Coach CEO: How To Make A Successful Brand Pformation In Turbulent Times?

BoF editor Imran Amed and Coach CEO Victor Luis launched a dialogue to discuss how the company can regain its growth in an age of uncertainty.

New York, USA today, the degree of globalization and interconnection is higher than ever.

But the interconnected world is becoming increasingly unstable and uncertain.

From the United States to Turkey, from England to Brazil, terrorist attacks, large-scale shootings and political crises have been staged all over the world.

This is most evident in current Europe.

In recent months, Europe has experienced a series of terrorist attacks, which not only threaten people's lives, but also weaken consumer confidence and perplex the whole world.

The uncertainty generally felt worse.

Amid such global turmoil, Coach CEO Victor Luis has improved its revenues, proving its strong management skills.

Indeed, Coach announced its third quarter sales in April this year, with profit and revenue rising for the first time in many years, and two digit growth in Europe and Mainland China.

Last month, at the BoF VOICES forum in New York, Imran Amed, editor in chief of BoF, had a conversation with Mr. Luis.

In IA:2014, when you started to master the power of the enterprise, what is the status of Coach business? What major challenges do you think the company faced at that time?

VL:Coach this.

The history can be divided into three main stages: we founded in 1941, and this year we celebrated the establishment of 75th anniversary. The first stage basically started from 1941 to the 1990 or early 2000, and Coach grew to 500 million dollars.

At this time, the essence of Coach brand is the Native American fashion company.

We sell a few unlined leather bags, mainly from New York.

The second stage is the collaboration of the former CEO and the new creative director at the beginning of this century.

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We call this period "3F era": add Fashion, Fun and Femininity to the brand.

We are also more diversified. The product category is no longer confined to the "unlined leather bag" single concept. It also adds fabric and other materials, and also authorizes the operation of fragrances, scarves, sunglasses and other products.

We saw a surge in business from $500 million to $4 billion 500 million to $5 billion in the past, becoming the darling of Wall Street, thus helping to create a light luxury industry in the US.

In the meantime, we may not have enough knowledge of the changing environment and increasing competition.

Other competitors join in to play their advantage in the fashion industry and change according to season.

They look fresh and modern, copying our white storefront, internal display tables and so on. In a word, many places look just like us, which may add more architectural details, different rugs or window displays.

In essence, competition is increasingly fierce, giving consumers more choices.

But we failed to get the facts that should be developed as soon as possible. We look like the brand of "past" rather than "now".

We decided that it was time to make subversive changes. The key is to find the next stage of Coach's creative vision.

We now call it "Modern Luxury": we need to develop a true self, as a leather company from the United States, to rediscover our brand history and heritage, as a fashion brand, to make a more real evolution.

We need creative ideas.

Luckily, we found the Stuart Vevers.

He has worked in traditional leather goods companies to understand our core technology, materials and design. His past experience can help brands pform into a broader lifestyle brand.

We have also made progress, from the original North American company, to become a business oriented global and continuously attracting Asian companies, especially the recent Chinese consumers in Japan.

Now we can see that there are two digit growth in the European market which is still developing at an early stage.

This year, our business in China will reach US $600 million and Europe will be US $125 million.

IA: but since the beginning of global expansion in the past 10 years, Coach, which is well known in the United States, has to face new challenges and establish new relationships with global consumers. And the global environment has undergone unprecedented changes at the same time. How do you achieve this in a way that is better than the majority of luxury brands?

I have been doing this since the beginning of VL:1991. I started my career in Japan, which is one of the oldest and most mature luxury goods markets.

We have experienced the Japanese yen against the US dollar from 120, 130 to 79, up and down several times.

We also experienced SARS, geopolitical problems and other kinds of crises.

I think the same thing is that you can manage some operational details.

Like a US listed company, we can do currency hedging, decentralization of supply chain, and use many operational steps to help deal with problems effectively through short-time effects.

It is geopolitical terrorism, tourist flow and other similar problems of currency exchange rate.

But in the final analysis, successful brands need to be kept in a direction, with excellent and best global narrative methods, which can pform plation among different cultures and resonate with different cultures.

From Stuart's accession to today, no matter what changes have taken place in Brazil or China or Japan or tourists tomorrow, our focus will be: how can we make the brand as emotional as possible and connect with our consumers as much as possible.

This is the key goal in the key.

In 2008, Coach made a decision that might be useful in the short term.

One may know that we have launched a series called "Poppy".

This is an amazing success, when we were in the middle of the economic crisis, the "Poppy" series was younger and cheaper.

We have a lot of discussion inside: is this a sub brand? That is, we want to put it in the main line in the store? And then we decided to do it. Frankly, in that two years, we were a great hero.

