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MY PUBLISHED WORKS
COACH STRATEGY
COACH:
RETAIL STRATEGY
COACH overall retail
strategy
PRINCIPLES OF RETAILING
LAUREN HOHEUSLE
APRIL 14, 2011
BACKGROUND/
OVERVIEW
Coach
Inc. was established in 1941 in Manhattan by a small, family-owned workshop
that specialized in making small leather goods.
A main component of the company since 1946 was Miles Cahn, who helped
Coach get to its “signature” style and find its place in the market as a luxury
genuine leather purse company (1960). When he took over, he brought the 6
workers hand-crafting leather goods in a tiny loft, to a full-blown, successful
business. In 1962, Bonnie Cashin was
hired as a designer, who is said to have revolutionized the company and its bag
image. In 1982 Coach was sold for $30
million to Sara Lee Corporations; this is when the brand really began to grow
and expand in all aspects of the business.
They were opening stores all over the country, and even opened stores
internationally in Japan and England by 1988. Coach also began expanding their
market to include shoes, menswear, jewelry, and many other high quality goods
that held on to their “classic American” image.
From just 1985 to 1989 Coach increased their sales upward of 5 times the
dollar value, reaching $100 million. In 1997, Coach began linking up and
creating partnerships with other companies, such as Movado. They started a watch line that was extremely
popular. In 1999, Coach.com was
introduced to the public, which increased profits tremendously.
Now
for more than 60 years, Coach continues to embody their “Classic American
Style”, with an even broader range, and a more modern touch. They offer more than just a product; they
offer a lifestyle and that’s something they have not lost sight of, which is
why they continue to be so successful. Their main target market is women, ages
25-40, making six-figures. However, in
the past 10 years, a large percentage of their sales are going to the younger
women, ages 14-25. They have
incorporated them into the brand with their release of the “Poppy” line; a
little cheaper, often not leather, and clearly for the younger crowd. It is much more vibrant and “fun”, and
includes a lot more of their tees, jewelry and accessories. This was a smart decision as to include them
so they still feel valued as customers, but make such a clear distinction so
that it does not make their main target market feel as those their Coach bag
doesn’t hold as much value. (Ex. A woman who spends $500 on a bag may feel
somewhat “offended” seeing a 14-year old with the same “classic” purse.
Lilian
Cahn, former owner of Coach Inc., stated that “At Coach, the brand is at the
core of the company's vision and strategy. The values of the brand--customer
satisfaction, integrity, innovation and collaboration--are the reasons Coach's
people come to work each morning. The strength of the Coach brand is,
ultimately, what makes Coach the company it is today”. This quote sums up the value that their
target market sees in them and their purpose as a company.
MERCHANDISE ATTRIBUTES
Coach
has also created many different bag lines, and collections over the years. They have expanded from using traditional,
darker toned leathers, to bright, vibrant colors, such as blues, pinks and
purples. Their current bag collections
are all titled after girls names. Their “Natalie collection” consists of wicker and
straw material, with floral accents.
Coach.com describes the collection as being “inspired by warm-weather
style” and taking a “luxurious approach to an otherwise casual concept: the
classic straw bag….Rustic romance meets modern glamour with elegant contrasts.” There is also the Madison collection, which
they named after the “most elegant
THE“Natalie”COLLECTION
avenue in New York.” The Kristin collection was inspired by a striking
curved clasp on a vintage bag, and therefore each bag in the collection has
interesting, bold hardware and statement clasps. Also included in their line is
the Alexandria collection, Poppy, and Coach Originals. All lines include all
leather, high-quality logo and cloth bags, and combination bags. 
Demographics-The
demographics of a Coach customer are tricky.
Traditionally, it is a mid to upper-class woman, age 25-40, who is
concerned with fashion and quality. She was considered an “elite shopper”. However, in the past decade, the “typical”
coach customer has changed drastically.
It has come to include business men, and the teenage girl group. Most customers
are home owners, white-collar workers.
The Coach customer, no matter what age, is willing to travel the
distance in order to shop for the product.
Coach is a destination store.
Because so many changes have happened
concerning demographics, Coach had to deal with this to effectively figure out
WHO their targets were. In 1996, sales in Japan dropped almost 30%, which
alarmed the CEO and president. To help
fix the problem (fast) they used and developed an incredible tracking system.
