/ Coach: Riding Out the Perfect Storm

It’s no secret that competition in the women’s handbag market has grown fierce. Coach, the 73-year-old handbag company, with global name recognition, now finds itself battling to retain its leadership. How did this happen? Let’s take a look at the critical factors that resulted in a perfect storm for Coach.

Charting the wrong course

The executives at Coach made a major marketing misstep when they elected to expand into the men’s clothing and accessories market (passport cases, backpacks, travel kits, watches and billfolds) — at the expense of its core product: women’s handbags.

Moving into a foreign land

The company also elected to move into China and now has 117 stores there. But, with a slowing economy in this region it experienced a 6% decline in revenue in December 2013. This is significant because it took place during the busy holiday shopping season.

Coping with rough waters

The Coach company underestimated the popularity of new brands such as Tory Burch, Kate Spade and Michael Kors. In fact it was blindsided by the remarkable success of the Michael Kors company which used clever “stealth marketing” to move into handbags. Kors has increased its stores in North America to 400 and its “store-in-store” boutiques to 1,000-plus.

Sailing ahead in the race

The participation of Michael Kors on “Project Runway” (2004-12), (which he had doubts about initially), introduced his brand to millions of viewers. His name recognition went from 11% to 71%.

Perhaps this is the most important point: Michael Kors himself totally understands the power of social media. He likes to focus on, and interact with, his customers: both in-store and virtually. Let’s take a look: on Instagram, Coach has over 300,000 followers, which is a respectable number — but Kors has over 900,000. And, when looking at “Likes” on Facebook we see that Coach has slightly under 5 million — but Kors has over 10 million and uses Facebook to launch new products and extend its customer reach.

Anchoring with flair

The boutiques of the two companies at Macy’s flagship store in Herald Square, New York, are indicative of the difference between Coach and Kors. When entering the Broadway side of the store one’s eyes go directly to the Kors “Cube” on the left — rather than Coach — which is right across the aisle. The Kors store-in-store is a dramatic, one-of-a-kind creation of gleaming chrome and glass with action-oriented LED screens that showcase Kors most recent show. It blows Coach clear out of the water.

Looking closely at both companies’ handbags one notices that Coach is fairly conservative, while Kors has more drama with metallic accents and high-shine studs. Pricing for both is about the same, with Kors skewing a little higher on some products.

Can Coach “go about” to change?

Currently, the company’s demographics are women over 35-years-old. This means it has to focus on the “pull” of branding to a younger age group by creating a line of handbags just for them. This can be done by conducting focus groups to research the needs, habits and fashion wants or desires of 16- to 34-year-olds and then creating and directing products that appeal to this group via social media (as Burberry has done).



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