Why Goldman Sachs Believes Coach's (COH) Turnaround Is Alienating Consumers

[AstridRhapsody]

I was at my local Macy's just a few days ago and was talking to the SA who was given coach as her main brand to sell. She said they are supposed to allow 180 days to return coach but really you can return at anytime like the majority of all the merchandise in the store. They are currently revamping their coach display and have had members of corporate coach in the store and she said they would not be pushing the 60 day return policy to match the coach fp store in the same mall.

 

[Luv2Shop1]

Yeah, the person at Macys said Coach wanted to put their own SAs in there, so I assume it would be like the LV in NM. SHe also said they had to agree to mark down only during certain events, but I certainly don't know the legalities involved with that.

Vendors can definitely put terms into contracts with their authorized distributors limiting how they sell, price, display, etc. Apple, for instance, has agreements with all their authorized distributors limiting how they can offer and discount Apple product.

 

[abl13]

I haven't been to my Macy's in a while but I stopped yesterday and was shocked to see that the coach counter was removed. They just have a few bags on tables with hardly any accessories and the empty space was filled in with Ralph Lauren bags. I always order online anyways but I can't believe they removed most of coach from the store.

 

[ltbag]

I don't buy a brand based on when I can return the merchandise and how often it goes on sale. I buy a brand because I love the merchandise. Coach let its discounting get out of hand in these stores and now they are trying to rein it in to preserve the value of their brand. I wish them luck and hope they are at least partially successful in stopping the downward spiral of their brand's value. (at the rate Coach was going before the Vevers changes, Target and Kohls would have been the next stop for the brand...)

Frankly I think Coach wants the frequent returners to shop other brands. Anyone who returns a bag over six months to a year after they purchased that bag, is costing Coach money. I am not discussing whether it is "right" to hold onto merchandise that long, or whether anyone has a right to return a bag a year later. They do have a right if Coach GIVES them a right and Coach is taking that right away and that is a good thing for Coach's brand valuation in my opinion.

As stores have more rules regarding pricing and updating of inventory of Coach, they will sell less Coach. The Macys near me are carrying much less Coach and the Nordstroms near me isn't carrying Coach at all anymore. I think Coach will mostly be in flagships of these department stores and the smaller, mall based stores will have a very small selection or none at all.

 

[swags]

Our local Macys downsized the amount of Coach significantly. The Coach store at the mall is still pretty empty when I walk by.

 

[baglady39]

Vendors can definitely put terms into contracts with their authorized distributors limiting how they sell, price, display, etc. Apple, for instance, has agreements with all their authorized distributors limiting how they can offer and discount Apple product.

Love me some Apple....like WAAAAYYY too much!!

 

[MIKOMEGMOM]

I don't buy a brand based on when I can return the merchandise and how often it goes on sale. I buy a brand because I love the merchandise. Coach let its discounting get out of hand in these stores and now they are trying to rein it in to preserve the value of their brand. I wish them luck and hope they are at least partially successful in stopping the downward spiral of their brand's value. (at the rate Coach was going before the Vevers changes, Target and Kohls would have been the next stop for the brand...)

Frankly I think Coach wants the frequent returners to shop other brands. Anyone who returns a bag over six months to a year after they purchased that bag, is costing Coach money. I am not discussing whether it is "right" to hold onto merchandise that long, or whether anyone has a right to return a bag a year later. They do have a right if Coach GIVES them a right and Coach is taking that right away and that is a good thing for Coach's brand valuation in my opinion.

As stores have more rules regarding pricing and updating of inventory of Coach, they will sell less Coach. The Macys near me are carrying much less Coach and the Nordstroms near me isn't carrying Coach at all anymore. I think Coach will mostly be in flagships of these department stores and the smaller, mall based stores will have a very small selection or none at all.