Frankfurt,
the CEO of Coach stated that “Fortunately, our continuous tracking and our multiple
views of the customer provided us with a way
to attack this problem…We found out why new customers were down, and as to
lapsed customers, we found out exactly why they left and what competitors they
had moved to.”
Coach kept their classic style, but added a more fashion-forward
edge .They include lines that are upward
of $1000 for bags, but also include lines that include bags less than
$200. This combination of accessible price
points (that are still of great quality) broaden their potential (and actual)
customer base.
Lifestyles- The lifestyle
of the average Coach customer can vary greatly.
Many are working women, working men, and younger girls and women
concerned with being fashion forward, yet remaining classy.
Motives-
The motives of Coach customers are fashion, quality and sophistication. They
may want to have the latest bag or chicest style, without having to worry that
it will seem “out of season” or untrendy in one season. They are motivated by the “classic” look,
with a little bit of edge, without emptying their wallets; which is exactly
what Coach delivers. The “special”
feeling a customer gets what they walk into the chic and classy Coach store,
along with the personable, stylish employees, is also a huge motivator for
purchase. Coach appreciates their
customers, and definitely lets them know.
If you have shopped at Coach and are included in their data base, each
season, a card is sent to you, signed by the president of the company. The card
states how valuable you are and as their appreciation, your next purchase will
be 25% off (in store only). This makes
it seem like more than just a coupon. It
makes it authentic and welcoming. It
also creates brand loyalty and speaks to those customers that are cost-conscious.
Shopping attitudes and behaviors- Coach customers
are willing to spend more than say someone shopping at Nine West for a bag or
shoes, or most clothing stores. They
refuse to sacrifice quality, but also don’t want to spend their life
savings. They expect good service, and
want to feel as though they get their money’s worth, in all aspects (service,
atmosphere, quality).
TOTAL
RETAIL EXPERIENCE
Includes all elements in a retail
offering that encourages or inhibits consumers during their contact with the
retailer.
Value-oriented retail strategy-Coach is largely value-oriented in many
different ways. Coach focuses largely on
quality. They use only the finest
leather, and Cahnn, the original owner of Coach, developed a specific way to
make such quality, deep-toned, leather, that softened over time rather than
looking warn and used. This quality has
not changed, and this is one of the main components of quality for the
customer. Coach creates such elegant advertisements
that do not just sell the product; they sell an image and lifestyle. They are so classy and timeless, that the ads
appeal to almost anyone in Coach’s target market.
Taken from
Coach.com’s “company information” page, listed below is their mission
statement, and what they see as true value to their customer.
|
Customer service retail strategy –Coach cares a great deal about their
customer service, as shown above. Coach
is one of those stores that never seems understaffed, because they make sure
they are going to be able to give their customer that full Coach experience,
every single time they enter a Coach store. The sales reps are very attentive
and welcoming. The company gives quality promise cards with every
purchase. They also have coupons sent to
those who have been customer the previous season. A great service they have is if they do not
have your size in shoes or clothing, or an item you would like in-store; they
search for it online or another store within the country, and send it to your
house, free of charge. They do not have
a rewards program or credit card. Coach
has e-mail alerts, where they update you on new arrivals, sales, etc. You can
contact them through e-mail, mailing address, in-store, or their 1-800 numbers. Coach also offers limited addition items,
which makes the brand even more exclusive for those who value that aspect of
the company. They definitely take very
good care of their customers, because they have seen how important that is to
the total retail experience and value of their customers.
Retail relationships –Coach
has many important retail relationships and partnerships. Coach has licensed
product, such as their watches with the Movado Group Inc. Their shoes are licensed with Jimlar
Corporation, and Marchon Eyewear is used for their sunglasses and
eyeglasses. Coach has linked up with
Macys, Lord and Taylor and Bloomingdales, accounting for 940 department stores
carrying Coach in the United States. All
of these relationships broaden the sales of Coach and help target more of their
customers while adding greater value. Overseas, because the market is very large in
Japan, there is Coach Japan Inc. Coach’s
most important retail relationship is with YOU, the customer. They are highly focused on targeting who
their customer is, in order to give them what they want. This is part of their competitive advantage,
which will be discussed later. They
focus on keeping their loyal customers, while expanding to different target
markets in order for growth.
