Market Opportunity Analysis: Coach Inc.: Is its Advantage in Luxury Handbags Sustainable?
These days, the relative hot discussion never fails to fascinate people whether Coach Company’s advantage in luxury handbags is sustainable. Considering the current situation that Coach is in and the new strategy that Coach will take, we believe that Coach’s advantage in Luxury handbags will be sustainable. Coach is a large, American luxury handbags-made company. In this article, we will first tell some beautiful stories on the background of coach. For another, we will analysis the reason why its advantage is sustainable depending on 4Ps theory. In the end we feel obliged to give some recommendations based on our analysis. …show more content…
But now, there are some of the luxury goods called accessible luxury, this kind of luxury specifically targeted the middle income consumers. Coach is one of these companies. There is no denying the fact that 4Ps theory is really important in marketing. The luxury goods industry also has competition. If we want to analysis the advantage in this industry, the Price, Place, Product and Promotion are the key words. The price can choose the different income class. The place directly determines the net sale. The product is the basically point for consumers to decide their purchase. The promotion is the basically way to increase the net sale. In luxury goods industry, the product was the most critical competitive advantage, but now the place and price has become increasingly important.
Product: Just like Coach’s handbags, Coach had famous for produce luxury leather products in the past, but now, the leather accessories by matching key luxury rivals on quality and styling is the key point to get the advantage in product.
Price: Starting at the new CEO Lew Frankfort came, Coach tried to position in the accessible luxury and use more outsourcing agreements to cut the cost. So another “P”， price become much more important. The price neither expensive nor cheap is suitable for middle-class consumer. Not only did Coach's $200-$500 handbags appeal to middle income consumers wanting a taste of luxury, but
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The luxury market is growing fast in China and India due to the rapidly increasing wealth levels and standard of living gains. Coach must keep in mind the different cultural backgrounds of each country and take that into account when designing and marketing new products and lines.
The following case analysis will assess Coach Inc. and its strategy in the accessible luxury brand goods market. The coach strategy focuses on its luxury rivals in matching key quality styles while offering it at a cheaper price. The company offers most products at a 50% off discount price less than other brands which gives them a competitive advantage pertaining to its customer base. Coach marketed its products to middle –income consumers desiring taste of luxury, but also affluent and wealthy consumers with means to spend considerably more on a handbag (Gamble, 2012. P.C-73) .The Company also has several other strategies such as to increase global distribution, improve same store sales productivity and continue its multi-channel business model which includes indirect whole sales to third party retailers but also focuses on direct consumer sales. Coach has done well in the luxury goods industry but the companies profit margin is still below the levels achieved prior to the onset of a slowing economy in 2007 ( Gamble, 2012. P.C-73.The Company had experienced a decline in sales as they are unsure if the company recent growth could remain constant and maintain their competitive advantage with other successful luxury lines Michael Kors, Salvatore Ferragamo, Prada and Dolce & Gabbana.
Coach experienced declining revenues in 2014-2015 after sluggish brand value. The company abandoned the strategy of discounting after customer demand for promotional products deterred interests in paying full price. Coach made a marketing correction and removed discounting in an effort to increase product appeal. In May 2015, Coach acquired Stuart Weitzman, a leading designer and manufacturer of women 's luxury footwear. Similar to Coach, it is a brand built on offering innovation, relevance, and value to a loyal customer base, and is known for its craftsmanship and quality – merging fashion and function. Coach has a very limited number of men products which weakens the company’s
Growth has been fueled by Coach’s niche as being ‘accessible luxury’. While Coach does not have the prices of most of its high-end competition, it is regarded throughout the industry, and most importantly by consumers, as being equal in quality to much more expensive brands.
On a flight from Paris to London, Hermès’ chief executive Jean-Louis Dumas had the privilege in sitting next to actress Jane Birkin in 1981. She had this old, straw travelling bag and she decided to place it in the overhead compartment of her seat when everything inside fell out and the bag itself because history. Jane explained to Jean-Louis how difficult it was for her to find the perfect leather purse, but had no luck. That’s when in 1984, Jean-Louis designed a black supple leather bag for Jane, and named it “The Birkin Bag”. It became a popular status symbol within the media eye. These beautiful and personal accessory of luggage are handmade and are known as a fashion symbol of wealth due to the high pricing and usage of celebrities. The
We think that the luxury goods market is very sensitive to economic conditions. Customers who are not as comfortable or upbeat about the economy tend to spend less or by cheaper substitutes. Recession or poor consumer confidence in the US or Japan could result in a decrease of sales for short or long periods of time. Also, strong competition from other companies creates further pressure to lower prices and reduce net income. Italian and French handbag makers have a history of being favorites of women seeking fashion. Coach will continue to see these companies as a threat as each attempt to regain customers.
