Coach Inc.: The Great Recession

Introduction, History and Key Issues

In 2000, Coach Inc. became the first recognizable retailer in providing an accessible luxury good, namely in the women’s handbag market. Coach’s mission was to do something competitors had not yet realized was feasible: they offered a product of comparable or matched quality at a significantly lower price. Coach’s sales increased at an annual rate of 20% until the onset of a slowing economy in 2007 known as “The Great Recession” (Gamble, 2015, Page 73). Slowing sales began to take their toll; however, it was the introduction of primary competitors following a similar business strategy (Ex. Michael Kors, Versace, etc.) to the market that directly threatened Coach’s standing. In an attempt to revive business, Reed Krakoff was hired as the new

creative director for Coach. It was Krakoff’s focus on conducting intensive market research, launching more product lines, and redesigning stores to better fit the brand image that breathed new life into Coach; and the financials reflected this (Gamble, 2015, Page 75).

Currently, Coach faces a unique circumstance: they must learn how to differentiate themselves in a newly competitive environment where they were once the only player. Similarly, Coach faces many direct and pressing issues related to this overarching theme, the first of which is building market share in underpenetrated markets, both domestically and globally. In North America, the growing middle class and male interest in accessible luxury goods have opened up two new market segments, both of which are currently untouched by Coach. Coach must find an efficient way to exploit demand in these segments, and if they cannot, risk missing out on a major opportunity. Globally speaking, India and China have developed similarly booming middle classes who have driven great demand for Western accessible-luxury goods. Coach must find a means to expand globally through the penetration of these viable markets and to remain relevant in the accessible luxury goods industry. The pressing issue here lies in Coach’s mode of market entry and global strategy within countries where there is significant cultural,

administrative, geographic and economic distance. Exacerbated by Coach’s global reach, “counterfeiting” in this particular industry has taken many retailers by storm. In 2012 alone, it was estimated somewhere between $300-600 Billion worth of counterfeit goods were sold globally, and as an extremely recognizable brand, Coach is severely impacted by this crime (Gamble, 2015, Page 82). Another pressing issue is Coach’s expansion of product offerings through licensing agreements. Although these product offerings have differentiated Coach from competitors, some licensing partners have provided little sales for the firm add minimal value. This is a major issue, as Coach needs to re-evaluate licensing agreements and form more strategic relationships without diluting the brand. Aside from Coach’s tangible products and in-store image, Coach faces a challenge in updating their web and media presence to remain consistent. Therein lies another pressing issue: creating seamless flow and a more inclusive online experience to match updates in physical store locations. A final issue Coach is facing is the fact that they are required to outsource much of their production in order to keep their costs (and similarly prices) low. This is an issue as high quality, an integral aspect of their brand, has been much harder to maintain and control in other countries versus at home.
In totality, Coach must answer a crucial question: How does Coach redefine who they are in order to gain an entirely new competitive advantage in an industry in which they once faced no competition?