Coach North America

Part
01
of three
Part
01

Coach North America - Key Competitors

Below is a detailed list of Calvin Klein, Ralph Lauren, Michael Kors, and Tory Burch. All of these companies have a significant amount of revenue and usually multiple subsidiaries, meaning that they have a large amount of business, success and well-known brand names. Most of these companies do not focus on one specific product, but a myriad of different products such as clothing, handbags, accessories, jewelry, and shoes.

Methodology

To identify the key competitors to Coach, we looked at companies in North America with a broad line of products. Owler and Hoovers were particularly useful tools in finding specific details on company such as recent revenue and top competitors. Companies with a single or only two lines of products were eliminated and companies with high end products (exceeding $1,000 or more in price for single products) were also eliminated. The final requirement to be considered a key competitor was a successful business model which can be identified by having high revenue and multiple branches. Listed below are Calvin Klein, Ralph Lauren, Micheal Kors, and Tory Burch. (Note Dooney & Bourke is excluded since they only have an income of about $30 million, which is not considered a key competitor compared to the sales of other companies on this list).

Summary

Michael Kors has a total revenue of $4.8 billion according to their latest SEC filings, their focus in products is in clothing, handbags, wallets, shoes, jewelry, and accessories. Michael Kors employs around 7,000 employees in 33 subsidiaries and 327 branches as of 2017. Michael Kor's revenue is mainly made in offline sales (wholesale or retail) with $4.08 billion, and only $242.9 million being made in online sales. Michael Kors makes this list since it has a successful and well-known brand name with an expanding revenue in the online market.

Tory Burch is an "online platform" which employs around 1,600 to 2,500 employees with an estimated revenue of $800 million in online sales alone. Tory Burch operates 2 subsidiaries and 74 branches. Tory Burch's main product line features clothing, swimwear, shoes, handbags, and accessories. What makes Tory Burch particularly competitive is its focus in online sales which is a platform that is exponentially expanding as more and more of the world become developed and have access to the internet.

Ralph Lauren's latest SEC filings reveal a revenue of $5.57 billion in offline sales (wholesale or retail) and an additional $584.6 in online sales, bringing their total revenue to around $6.7 billion in 2017. Ralph Lauren employs around 24,000 employees in 29 subsidiaries and 366 branches. Their strongest products are in clothing, shoes, and additional accessories for women; they also have a tailored clothing line, polo shirts, shoes, and additional accessories for men. Ralph Lauren's diversity of products makes it a strong competitor since it sells to both the online market and offline markets.

Calvin Klein is by far the most profitable and largest company in this list, with an annual revenue of $9.1 billion globally in 2017. Calvin Klein employs around 40,000 employees in 3,655 stores. Their main products feature clothing, bags, accessories, and shoes for both men and women. Since Calvin Klein is so successful, it's important to note that their sales in the United States as of 2017 were reportedly $6.6 billion. Calvin Klein is a world-renowned brand that's been incorporated only since 2002 (founded in 1968).

conclusion

Most of the companies listed above considered direct competitors since they offer similar products and have large amounts of revenue indicating a highly successful business model. All of these companies offer products that are either unisex or provide male and female oriented products. Each of these companies provides a diverse line up of products which are all innovate which helps their respective brand names maintain relevance.
Part
02
of three
Part
02

Coach North America - Sales data

Coach's total revenue in North America was worth $2,349.5 million in 2017. The given total revenue accounts for Coach brand only, excluding sales generated by its acquired brand in 2015, Stuart Weitzman. Of the total Coach brand sales revenue, online sales were estimated to worth $93.98 million, a 4.0% share from the total net sales, and its offline store sales from its retail and wholesale outlets was about $2,148.96 million in 2017. According to the company's annual report for FY 2017, North America region accounts for approximately 52.3% of the total market. All figures used in this research was based on FY 2017 unless specifically noted and expressed in 'US$ millions'. Below you will find more details of our findings and any calculations, estimations, and assumptions made to derive the above figures.

COACH BRAND NET SALES IN NORTH AMERICA

From the latest 2017 annual report released by Coach, Inc., North America accounts for 52.3% of the total company's net sales globally. North America's net sales revenue in 2017 for Coach brand (excluding Stuart Weitzman brand which the company acquired in 2015) was $2,349.5 million. This sales revenue "composed of Coach brand sales to North American consumers through stores, including the internet, and sales to wholesale customers" which also include other revenue sources such as licensing.