Coach Inc. is one of the dominating brands that are in the leading position of the affordable-luxury handbag market in relations to the overall annual sales results, but at the same time it faces harsh rivalry from its competitors. Some of the direct competitors in the North American market, such as for example Michael Kors or Kate Spade, have seen a drastic increase in popularity as of late, giving rise of concerns over Coach’s future market share. At the same time, Coach has strug-gled alot to compete against many of the leading European fashion companies such as Salvatore Ferragamo, Armani, Versace, Louis Vuitton, Gucci, and Longchamp. The
Two threats that Coach and other luxury goods industries face are counterfeiting and the growing demand for luxury goods in emerging markets. An estimated amount of $300-$600 billion worth of counterfeit goods has been sold throughout the world (Thompson A., Peteraf, Gamble, & Strickland, 2014). Fake and knockoff brands have been an ongoing threat for the luxury goods industry since the mid-2000s. Many companies have been teaming up to develop practices for measuring and implementing piracy enforcement. Because counterfeiting has become so prevalent, many luxury brands have found this strategy to be financially and operationally beneficial.
Coach is the manufacturer of a collection of handcrafted leather goods that are considered high in quality and unique in craftsmanship. Coach strives on their continued high standards that are required for the materials and workmanship that go into their handbags. The Coach brand is attributed their reputation and is considered one of the leading high-end handbag provider. The Coach brand is considered a “unique combination of their original American attitude and design, their heritage of fine leather goods and custom fabrics, their superior product quality and durability and commitment to customer service” (Coach Company Profile, n.d.). Coach has materialized as one of America's distinguished designers and manufacturer of fine handbags for women. The Coach brand has been developed over time from the signature styles and unique character that the handbags posses. (Corkindale, 2008).
Key managers that can run each business independently but with a group vision are also part of the equation. Additionally the luxury industry is strongly dependent on tourism which is influenced by economy trends. The 9-11 events and the global economy slowdown have had a great impact on the industry. Finally huge investments were done to win strategic position, having an important impact on revenues. Appendix 5 is an example of the proportion of cost and impact on revenues and the stock performance.
Coach Inc. operates in the luxury goods industry where it sells high quality leather handbags, accessories, and other leather products. The scopes of the products within this market are rated high in their “quality, style, and value” (Gamble, 2015, Page 71). The qualities of these luxury goods are rare, desirable, hard to replicate, and have a strong brand reputation. Firms within this market choose to compete domestically, in North America, and globally, in Europe, and more recently Asia. Within the luxury goods market, there are three sub-categories: haute couture, traditional luxury, and accessible luxury. When Krakoff joined Coach in 1996, he implemented a successful strategy to develop the “accessible luxury” segment. By 2000, Coach was dominating the sub-category market over its new competitors DKNY, Dolce & Gabanna, Giorgio Armani, and etc. The luxury goods industry had a direct bearing on Coach’s profit potential. This effect can be explained by looking at the environmental layers in detail, moving from Coach’s general environment to its task environment.
The fashion industry is very competitive. Company that venture in fashion should therefore have a proper marketing strategies that will make it have competitive advantage over the other companies. Most companies engaging in fashion have therefore turned to luxury brands being that there is global interest in fashion. Based on the environment that the businesses operate, the target markets and product attributes as well as marketing methods, the companies have embraced luxury brand management and fashion marketing strategies that have made them be on top of the fashion industry. This paper looks
You’ve heard about the art of the deal? Well, we live in the age of the deal, where consumers are trained to only look for the very best bargains before proceeding with a purchase. Whether people are shopping for the holidays or simply looking for that one item on their list that they have to have, it is now ingrained in them that they should only proceed when they have an optimum price that can’t possibly go any lower.