Fashion Coach: The Global Drift of a Luxury Brand

When the middle class feels that its wealth has shrunk, the luxury market that has been growing for the past six years may face an inflection point.

In the first three months of 2009, sales in the US high-end accessories and handbags market fell by 10% to 15%, while the Japanese market dropped by 15% to 20%. For all luxury brands including Coach, the sharp drop in the two major consumer markets has brought about a lot of chill.

“The economic crisis will certainly have an impact on our consumers.” On April 30, Victor Luis, President and CEO of Coach China and Japan, told this reporter that with the decline of real estate, consumers feel To shrink the wealth will certainly affect its consumer confidence and hesitate to purchase luxury goods.

The closure of American stores and European factories is a matter of course. And emerging markets including China have become Coach's new hope for growth.

Overall decline

Entrusted by the Italian Federation of Luxury Goods Companies, Bain Company recently released a survey report showing that in the face of the global financial crisis, even the richest consumers are cutting spending, which may lead to the global luxury retail market in 2009. A recession has occurred.

Compared with shrinking wealth, consumer confidence and psychology have been hit harder. In this round of economic recession, department stores were forced to provide substantial discounts and clear inventory as consumers tightened their wallets, and sales figures for luxury goods makers in the first quarter were not optimistic.

Earlier, the US high-end fashion brand Coach announced quarterly reports that the impact of layoffs and closure of store costs, coupled with consumers in the economic crisis in substantial spending cuts, its profit decreased 29% over the same period last year, gross profit margin from 75% over the same period last year To 71%.

The world’s largest luxury goods group, LVMH, announced on April 30 that due to the continuous impact of the international financial crisis, the Group achieved sales of 4.018 billion euros from January to March 2009, a slight increase of 0.4% compared to the same period last year. There has been a "stagflation" phenomenon.

An industry source pointed out that due to the longer history of high-end luxury goods, the customer's brand loyalty is also higher, so the demand is more rigid than the low-end luxury goods, and the corresponding ability to resist the economic recession is stronger.

So, Coach is positioned in the "available luxury goods", the price is about half of the traditional European luxury brands, and its resistance to the crisis is how?

According to Victor, who presented the report to reporters in the first quarter of 009, Coach's performance in the U.S. and Japan markets was better than the market average, and sales in the U.S. market fell by only 1% in the previous quarter. The market even rose by 1%.

"Coach's strength lies in its ability to innovate and launch new products, which allows companies to win more consumers." Victor said that in order to keep consumers fresh, Coach needs to launch new products every month. Special attention will be paid to the product development cycle.

Lower the body

Compared with the European luxury brands, in addition to updating the models faster, Coach has the advantage of lower prices. Faced with the economic downturn, discount promotions and the launch of a variety of low-priced products are one of Coach's choices. This is also an important reason for the small change in sales, but the significant decrease in profits.

In order to attract consumers, Coach CEO Lew Frankfort has made adjustments to the product classification and cut the retail price by 10% to 15%, making the price of various products fall to between $200 and $300. Attract more patrons of "price-sensitive" consumers.

But does this drag down the brand image? In addition to price cuts, Coach is one of the few luxury brands that dares to announce that its products are outsourced in China and Vietnam.

Victor told reporters that Coach does not think that outsourcing will reduce the brand image. Moreover, outsourcing production is carried out under its strict supervision, and the quality of the product is guaranteed.

In fact, placing production in lower cost areas is an important strategy for Coach. Earlier, it had closed some stores and factories in Europe and the United States to resist the economic crisis.

Its third-quarter financial report shows Coach closed four North American retail stores and one sample manufacturing facility in Italy. Coach also plans to reduce the number of new stores in North America from 40 to 20 each year and suspend existing store expansion plans.

"Our strategy of spending cuts will also help Coach increase profitability." Frankfort said that at present, "we have stable financial position and huge cash reserves. Despite the current sluggish consumer situation, we are in the US handbag and accessories market. Shares continue to grow and stay ahead."