PRICING
ORIENTATION
Coach is one of the few
luxury brands with such a large range of product pricing. As mentioned earlier, this was a risk taken
in order to expand their market, and they did so through such technical
research and consumer evaluation that it ended up being very successful. Coach prices range anywhere from $20 for a
sale keychain at Macy’s or an Outlet store, to $2000 for a beautifully shaped
and detailed python bag. The items that
are created more for their younger market, such as sneakers, tee shirts, and
vibrant poppy wristlets and bags, are priced generally lower; their cheapest
bag is $148. For the mid-class, semi-conscious
of money consumer, they have a wide range of bags between $258, and $498. For their most luxurious, larger bags, the
prices range from $498 to $1200. Shoes
range from $58 for sandals, but most shoes ranging from $118 to $258. These prices leave the market open to just
about anyone who wants to be able to say they own Coach, but the price points
are clearly distinguishable, as to not offend someone who DID by that $1200
bag. The quality is always there, but
the detail, luxury and style of the more expensive products are unmistakably
statement pieces. Their price points are
obviously all ending in 8, except for the ONE bag they have for $1200. This is called psychological pricing, used to
make it seem of high value. (It can also be considered price quality
association, or prestige pricing) If
they ended in .99, it would make it seem cheap.
Personally, I think of groceries or sale items when I see .99, as do
most people. The full dollar amount makes
it seem more appealing, and in a sense, more exclusive. Because most of the items are high ticket items, someone buying Coach is aware of this, and
using pricing such as .99 or odd cents, would almost see like they are trying
to trick you into thinking you are getting a sale. Coach definitely uses market skimming price
strategy.
IMAGE / ATMOSPHERE
RETAIL PROMOTIONAL MIX
Coach’s retail promotional mix has
been greatly referenced throughout the paper,
From their elegant
website and magazine advertisements, to their customer service retail strategy
(see page 6). Along with their exclusive
coupons for Coach shoppers once per season, Outlet stores, and department store
sales, Coach does not offer discounts.
This keeps the “value” of the brand.
Coach does not use commercials, or the same advertising and promotions
that most companies use. This is because
they are at the higher-end of the market, and most upper-status brands rely
more on word-of-mouth, and the prestige of their brand. They do have catalogues, but they only send
then once per season. However, they always have them in-store, and hand one out
with every purchase. Most of their
advertising and promotion money is spent on magazine ads, and in-store
promotional tools, such as window photos and displays. They do, however, spend more on advertising
in larger cities, such as NYC. They have done billboard ads in Times Square and
bus advertisements. All in all, quality often speaks for itself, therefore
Coach focuses more on enhancing the Coach experience in-store and online.
TRADE AREA ANALYSIS- Coach is an
American brand, with most of their stores existing in the United States. New York City has the most stores in a
concentrated area; however, all 52 states have access to a Coach store. Japan has become the second leader of sales
and therefore Coach’s most prominent global expansion area. Hong Kong is the city in Japan where there
are the most available Coach stores to visit.
Canada also has many stores, along with recent additions to England,
Thailand, Spain, and 22 other countries. “As of fiscal
year end 2010 Coach was available at over 940 department store locations in the
US, 182 international department stores, retail store and duty free shop
locations in over 20 countries, 161 department store shop-in-shops and retail
and factory store locations operated by Coach Japan, Inc.”. The Coach store on 595 Madison Avenue
is one of their largest stores, carrying all products, exclusives, and a large
selection of men’s clothing and accessories.
This store is by far one of the biggest destination stores Coach has
opened. Of course, there are the upper
class men and women in New York City that would not have to travel far to be at
one of Coach’s best stores. They would be
considered the primary market, traveling less than 10-15 minutes distance (with
normal New York traffic). The secondary market
would include the millions of business men and women, and others working in
Manhattan, which is a very large percentage.
These customers would be the most consistently returning customers. Their fringe areas include just about anyone
not living in New York City. Many people
living in the 5 boroughs and suburbs travel to New York City to travel. Even with subways and trains, the time it
takes is often greater than 30 minutes.
Personally, I don’t go into the city to specifically shop at this
location, but I DO plan on going to Coach when I do plan to shop in the city.
Part of their fringe market also include the millions of tourists traveling
from all over the globe, that want to enter one of Coach’s most exclusive
stores in such a big and famous city (close to where the brand was established
in 1941). These customers most likely won’t return often, but they do make up a
large part of sales, considering people traveling do have discretionary income
to spend. The market structure in New York City is much different than most
areas where there are Coach stores.
