Coach Will Merge With Burberry To Save The Low Tide Of Luxury Goods Industry.

With the intense competition of electricity providers and the strong dollar this year, the US luxury market has been struggling and shopping centers are slowing down. The uncertainty of global economy and geopolitics is a major drag on consumers' purchase of luxury goods. This further causes the industry to worry about the future of the luxury goods market. In view of the persistent downturn in the luxury industry this year, this new strategy can not help but arouse speculation, such as Coach and Michael Kors.

Perhaps it should be a cooperative relationship with department stores instead of completely withdrawing.

To this rumor, Neil Saunder, chief executive of consumer research firm Conlumino, explained: "these two brands can not come together either from a retail perspective or from a brand perspective. But because of the extremely slow growth rate of luxury goods industry, it is not surprising that these two brands need to meet their needs through mergers."

As the luxury industry continues to slump, Coach, Michael Kors, Kate Spade and other luxury handbag brands are gradually reducing the number of shipments to department stores, trying to avoid hurting the reputation of these stores.

After nine consecutive quarters of decline in performance, Coach has seen three quarters of sustained growth after the change. In addition to developing new products to attract consumers to buy at full price, the group also acquired designer shoes brand Stuwart Weitzman last year. At present, sales of brand handbags still account for more than half of the total sales, but sales of accessories and shoes are also increasing.

In addition,

Michael Kors, a competitor, is also trying to diversify. In addition to the planned expansion of men's wear series, Ralph Lauren and Kate Spade are also developing smart watches and fitness trackers.

To cope with the gradual decline of department stores' passenger traffic and the gradual change of consumption preferences of the millennial generation, the latest strategy of us department stores is to win less.

Contrary to previous years, luxury retail stores such as Nordstorm, Bloomingdale and Braneys reduced the number of new items of handbags.

According to Edited data, in the three months ended August 31, 2016, the number of new handbags released by Nordstrom and Bloomingdale Department decreased by 23% and 3% respectively compared with last year, while the number of new products in Barneys in the third quarter of this year decreased by 41% compared with last year.

Department stores think that the limited number of new products is helpful to help consumers make decisions more quickly, providing too many styles will make consumers feel confused.

Katie Smith, a senior fashion analyst at data analysis firms, also agreed with the strategy of "win by little." she stressed that the move is conducive to the promotion of sales of positive prices in the mall, thereby avoiding excessive discount sales to solve the problem of excess inventory.

However, the reduction of consumers in American department stores is becoming a headache for light luxury brands.

Coach department stores in the United States continued to decline in sales and promotional activities were frequent. The company said it was preparing to close its 1/4 stores in US Department stores.

In the latest quarterly earnings report up to July 2nd this year, sales of Coach Direct stores in the United States increased by only 2%, but sales in department stores fell sharply in two digits. Under the influence of this measure, Coach expects 2017 revenue will have some negative effects, and investors are also beginning to worry about the growth momentum of Coach.

Buckingham research group analyst Scott Krasik pointed out that sales of Coach Direct stores account for more than 50% of the total sales volume in North America, so the brand will now face the pressure of continuous reduction of passenger traffic in Direct stores.

He stressed that if Coach sales did not increase further, its profit margin would not rise.

Simeon Siegel, an analyst at Nomura Holdings Limited, said investors expect Michael Kors to release its earnings this week.

Michael Kors also pointed out earlier that the group has taken some measures to rebuild its brand image. Since last year, it has gradually reduced the proportion of brand in department stores, increased the number of brand Direct stores and focused on developing e-commerce platforms.

Coach and Michael Kors will release the latest quarterly results this week, with analysts' attention on whether they are effective in restraining discounts and coping with reduced demand.