ONLINE AND OFFLINE SALES OF COACH BRAND IN NORTH AMERICA

From eMarketer Retail database which analyzes and reports major retailers brand in North America and globally, Coach's e-commerce sales in 2016 was $190.0 million which accounts for 4.2% of the total market. According to this report, estimated data for FY 2017 (Q4 results not available and figure was based on the last 12 months result) for its e-commerce sales was $181.2 million, a decrease of 2.8%, and its market share from total was 4.0%. According to the company, internet sales continue to decline due to the reduced number of promotional events since fiscal 2015. From the eMarketer database, Coach's e-commerce sales in 2014 and 2013 were at high 10.0% and 11.7% market share respectively and have started its decline in 2015 with 4.8% share. While this percentage share represents global sales, we assumed that this share is also similarly proportionate with the North American region adding also that this region represents more than 50% of the total Coach market.

E-commerce sales or online sales in 2017
= North America Coach brand sales revenue * 4.0%
= $2,349.5 million * 4.0% = $93.98 million

Coach's e-commerce or internet channel was from sales of products ordered through the company’s e-commerce sites and from retail internet revenues. There was no further segmentation given to its specific channel.

If 4.0% accounts for online sales, then we could roughly estimate that 96% [100%-4%] accounts for offline retail and outlet sales (physical stores), wholesale customers and from other revenue sources.

Offline sales and other revenue source such as licensing
= $2,349.5 million * 96% = $2,255.52 million

To estimate its offline or physical retail and outlet net sales, we used the given average store sales per square foot in North America and multiply it with the total square footage of the company's retail and outlet stores in the region using the last 12 months figures (2017 estimates, TTM).

Average sales per square foot in North America = $1,075
Total store square footage at fiscal 2017 year-end (retail and outlet stores) = 1,884,204

Sales from retail and outlet stores
= $2,025.52 million

% of retail and outlet stores sales from total in North America
= ($2,025.52 million/$2,349.5 million)*100
= 86.21%

From the annual report, it stated that the North American wholesale outlets account for about 3% of the total Coach's net sales. In 2017, Coach's global net sales were $4,114.7 million.

Sales from wholesale outlets
= $4,114.7 million * 3% = $123.44 million

% of wholesale outlets sales from the total in North America
= ($123.44 million/$2,349.5 million)*100
= 5.25%

Total offline sales from retail and wholesale outlets
= Sales from retail outlet + wholesale
= $2,025.52 million + $123.44 million
= $2,148.96 million

Total % for offline channel
= % from retail outlet + wholesale
= 86.21% + 5.25%
= 91.46%

CONCLUSION

In North America, estimated online/internet or e-commerce sales revenue of Coach brands accounts for 4% of the total market, and about 91.46% from its offline channel specifically retail and outlet stores (86.21%) and wholesales' stores (5.25%). The remaining percentage was assumed to account for the company's other revenue sources such as licensing and others.
Part
03
of three
Part
03

Coach North America - Consumers

INTRODUCTION

Coach brands have undergone a major transformation in recent years. While data on specific customer behaviors is scarce, there are some key metrics and trends that can help Coach assess its current position in the e-commerce landscape and identify opportunities to improve its digital capabilities.

One of the key changes Coach has made in recent years is to move away from "discount fueled expansion" and focus more on rebuilding its position as a luxury brand. This has resulted in a consumer base that is more drawn to their high-end products and has earned Coach a position in the top 10 most valuable luxury brands.

With the number of consumers preferring to shop from their mobile devices versus a desktop expected to increase by 50%, Coach brands recognize that digital must be at the center of their strategy. In fact, 86% of women look at social media before making a purchasing decision. Considering that the main market segment for Coach brands is females between 20-44 years of age, having a social strategy is key.

Additionally, because 57% of mobile users will not recommend a business that has a poor mobile site, designing mobile-optimized websites to drive e-commerce is critical to success. By leveraging programmatic advertising to identify and drive consumer behavior, and taking advantage of mobile apps, creative delivery concepts, and offering an attractive mobile shopping experience, Coach can continue to build on the positive changes it has made in its business model and adapt it for today's tech-savvy consumers.

METHODOLOGY

After extensive research, information specific to Coach customer purchasing behavior (e.g., number of products they own, how often they shop, average cart size, and purpose of the purchase) was not available. While conducting our search, we surveyed annual reports, press releases, corporate websites, and various reputable industry websites. Due to the lack of data, it was not possible to triangulate nor calculate reliable responses for the specific criteria provided.

In an effort to address the primary objective of this request, the data that follows is intended to provide potential improvements in Coach's digital capabilities to build upon the success of its brand transformation.

HELPFUL FINDINGS:

MARKET FACTORS

Coach is currently one of the top 10 most valuable luxury brands in the world. Topping the list of most "well-owned" brand for girls between 13-29, the brand has also seen its brand diluted as a result of "discount fueled expansion."

