Image Propels Coach’s Growth
Coach has built its handbag and retail business around an upscale image. That image has brought record numbers of consumers into the company’s retail stores and factory outlets to buy their own portable piece of Coach luxury.
The company’s top and bottom line results have been so outstanding that Coach CEO Lew Frankfort has announced the company will increase the number of new stores it plans to open this year from 30 to 40.
“We’ve never been more excited about the potential for the Coach brand,” he said
But, is Mr. Frankfort pushing ahead too quickly? Will ubiquity or other factors lead to a devaluation of the Coach brand?
A report on BusinessWeek.com suggests there is a potential for such a problem at Coach. A close look at the company’s sales, the report concludes, shows retail revenue increases came primarily from Coach’s factory outlet stores that stocked discounted merchandise. Sales at Coach outlets were up 33.4 percent compared to the 20.8 percent registered by its retail stores.
In recent years, Coach has departed somewhat from its upscale niche with the introduction of some more affordable items, such as current season purses sold at under $200.
While $200 purses are outside the budget of many Americans, the report said items in this price neighborhood have brought more middle-income consumers to stores to buy Coach brand accessories. Items sold at the company’s factory outlets, sometimes at half the price charged in its retail stores, bring in even more shoppers.
While it is difficult to suggest from the current numbers that the Coach bubble is about to burst, Robert Passikoff, CEO of Brand Keys, offers a caution. “Ubiquity can be the death of a brand. You need to be very careful when you expand.”
Discussion Questions: Do you see Coach in some danger of devaluing its brand? Are there other brands you can point to that have become devalued as a result of expanding their retail presence too quickly, making pricing changes, etc.?