Coach article in Chicago Tribune

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    Coach's new purse line makes play for high end
    Confident in its customer research and product quality, Coach moves toward designer level with Legacy bags

    By Sandra Jones
    Tribune staff reporter
    Published February 19, 2007


    A tangerine tie-dye clutch with a rhinestone closure. A snow-white ski hobo bag with fur trim. A royal blue python satchel.

    This is not your mother's Coach handbag.

    The 65-year-old maker of sturdy leather purses is pushing into fashionable designer territory, going up against the likes of Louis Vuitton, Prada and Gucci in the race to tap into women's insatiable appetite for chic handbags.

    Just a decade ago, it would have been difficult to imagine such audacity from the old-fashioned company that relied on descendants of George Washington, J.P. Morgan, Mark Twain and other famous Americans to advertise its bags. But since spinning off from Sara Lee Corp. in 2000, Coach Inc. has found new life as a fashion icon.

    "We went through a metamorphosis from a house of leather goods to a lifestyle brand," said Lew Frankfort, a 28-year company veteran and Coach's chairman and chief executive since 1995.

    Now, Coach is testing the limits of its cachet. Late last year the company unveiled its highest-priced line to date, called Legacy, with some bags approaching $1,000. Coach plans to open two freestanding Legacy stores, in New York and Los Angeles, this fall.

    Coach is aiming high at a time of plentiful designer competition. Mulberry, the British leather-goods house, is in the midst of a retail expansion in the U.S., and Lambertson Truex, New York's hottest new luxury house, is rolling out its first freestanding stores and starting an aggressive expansion under new owner Samsonite, the world's largest luggagemaker.

    "It's very dicey," said Allen Adamson, managing director of Landor Associates. "In luxury brands, you can go down, but it's very hard to move a brand up."

    But Coach has been doing just that: It has been steadily testing higher-priced goods, rolling out more stores and unveiling new products every month. The strategy has fueled profit growth of 30 percent each quarter for the past five years and 20-fold rise in its stock price since the 2000 initial public offering. Since July, Coach stock has risen 80 percent, to $47.

    The New York-based luxury firm has been helped by the explosive popularity of handbags industrywide. Handbags are the most popular accessory women buy, according to Port Washington, N.Y.-based NPD Group. And the prices shoppers are willing to pay keep climbing.

    Coach made a niche for itself as an "accessible luxury." The average price for a Coach bag is about $300, and women can own a Coach for as little as $138. The new Legacy collection averages about $450.

    Just for fun, Coach sprinkles its most prominent stores with unexpected luxury items to keep shoppers interested and test how they sell.

    In December, for example, Coach made eight alligator bags priced at $20,000 each and sold them at Coach stores in tony locations in Las Vegas and New York. It also sold 50 pairs of designer blue jeans in 15 select shops.

    Pushing the frontier doesn't come without risks. Coach has the difficult challenge of balancing change without alienating its faithful shoppers.

    "We have an extremely loyal customer base that we've worked hard over decades to cultivate," Frankfort said.

    At the same time, Coach wants to win over the women who are wowed by "it bags," such as the Fendi B. and the YSL Muse, bags that command thousands of dollars and in many cases fly out of stores before they hit the shelves.

    Maureen Costello, a Lake Forest-based business-etiquette consultant, is just the type of shopper Coach hopes to win over. She was a Coach fan 15 years ago when the company was popular with working women. At the time she owned eight Coach bags. They're no longer in her closet, and her favorite handbag now is from the Parisian luxury luggagemaker Longchamp.

    "Back in the '80s when businesswomen wore suits full time, it was a symbol of quality and endurance," Costello said. "As you endured, so did the bag. I stopped carrying them when I started expanding my own image. They started looking a little heavy for a smart casual wardrobe."

    As the work world fell under the spell of dot-com khakis in the late 1990s, Coach fell into a funk. Once Coach got out from under Sara Lee's roof, where it competed with Ball Park franks and frozen cheesecake, things started to get better.

    Armed with the product-testing know-how of the consumer products giant, Coach became famous for its rigorous market research, an anomaly in the fashion industry where merchants are revered for instinct, not number crunching.

    Last year, Coach interviewed 65,000 women on everything from shopping to exercise to consumer electronics. One finding not directly related to handbags: Don't expect women's apparel sales to grow in the foreseeable future. They aren't buying much these days.

    On top of the interviews, Coach tests its products in stores and makes changes within weeks if something isn't right.

    For example, when Coach put its latest Ergo handbags, slated to debut in April, in select stores and asked customers what they thought, executives discovered that the drop from the shoulder strap to the bag was too short. It didn't sit comfortably against women's coats. So Coach designers are redesigning the strap before broad distribution begins this spring.

    Another example: After discovering that its best customers visit the store every four weeks, Coach began to bring in new products to its stores once a month.

    "We spend an enormous amount of time studying the consumer," Frankfort said.

    Even Coach's headquarters is oddly placed for a luxury house, located on a gritty, obscure street on the outskirts of Chelsea near the Hudson River. Its white, loft offices, sparse and clean, overlook the conventioneers streaming through the Javits Center rather than the designers and merchandisers milling about the Garment District.

    The challenge for Coach as it expands is to balance its designer aspirations while keeping its broad appeal, brand experts say.

    Coach is expanding its factory outlets even as it pushes into higher price points. It operates about 90 outlets, compared with 280 full-priced stores. Roughly 80 percent of the goods sold at Coach outlets are lower-end pieces manufactured specifically for those stores, rather than marked-down merchandise.

    Coach began selling jewelry last year and plans to introduce its first fragrance at U.S. stores in March.

    In the next three years, it will be easier to find Coach. The company anticipates operating more than 400 freestanding stores in the U.S. And it already sells its products in about 900 department stores.

    Shoppers like Penny Sanchez and her daughter, Sherree Burress, will have the last word. The 52-year-old suburban mother received her first Coach handbag as a gift five years ago. She since has bought more for herself and two for her 16-year-old daughter.

    Sanchez likes the quality, while her daughter likes the fashion. They both like the cachet.

    "It's a bit of a status symbol," Sanchez said.

    Keeping that balance is what Coach is banking on.

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    smjones@tribune.com
     
  2. great article - thanks for posting!
     
  3. Great read - thanks!
     
  4. :roflmfao: :roflmfao: :roflmfao: :roflmfao: :roflmfao: ONLY every four weeks?? Wow, I guess I'm practically an employee, then.:p

    Anyway, thanks for posting that, messengerbaglover. It was an interesting article, especially the part about changing the design of the Ergo bags in response to customer feedback. Cool.
     
  5. nice one!! way to go coach!
     
  6. Great article! I can hardly wait to see what Coach will be like in a few years. I'm hoping that one of their new stores will be within an hour or two of me! A boutique in Fargo and outlet in Sioux Falls would be perfect! Then I can visit at least once every 4 weeks!
     
  7. Great article!!
     
  8. I agree on both counts! LOL
     
  9. Good article........but what I really want to say is that, messengerbaglover, is that I REALLY looooooove your avatar! :love: Gary Allan, YUM! LOl!
     
  10. Thanks for posting, I really enjoyed it!!!
     
  11. wcofer - thanks! He is quite a looker, huh?
     
  12. I mentioned the strap length for ergos in our survey!!! I'm glad to know they updated it for the collection.
     
  13. I want Coach jeans. Did anyone see them? How much were they?

    Thanks for the article. I read the whole thing.
     
  14. Interesting article. Thanks for posting it!
     
  15. They were $498