The auxiliary line has greatly helped the business. Low price products resonate with specific consumer groups and bring traffic to stores.

But this medium to long-term impact on Coach market positioning is not necessarily satisfactory.

For us, what we want to do is a sustainable business model in the long run.

We also diversify our brand portfolio.

About a year ago, we made a very important decision to acquire Stuart Weitzman.

This brings us new brands, different positioning and skills, which can help us diversify further and bring business growth.

But the most important thing is that every brand of our company can continuously innovate and resonate, and establish contacts with consumers through the creative idea of the team.

Nothing is more important than that.

Because this can help us create long-term and sustainable business models, and consumer relations contain the ultimate truth.

Our move is not only focused on the short term.

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IA: when I talk with business leaders around the world, especially when talking to business leaders in Europe and the United States, I think the luxury industry may be overly dependent on tourism consumption. Although Chinese consumers who are shopping in Europe and the United States are very important, consumers in local stores are equally important. How do you satisfy these two types of consumers in the same store?

VL: I think any store that can benefit from tourists' consumption must also have excellent performance in some local markets.

If you have a large number of Chinese tourists in your shop, that means you have a good brand awareness in China, so that you can give full play to brand advantage and develop business.

Yes, there are bound to be tourists who come to your market to find you, but if you think more about them, you can't resonate with the local consumers.

This is the fact.

From this point of view, Japan is the first and most important market.

Looking back on our past 20 to 25 years of development, the huge growth of this market is also divided into several key stages.

The first stage is, by developing business in the US, European brands begin to reproduce the success they see in Japan.

Because at the very beginning, 60% to 70% of many big brands were in Japan, which included both Japanese and Japanese consumers traveling abroad.

In recent years, China has provided unbelievable business opportunities for all.

I think, during the period of SARS and the end of SARS, people thought that duty-free shops and tourism consumption would be destroyed.

But this is not the case, because China has also developed a new market, that is, an unprecedented number of Chinese travel abroad.

The key is that if you focus on domestic consumers, you will also win travel customers.

Recently we have seen consumers from South American countries like Brazil.

Now, due to currency and domestic problems, this business is not that big.

Eastern Europe and Russia are also.

But today, there are far more consumers in travel than we did 10 years ago. These figures have not been reduced, but have continued to increase.

This year-on-year impact is everyone's concern.

Because of China's domestic problems and the RMB exchange rate, US retailers find fewer and fewer consumers from China.

We see fewer consumers in Brazil.

But I don't know if the brands in the US and Europe are not paying enough attention to American consumers.

All brands that really want to grow in the world will focus on a few key markets.

There must be Japan, but two years ago it wasn't like this. Now they are paying attention to Japan, and they all have to thank the Chinese.

China, some other Asian countries, Europe and the United States remain the main driving force of global business.

Then you have small business opportunities in the Middle East, Latin America and several other areas that are still volatile. But in the long run, I am also excited about the opportunity to be shown before us.

If you think that India and Latin America are likely to surpass China in the future, we can not place too much emphasis on short-term business impact and really think about the long-term direction of development.

The reality is that half of the world is rural.

Even in China, half of the population is in the countryside and is undergoing urbanization.

India is obviously the same.

In addition to the handful of shopping centres, the country has not even developed any infrastructure.

IA: another change we are seeing is the change of generations. The millennials and their next generation have different perceptions of luxury brands. I don't know if there are some young consumers' psychology in traditional brands like Coach. For example, "I don't want to buy brands that my parents bought," will eventually affect. For this group of consumers who are less loyal, less likely to be more impulsive and have more channels, how do you make them value themselves in a completely different way?

VL: even if I were myself, I wouldn't want to buy the brand that my parents would buy after growing up.

No matter which generation it is.

I think the information access channel you mentioned just now is the most important.

If we want to talk about the biggest difference between our children and the next generation, this is it.

Information access channels will have a huge impact on some important consumer behaviors.

Among them, they can conduct prior research, make quick comparisons through digital shopping, and even do not have to go to physical stores.

The information is very pparent, the speed of flow is too fast, and the speed of Information Obsolescence is very fast.

I think that because of the emergence of smart phones and other technologies, this will have more impact on those who have more choices, and this effect will always exist and continue.

Does that mean that brands are less important? No, I think that means "being different" is more important than ever.

The feeling of "stereotyped" has also increased dramatically.

Whether material or handbag shape, you can compete on many things.

If you go to a department store or a specialty store, or go around the Fifth Avenue, it's harder to find differentiation than before. There are many reasons behind this.

First, there are more brands on the market, and they can communicate with consumers more quickly and efficiently with their own strength.