Agree with what you said.
I was also told at my Dillards that when their current contract is up Coach will have dedicated SA's just like our MAC and BCBG depts. operate right now. She said that its going to take a while as different stores have different contract expiration dates but the goal is to be a 'store within a store'. I see lots of that in the dept stores in Vegas so I am sure its done already on a wide scale.
Also looks like Coach is not producing as much as they have in the past. I think lots of the Vever's merchandies is limited. I think alot of the items we are seeing now are still RK designs. I found information that SV has not produced any Mens items yet and his Men's line wont launch till Spring. So I think some of the styles that look like they are refreshed from before are probably not his designs IMO.

 

[tonij2000]

I don't buy a brand based on when I can return the merchandise and how often it goes on sale. I buy a brand because I love the merchandise. Coach let its discounting get out of hand in these stores and now they are trying to rein it in to preserve the value of their brand. I wish them luck and hope they are at least partially successful in stopping the downward spiral of their brand's value. (at the rate Coach was going before the Vevers changes, Target and Kohls would have been the next stop for the brand...)

Frankly I think Coach wants the frequent returners to shop other brands. Anyone who returns a bag over six months to a year after they purchased that bag, is costing Coach money. I am not discussing whether it is "right" to hold onto merchandise that long, or whether anyone has a right to return a bag a year later. They do have a right if Coach GIVES them a right and Coach is taking that right away and that is a good thing for Coach's brand valuation in my opinion.

As stores have more rules regarding pricing and updating of inventory of Coach, they will sell less Coach. The Macys near me are carrying much less Coach and the Nordstroms near me isn't carrying Coach at all anymore. I think Coach will mostly be in flagships of these department stores and the smaller, mall based stores will have a very small selection or none at all.

I think Coach is recruiting a core customer who buys what she likes from full price. Granted, they have a lot of work to do to but it seems to me that they're going in the right direction.

 

[ltbag]

Agree with what you said.
I was also told at my Dillards that when their current contract is up Coach will have dedicated SA's just like our MAC and BCBG depts. operate right now. She said that its going to take a while as different stores have different contract expiration dates but the goal is to be a 'store within a store'. I see lots of that in the dept stores in Vegas so I am sure its done already on a wide scale.
Also looks like Coach is not producing as much as they have in the past. I think lots of the Vever's merchandies is limited. I think alot of the items we are seeing now are still RK designs. I found information that SV has not produced any Mens items yet and his Men's line wont launch till Spring. So I think some of the styles that look like they are refreshed from before are probably not his designs IMO.

Yes I agree, the fall line was a mixture of Vevers and RK designs. Some of the styles do seem limited, but I think they did produce some in large numbers so there will be some Vevers stuff on sale during the next sale. I think over time less will be produced.

It will be good to have a store within a store concept for the dept stores. If Coach is going to take back its image it needs to stop the bargain basement policies and have some control of the merchandising and pricing etc.

 

[ltbag]

I think Coach is recruiting a core customer who buys what she likes from full price. Granted, they have a lot of work to do to but it seems to me that they're going in the right direction.

I agree. I think they are changing their core customer and that is a must if they are going to stick to their new pricing structure etc.

 

[tonij2000]

Agree with what you said.
I was also told at my Dillards that when their current contract is up Coach will have dedicated SA's just like our MAC and BCBG depts. operate right now. She said that its going to take a while as different stores have different contract expiration dates but the goal is to be a 'store within a store'. I see lots of that in the dept stores in Vegas so I am sure its done already on a wide scale.
Also looks like Coach is not producing as much as they have in the past. I think lots of the Vever's merchandies is limited. I think alot of the items we are seeing now are still RK designs. I found information that SV has not produced any Mens items yet and his Men's line wont launch till Spring. So I think some of the styles that look like they are refreshed from before are probably not his designs IMO.

Love the store within a store concept. And yes, it's gonna take time to revamp the whole system but I do see positive change taking place and I'm excited for Coach.

 

[momtok]

.
Regarding the concept of reducing/controlling department store presence ....

