The Homa Files

Summary: Adapting to a more frugal consumer, Coach has created the less pricey Poppy line, revamping its product mix to lower its average bag price to $290

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Excerpted from Business Week, “Coach’s Poppy Line Is Luxury for Recessionary Times”,June 18, 2009

The Coach brand  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. It had created the very conceit of affordable luxury.

But, even before the recession Coach had become too expensive. “We have a long history of being a very grounded $200 handbag business,” he says. “Beginning around 2001 we started moving up and became a $300 handbag business. Then we reached $330. And the customer came right with us.  Until we reached our natural limits,” .

So began a nearly yearlong quest to design a line of purses and accessories that could be priced to fit the times without cheapening, or otherwise damaging, Coach’s image.

The resulting collection, which will be introduced in late June, is called Poppy. It’s more youthful, eclectic and spontaneous. The average price will be $260, about 20% less than the usual Coach purse.

The main pieces in the Poppy collection were tested in nine Coach stores and 23 department stores in April and May. And for the first time, Coach let people make online purchases through Facebook. Two $198 bags, the Groovy and the Glam, did better than Coach expected. But one didn’t do quite as well: That was the Spotlight, which sells for $298.

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Factoids

Coach spends about $5 million annually on that customer research.  It frequently surveys customers about their outlook and tastes; it carefully tests new designs; it measures almost everything.   Every three months it surveys some 20,000 women online about the Coach brand as well as about their economic expectations and spending habits.

Coach’s gross margins had been above 75% for the past five years. But during the recession, as the company has lowered prices at its factory stores, its margins have fallen to 72.4%. By comparison, brands such as Polo Ralph Lauren and Tiffany have margins of less than 60%.

Full article:
http://www.businessweek.com/magazine/content/09_26/b4137040272361.htm

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This entry was posted on July 27, 2009 at 7:15 am and is filed under Mktg - Brands, Mktg - Product & Innovation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.