There are so many locations in the city, because of the amount of people
there. Having so many stores in a
concentrated area, therefore does NOT hurt their business. However, because New
York City is the fashion capital of the world and there is SO much shopping
available, the number of competitors such as Cole Hann, Dooney & Burke, or
Kate Spade, is much higher than in other areas. Having so many Coach Stores, in
NYC, specifically the one on Madison, is ideal because the concentration of
their consumer profile is so prominent.
Business men and women are everywhere, and many fashion-conscious women
see NYC as their top destination.
SWOT-
Strengths, Weaknesses, Opportunities, and Threats
Strengths
·
Strong brand equity. Coach has been around since 1941 making fine
leather goods, without ever sacrificing quality. They are known by their Coach horse symbol
and “C’s”.
·
Out-sourcing to cut and maintain lower
prices (Cheaper labor in the Middle East and China)
·
Loyal customers- they even send
exclusive coupons signed by the president to frequent store customers.
·
Strong financial performance (increase
in stock value)
·
Went global, entered China and Japan for
major sales profit, along with 22 other countries.
·
Branching out with clothing, accessories
and men’s.
·
Variety for age/income level (Coach
leather, Coach Poppy, etc.) They also carry specific styles in Macy’s for
lower-income target markets (which is why the can use discounts).
·
Exceptional and welcoming customer
service in-store. Friendly and attentive
staff. Offer free shipping if items are not available or are sold out. Online
site is very user-friendly
·
Monthly introductions of fresh and new
bags, as compared to previous years (only each season)
·
Classic style does not go out of trend
as often.
·
Intense customer database, including
customer information of over 9.5 million households, in order to better define
target market and create products better suited.
·
Use multiple ways to reach customer- one
on one customer interviews, phone surveys, etc., in order to improve demand
forecasting.
·
They monitor early warning signs of
customer change through detailed sales data.
WEAKNESSES
·
High level of inventory – causes them to
need to make markdowns and send to outlets faster resulting in lower than
expected profit.
·
Large percentage of Poppy line is lower
price point, and “over-brands” Coach.
Can be viewed as diminishing brand value. Seems very young.
·
Geographic concentration- although they
are branching out, 70% of stores are in the United States. (Opportunity as
well)
Opportunities
·
Further development of clothing line and
accessories. Coach is trying to be known for more than just their bags.
·
Creating off-price stores that carry
exclusives. This would better suit the mid-class Coach customer.
·
Product expansion for men’s. Men’s,
luggage and outerwear only account for approximately 5% of sales. They
currently have two stores devoted to men, but branching out with more products
would make this market expand.
·
Continue global expansion (growing
consumer market in Middle East, Australia, and Mexico.
Threats
·
Strong competition since their target
market is so broad. Brands from luxury Italian
designers (Prada, Gucci) are threats, to lower brands like Dooney & Burke,
Michael Kors and Kate Spade.
·
Counterfeit Coach is extremely
detrimental to company brand and sales.
·
Quick change of trends (can be seen as
weakness or strength)
·
Those seeking true luxury might view
Coach as inferior to other brands, due to discounts, price point, and easy
availability of product. (compared with Louis Vuitton)
COMPETITIVE ADVANTAGE
Coach
is a retailer that clearly sets itself apart from many other brands and companies. Over the past 70 years, coach has transformed
their profits without losing sight of their classic style. One of their major attributes and competitive
advantages is their brand equity. They
have established brand equity because they
have always promised their customers quality leather and that’s what they have
always given. It began when the company
began: 1960. Cahn, the original owner
was working in the loft workshop making leather goods. Cahn was inspired by a
simple baseball glove. He noticed that
even after overuse of the glove, the leather became softer and supple. Cahn replicated this quality leather by
developing a process of making leather that made it age well, kept it strong, flexible,
and soft. He also made it absorbed rich
colored dyes to make for bold leather bags.
Their first purses were made of durable cowhide, where the grain of
leather could still be seen. Compared to most of the low-margin handbags being
designed during this time, Coach was a brand making a statement. Their innovation of classic style and visible
quality marked the entrance of Coach into the women’s handbag market. Once the
business got going, Coach remained true to their classic and traditional style
and didn’t follow fast moving trends.