To do that, they do not necessarily spend money on buying 50 pages of advertisements in traditional fashion magazines.

They can give their own handbags to the stars, so that 600 thousand people will see this handbag overnight, or just put them in the video.

Will this change what we need to do? Absolutely not.

I think inheritance is still important.

Cultural heritage is very important and quality is absolutely important.

You are real, you are authentic, you win.

Because consumers can get more information, you can't make a mess of it because all information can be found.

In the past, if you wanted to go to Japan, you would slow down and do a good job of price discrimination. After a few years, people would know you.

Today, everything can be completed in an instant.

My children grew up in the skateboarding era. Compared to the traditional fashion brand press conference, they are most concerned about what new things Supreme has.

But nowadays many traditional fashion houses refer to many street fashion references.

To maintain relevance, you must take part in popular culture and participate in events in New York, Losangeles, London and Paris.

A brand that does well at this point will not deviate from itself. Consumers will think the brand is genuine.

IA: do you think that people who break the existing fashion business model can open up new business opportunities?

VL: I still think every brand should try to find its own way.

But the reality is, you ask ordinary consumers what holiday series are, what is autumn and winter series, what is the spring and summer series, they can see no difference.

Fashion loving consumers do interact with us. This may affect many people, but they usually don't do so.

So we think fashion week can tell some opinion leaders about our brand story.

First and most importantly, we want to tell this story to our internal team.

They need to understand our position and vision, who are the ideal women and women of Coach, and how he has evolved with her.

Second, we should tell the story to retailers and partners.

We believe in multi-channel and multi-level distribution, so we are interacting with specialized stores and department stores around the world.

We want them to understand us and let them know what we do not accept.

They have their own annual planning cycle, quarterly planning cycle, and open purchase.

If they are going to do the next season with us, then we will show them the next season, not now that we can provide them today.

If we do, what do we mean by that? If we are going to give them something now, I have planned, bought, made, and the product has been stored in my warehouse, so it is inevitable that someone should make preparations for half a year in advance.

Before you get a 3D printer in your home, you just press a button and the product will come out.

By that time, the third party distribution may have ended.

But technology has not yet reached that point.

So I think the most important limitation is time.

Of course, it depends on what type of brand you are and where you are.

But at least for most brands in our high-end market, you still need 9 to 12 months to turn the concept into a high quality product, and you may need to develop new materials for this purpose.

Sometimes we have to go to the details to see. We may say, "I don't like the color of this pin, I want another color or another kind of spacing."

You often have to go through experiments to get something that really inspires people.

I don't know what I can do to shorten the time - at least in the short to medium term.

The third parties we need to deal with in fashion week include the media.

The media with short lead time gave the fashion system a lot of pressure because they saw fashion releases today, but consumers could not buy them in 6 to 9 months.

This aroused a lot of discussion. Frankly, I don't know the answer either.

I think some brands will choose to display the spring and summer series today, and display the spring summer series in September. They may buy a few pieces of products in advance and put them on the press conference. Some brands will not.

Some brands plan ahead and then show them, but you still have to plan 6 months ago.

This is unavoidable.

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IA: I have to ask the brand's current situation in the US market, otherwise I will be dereliction of duty. American consumers have not returned to Coach in droves. Although the low unemployment rate and the strong economic situation have been the fundamentals of the macroeconomic environment that has lasted for many years, what is the matter with the American consumers?

VL: I don't know if there is any specific data to illustrate the US consumer health index.

In our field, many people are discussing the impact of tourists.

If we do not look at this point, this will fully illustrate the second question: what changes have taken place in the US consumers themselves?

I also hope to give you a definite answer.

But it is obvious that people are aware of what we hear and what we have discussed a lot.

It is increased competition, increased channel inventory, resulting in an increase in the final promotional activities, as well as consumers access to information channels, network promotion channels.

We will do a lot of analysis behind it, but because the price is relatively low, the number of units sold is still increasing.

But we see price oriented growth growth, which usually occurs when the dollar rises. So I think this is one of the main problems.

At present, many people also discuss uncertainties, including other factors such as the US presidential election.

Frankly speaking, I am not sure about that.

I talked with the team and the store about what they heard and heard from consumers. I think many consumers want to get inspiration from new things and increase more fashion elements. Most consumers participate in interaction, so we are very excited about this direction.

In such fierce competition and so much attention to price strategy, consumers are starting to seek new inspiration, so you can not just stay at the price level, to sublimate to emotional level.

It is true that emotion is more important than price.

If you have the brand you really want, and you can successfully price it and distribute it, consumers will interact with you.

Today, all kinds of products have such outstanding people.