Can (should) brands do without department stores?
Is there more to the news that Coach is reducing the number of department stores where its luxury handbags are sold in an effort to restore the brand’s equity and increase full-retail sales of its products? According to a Christian Science Monitor article, the answer may be “yes” and the “more” is an acknowledgment that a fundamental shift has taken place in the consumer market where brands such as Coach are not nearly as dependent on department stores as in the past.
The struggles of department store chains have had a recurring storyline in the business press this year. Initially, slower sales during the winter were blamed on unusually warm weather, but it’s clear to all that the problem goes beyond Mother Nature’s influence on retailing.
Younger consumers, working in lower paying jobs and struggling with college debt, are not in a position to drop hundreds or thousands of dollars on luxury items. For those with the money, many are more inclined to invest in electronics than apparel and accessories. Finally, even when making purchases, a growing percentage are likely to go shopping on Amazon.com or elsewhere online rather than head to a department store.
Coach has the luxury, so to speak, of pulling back from department stores because the brand is able to sell directly to consumers through its own specialty stores and e-commerce site. This strategy, applied by other manufacturers both inside and outside of fashion (think Apple), may ultimately be where Coach’s future lies.
Of course, while brands such as Coach and Michael Kors pull back from department store distribution points, there are exceptions. A case in point is Under Armour, which recently announced plans to expand the sale of its sneakers and sportswear to Kohl’s. This addition will help the brand following the liquidation of Sports Authority, one of Under Armour’s largest customers. Of course, Under Armour also has a consumer direct hedge with its own brand stores and site, which now account for about a third of the company’s sales, according to The Motley Fool.
- What department stores say about America’s changing income classes – The Christian Science Monitor
- Will selling in fewer department stores help Coach sell more handbags? – RetailWire
- Under Armour to Partner with Kohl’s in Push to Become Mainstream – Bloomberg
- Under Armour Investors: Stop Worrying About Sports Authority’s Bankruptcy – The Motley Fool/Madison.com
DISCUSSION QUESTIONS: How likely are shifts in the consumer marketplace to lead brands to abandon department stores for consumer direct or other alternative channels in the future? What might department stores do to become more important trading partners to brands such as Coach?