In 2014, when Victor Luis took over at the helm, he wanted to return the brand to its roots and "launched a campaign to recover its 20th-century mystique. He shrank the business—on purpose—and repositioned Coach as a smaller, healthier retailer, prioritizing quality over mass-market quantity." Additionally, to further stoke its image as a luxury brand, Coach cut down on online "flash sales" and focused instead on runway shows and its own stores.

Coach has put significant effort into its displays and collections to boost perceptions of their products and further its image as a top luxury brand. While these changes did not produce improvement overnight, by 2016, Coach began to reap the rewards of its efforts to "elevate the brand perception." By December 2016, handbags over $400 accounted for 50% of sales and resulted in an increase of 20% from the previous year. Net profits that quarter increased by 17.4%.

In considering the target demographics for coach products, females aged 20-34 years (20.9% of US female population) tend to purchase more handbags than their older counterparts. Consumers age 35-44 (16% of the US female population) are also frequent handbag buyers. In our research, we were not able to identify the percentage of these consumers who purchase Coach products, the frequency of those purchases, nor the purpose of the purchase (gift versus personal use).

While Coach has steered consumers away from e-commerce deals, most recently, Coach has begun to take advantage of the digital marketplace. Following the trend of other brands "Coach is one of several brands that are increasingly skipping department stores to sell their purses, sneakers, and clothing straight to shoppers." For the February 2018 New York Fashion Week, Coach made its fashion show available on Instagram and Facebook and then offered "first dibs" to their limited edition Dreamer purse on their website. According to Andrea Shaw Resnick, a spokeswoman for Coach’s parent company, Tapestry, "[s]ocial was able to drive a significant portion of that style’s revenue on Coach.com.’’

While Ms. Resnick did not specify what percentage of Coach's total Coach.com revenues is attributed to social media, it is clear that mediums such as Facebook and Instagram played a significant role in driving revenue for the brand. Considering that 86% of women look at social media before making a purchasing decision, social media has become a key component of the retail experience. In fact, "57% of all mobile users will not recommend a business if their mobile website is poorly designed or unresponsive."

For this reason, looking at digital trends in the retail space can provide insights into how the Coach brand can expand its digital footprint. Heroic Search, a company that helps companies capitalize on their digital presence, identified 3 major trends in 2017 that are transforming retail sales:

DIGITAL TRENDS

1. Consumers are turning increasingly to their mobile devices for online shopping. According to research by think tank Gartner, mobile commerce was expected to boost e-commerce-driven mobile revenue by at least 50% in 2017. With the introduction of mobile wallets and branded mobile apps, this trend to choose mobile interfaces over a desktop is expected to continue. To take advantage of the mobile revolution, it is critical that retailers develop "mobile-optimized" interfaces that enable shoppers to easily view, select, and check out on their mobile devices. Amazon, Walmart, and eBay are all good examples of companies that have mastered the mobile experience.

2. The second trend for digital retailers is to offer enhanced delivery capabilities. That is, streamlining the supply chain to get a product to consumers as quickly as possible. Amazon partnered with UPS to deliver on Sundays. Services like Grub Hub and Uber provide express delivery of meals. Finding ways to expedite and innovate product delivery is becoming a key component of the digital shopping experience.

3. The third trend in digital retail is programmatic advertising that delivers targeted advertising to a specific audience at the right time. "More and more retailers looked to programmatic as a data-driven solution to better target users and" drive sales. In fact, Mark Abay, Content Director at Ashton Media, predicts that “programmatic is going to drive 100% of advertising trading execution by 2020.”

CONCLUSION

Coach brand is one of the most recognized luxury brands in its market segment. While specific data on the purchasing behaviors of Coach's customers was not available, we can glean some valuable insights on how Coach can improve its e-commerce practices.

Because Coach has the broadest appeal to consumers between 20-44 years of age, the trend toward digital marketing and shopping behavior is a significant advantage for Coach. This demographic lends itself to the digital space which provides Coach with a vast audience. By leveraging social platforms for targeted, right-time marketing/advertising, Coach can customize its marketing based on an individual's online activity. This capability enables Coach to deliver the right message to the right consumers at the right time.

To capitalize on the traffic generated by programmatic advertising, Coach might assess its mobile capabilities and social media presence. Providing a mobile app and optimizing its website for mobile devices will attract and retain shoppers and increase the likelihood of a purchase. With 86% of women looking on social media before purchasing and relying on their mobile devices to access online shopping, enhancing their social media presence in a mobile-friendly interface is crucial to capture today's tech-reliant consumer.

Finally, exploring the future potential of creative delivery capabilities that streamline the supply chain and appeal to today's "want it now" culture, would offer an additional differentiator for today's tech-savvy consumer.
Sources
Sources

From Part 01