other competitors, Hermes $2.2 billion and tods $840 million. The rising share price and the large increase in sales volume also made coach's president's revenue reach 44.4 million US dollars in fiscal year 2006, which is equivalent to the president of Wall Street tycoons such as Goldman Sachs, which is much larger than coach, and is almost twice as much as the president of Citigroup. At the same time, coach's sales growth and net profit growth in recent years are far better than Hermes, showing a strong growth momentum. Before 2002, coach's sales revenue and net profit were lower than Hermes, and in 2006, both of these two indicators exceeded Hermes. Not only did it expand rapidly in scale, but the profitability of coach also increased significantly. In 2007, the operating profit margin reached 49.1%, far higher than the figure of about 30% of LVMH, Gucci and Hermes. Compared with other luxury brands, the relatively low operating cost is the main reason for coach to achieve higher profits. On the one hand, coach does not have any stores in Europe, which is the important place of traditional luxury brands, thus avoiding huge infrastructure investment costs and operating costs in the European market. On the other hand, its production base is mainly concentrated in China, India and other countries with low labor costs. In recent years, the price of luxury goods has become more and more popular in the whole industry. In terms of high-end stores, the two different pricing strategies are conducive to meet the demand of consumers. "No discount" luxury experience: on coach's official website, the price of handbags of different styles and sizes ranges from $128 to $500. In its exclusive stores, consumers will also see a python skin knapsack with a price of $1900, which is comparable to the Monogram canvas Manhattan GM of Lv's old flower series. Recently, alligator's bag is more than $10000. And for a long time, coach has adopted the same strategy as LV in its e-commerce website founded in 1999 or in its exclusive stores, never discount. High priced goods are only one aspect of coach's luxury image. In the eyes of many coach fans, coach is not only comparable with Gucci, Versace and Dior in terms of product design and quality, but also can enjoy the same noble feeling in coach's special stores. Ray Frank Ford, CEO of the flagship store, who knew that the flagship store was the "face" of the brand, renovated the existing exclusive stores of coach and redesigned the advertising image soon after taking office. At present, many of coach's flagship stores are located in the most expensive business centers in the world, conveying the message that "coach is one of them". In the United States, coach's large "C" logo can be seen on Beverly Hills, where luxury brands abound, and Madison Avenue, where luxury brands gather. The 836 square meter flagship store on Madison Avenue is the largest one among coach stores. Not far away, the window of LV store always displays the latest payment for goods in the season. Compared with LV, Fendi and other handbags, customers can buy a very fashionable new product in the current season at coach stores for about $200-400. The cost is only 50-60% of the price of European famous handbags, and the price of entry-level handbags is more attractive. Before ray Frank Ford took office, coach's handbags were limited in style, old-fashioned in design, and only had 14 colors, and only launched two new models a year. In addition, there will be a new trend for the series of bags in July, but there will be different trends for each season. The abundance of products is also the guarantee for coach to implement hierarchical pricing strategy successfully. Under the banner of existing high-end brands, the market competitive advantage of coach products is really placed in front of every consumer with a variety of choices, fashionable design, and relatively people-friendly prices. Another significant difference between coach and traditional luxury brands is that it has opened discount stores on a large scale in the North American market, attracting consumers who love the brand, pay attention to product quality, but are more price sensitive. In fiscal year 2007, 93 discount stores in North America contributed more than 25% of annual sales revenue. And compared with the per capita spending of $1100 for exclusive store consumers, the per capita consumption of customers in coach discount stores also reached $770. Discount stores have become another major retail channel besides coach stores, and their revenue growth rate is faster than that of exclusive stores in recent years. In fiscal year 2007, revenue from exclusive stores in North America increased by 16.4%, while that of discount stores increased by 30%. In the first quarter of fiscal year 2008, they increased by 10.8% and 27.3% respectively. However, according to the coach's layout, there is still a strict boundary between those who are keen on fashion and willing to spend a lot of money on luxury goods and those who like to go to discount stores to buy discount products. Discount stores are usually set up not less than 50 miles away from specialty stores, and the driving time is no less than an hour. What's more, the stores usually sell products from the previous year or out of season, and from time to time, they will also launch some products designated for sale in these stores, usually with a discount of 10-50%. Consumers will never find the season's trendy items in the store. At the same time, coach's consumer survey results show that the average age of consumers in exclusive stores is 35 years old, usually with a college degree, and most of them are single women or newly married. In contrast, the average age of customers in discount stores is 10 years older, and most of them are married women. Generally, they spend 80% of the coach budget in a year in discount stores. In an interview with business week, coach president also said that although the sales revenue of discount stores increased well, the company will still focus on the exclusive stores, and the total number of discount stores is expected to be less than 100. "We look forward to the growth of revenue, and we also attach importance to the continuous strengthening of high-end brand image in the eyes of consumers.". On the contrary, coach emphasizes the importance of meeting customer needs. Over the past decade, the golden rule of luxury goods has been: don't ask consumers what they want, but let brands tell them what they should have. In recent years, it has also guided consumers' aesthetic orientation. Coaches who follow the "people friendly" route are not. Every year, coach invests more than $3 million in Market Research on more than 10000 customers to understand their consumption habits. At the same time, it will launch new packages in some exclusive stores to investigate market reaction. Up to 80% of the products will be available before the official launch