Case Study #7: Coach – Blows the Whistle on Customer Luxury Spending and Rotates Poppy Products Into Lineup

Earlier this year, I stop by the Coach store on Michigan Avenue to exchange a belt. I am greeted by a very friendly sales associate. She recommends a more appropriate style for me, and then suggests that I look around the store to see if I want to purchase something else. I decline. Then she asks, “Well, maybe you can get something for your girlfriend!” Lines of disheartenment simultaneously crease our faces as I tell her I am recently single and just need to shop for one today.

The lines of disheartenment are not reflective of her sympathy to my bachelorhood. Rather, it most likely stems from severe pullback in customer spending on luxury goods, as identified by her superiors at Coach. In July 2008, the senior executives of Coach gather in the empty second floor of their 4,000-square-foot store at 69 Main St. in East Hampton for a private annual meeting. At the end of the first day they make an important decision. The brand had emerged from its modest origins in the 1940s to become an emblem of the working woman and then, remarkably, a favorite among the fashion-conscious. Now that sense of expansiveness, opportunity, even desire, is diminished. Coach has to adapt (Berfield, Susan. “Coach's Poppy Line Is Luxury for Recessionary Times”, Businessweek.com, 18 June 2009).

The Poppy line of products (clothes, bags, shoes, accessories) is representative of a collaborative approach to adapt the Coach brand to changing social and economic times without diluting its core equity.

Creating a new product to be sold at a 20% lower retail price point requires a very lean cost structure. Every function involved, from designers to suppliers to marketers, must trade-off certain expectations by keeping the philosophy of long-term brand growth in mind. Coach frequently surveys its customers on tastes and outlooks. Known for its data-and-insights driven approach, Coach has its finger on the pulse of its global retail operations, so it is no surprise for the fashion leader to pre-empt a decline in sales and profits one year ago, and develop a product strategy to blunt further financial losses this year and beyond. According to Coach’s research, people are anxious, uncertain of their prospects, and they want to buy something fun (Berfield). This may not necessarily be congruent to deflated consumer confidence statistics, but assuming that the scope of the research is around target customers, Poppy may be perceived as a more personally appealing and economically sensitive purchase than expensive flagship offerings. The name doesn’t sound cheap or frivolous. Rather, it is charming and distinctive. There’s credibility behind this product lineup as it is built by Coach stakeholders. Target customers have positive associations with its quality and service, so an investment into a new product lineup is seen as innovative and refreshing, rather than operational or reactive.

So, when and if my bachelorhood and this recession ends, I am happy to step into Coach, and buy for two rather than one!