They produced solid colored, basic bags of genuine leather. Once they gained respect in the industry,
their high-priced bags developed a positive reputation and a certain
prestige. However, during the 1960s,
trends began to change rapidly with all that was going on in the world of
women, and Coach did accommodate. They
developed bags that included statement pieces and were much trendier than their
original basic bags. In 1969 they began developing styled bags such as the
“shimmy” bag and “bucket” bag. Today,
Coach has multiple classic styles, colors and structured bags. Each season, new designs on these same
structures are created and made to compliment the fashion-forward classic
style. Their innovations have caused
many to imitate their styles. These copyright infringements caused Coach to sue
many companies, such as Anne Taylor in 1990, and Target in 2009. It has been
said that imitation is the greatest form of flattery; therefore companies are
aware that Coach is a leader in its market segment.
Another
major competitive advantage of Coach is their in-depth customer analysis
processes. These processes allow Coach
to be 5 steps ahead of the competition, which has clearly been shown by their
increase in sales even during tough times.
In 2000, Coach was seeing drop in sales and profits. This caused the president and CEO to really
work together to devise a plan to change their decline in sales to an
increase. Frankfort stated that “"When everything is going your way, you can tell yourself
you're a genius…But you're a fool if you believe it. I have every confidence
that we'll continue to be as relevant and strong as ever, that our strategy
will win out.” Frankfort’s attitude is
what was needed to keep the brand alive and to succeed. He knew that the customer was the key
component to the business. To figure out
why they were losing customers and not gaining new ones, they took an in-depth
look at who was buying what, and where. The company did this through technological
advancements and research methods. They
conducted more than 40,000 one-on-one customer interviews, and over 500
customer telephone interviews. They also
conducted a number of market experiments, used competitive analyses, prototype
studies, and in-store product tests.
Their customer database includes over 9.7 million households. Frankfort visits individual Coach stores each and every week to see what is going on
in stores, who the customer is, and what improvements can be made. He even asks customers in-store, how their
experience has been. Through all these methods, Coach really gains a grasp on
who the customer is and what they want.
This allows stores to tailor their merchandise to fit the demographics
of their customer at their location. For
example, in Manhattan, the highest end and trendiest products will be sold,
while in the Midwest, they may not choose to place those items in-store.
Coach’s strategies related to customers and their business helps increase
profits, satisfy the customer, save money, and be the success they have desired
since established in 1941.
PREDICTIONS
Coach
has succeeded in its market and expanded tremendously over the past 70
years. I feel that, especially with the
CEO and President’s attitude, they will continue to stay 5 steps ahead, and if
they are not, they will do what they need to figure out how to get back there. I think continuing to expand globally is a
very important opportunity that Coach should take advantage of. Placing more stores in Asian markets will be
sure to increase sales. Focusing even
stronger on the men’s market, especially in bigger cities, will be an important
factor. They need to do more men’s
advertising to get it out there. A big
opportunity would be to create off-price stores, that carry new items, (not
mark downs) but are segmented at lower price-points. I think this would please many
customers. Even creating POPPY stores
that are segmented more for their younger market would be an excellent
idea. They should create a
“create-your-own” look, for their website, since their shoes, clothing,
accessories, and bags are all created to complement each other each season.
Emerging threats, especially for their partnership with department stores, are
“exclusive” lines that are being showcased and featured at cheaper prices. These exclusive lines are often high-end designers
that create exclusive lines for a season. (H&M had Jimmy Choo create a much
cheaper line for them). This reaches a
large part of their target market: shoppers wanting high quality and brand name
without breaking the bank. Coach could
possibly do their own “exclusive” line, with a designer one season, and have it
featured only in department stores. I
think Coach should continue with their in-depth customer research and database
collection, and not feel that they know their market, since it is always
changing in today’s world.
APPENDI
COACH STORE 595
MADISON AVENUE
COACH STOCK EXCHANGE (COH)
| Symbol |
Value ($)
|
Sales*
|
3.96 Bil
|
Income*
|
845.47 Mil
|
Sales Growth*
|
+11.70%
|
Income Growth*
|
+17.90%
|
Net Profit Margin
|
21.36%
|
MENS COACH CAMPAIGN
MENS AD, 2011
ADVERTISMENTS AND CAMPAIGNS
POPPY CAMPAIGN
2011 AD, FEATURING ACESSORIES
WORKS CITED
PHOTOS
GOOGLE.COM/COACH
http://www.myfdb.com/campaigns/9931-coach-ad-campaign-spring-summer-2011
ORIGINAL CHOBANI MARKETING CAMPAIGN
VICTORIA'S SECRET MARKETING PRESENTATION
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