I was reading a recent article about Prada buying up leather tannerie, in order to have better control of their supplies, and there was also a mention in the article that Prada had recently done this department store shuffle as well ....... that is, backing out of department stores and/or opening up their own counters within those stores. (That first article is here: http://www.businessweek.com/articles/2014-10-09/why-prada-is-getting-into-the-tannery-business)

It's an interesting read in its own right, but I mention it primarily because it set me onto a different link, not discussing tanneries, but rather this change in interaction with department stores. That next article, from early 2014, is here: http://www.businessweek.com/articles/2014-02-12/prada-gets-even-more-elitist-and-it-pays-off )

One highlight from that article:

If one has a $3,000 handbag, she shouldn’t let just anyone get their grubby hands on it. That’s the message this morning from Prada (1913:HK), which has been limiting the amount of fancy clothes and accessories it sells through wholesale channels. Instead, the Italian design house has been opening its own stores, adding 79 in the past 12 months to bring the tally to 540.

The theory, perhaps best refined by Apple (AAPL), is that a company with a particularly strong brand can benefit by controlling as much as possible about where and how its products get sold—and to whom. Selling via a staff that it trains, in a store it designs, insulates such companies and their customers from increasingly mall-like department stores and potentially surly salesmen.

And that, in turn, leads to yet another article, humorously titled, "Prada CEO Explains Why Department Stores Can't Have Nice Things," which is here: http://www.businessweek.com/article...s-why-department-stores-cant-have-nice-things .... (that article also goes on to mention some other companies too ... JCP, Gap, Kors, etc.).

Quote from that one:

As one might expect, the chief executive officer of Prada (1913:HK), Patrizio Bertelli has a somewhat snobby take on U.S. department stores: They’re too low-rent, what with never-ending discounts. “They seem to be on a permanent end-of-season sales mode,” Bertelli said during a conference call late on Friday.

Even for Prada, a brand that would rather die than be caught in an “everything-must-go” situation, this is a growing problem. “They are not interested in promoting products and brands while in display, because they are constantly engaged in markdowns,” Bertelli said. Translation: “If you’re the type of consumer who buys $450 sneakers, you’re focused on the shoes, not the price.”

I realize that's Prada, not Coach, but it seems to be the same phenomenon, and if Coach is indeed trying to run with the "big boys," then there is some relevance. It's interesting reading on the topic, if nothing else.
.

 

[Luv2Shop1]

Love me some Apple....like WAAAAYYY too much!!

Me too!

 

[tonij2000]

.
Regarding the concept of reducing/controlling department store presence ....

I was reading a recent article about Prada buying up leather tannerie, in order to have better control of their supplies, and there was also a mention in the article that Prada had recently done this department store shuffle as well ....... that is, backing out of department stores and/or opening up their own counters within those stores. (That first article is here: http://www.businessweek.com/articles/2014-10-09/why-prada-is-getting-into-the-tannery-business)

It's an interesting read in its own right, but I mention it primarily because it set me onto a different link, not discussing tanneries, but rather this change in interaction with department stores. That next article, from early 2014, is here: http://www.businessweek.com/articles/2014-02-12/prada-gets-even-more-elitist-and-it-pays-off )

One highlight from that article:


And that, in turn, leads to yet another article, humorously titled, "Prada CEO Explains Why Department Stores Can't Have Nice Things," which is here: http://www.businessweek.com/article...s-why-department-stores-cant-have-nice-things .... (that article also goes on to mention some other companies too ... JCP, Gap, Kors, etc.).

Quote from that one:


I realize that's Prada, not Coach, but it seems to be the same phenomenon, and if Coach is indeed trying to run with the "big boys," then there is some relevance. It's interesting reading on the topic, if nothing else.
.

Thanks for posting these!

 

[LVk8]

.
Regarding the concept of reducing/controlling department store presence ....

I was reading a recent article about Prada buying up leather tannerie, in order to have better control of their supplies, and there was also a mention in the article that Prada had recently done this department store shuffle as well ....... that is, backing out of department stores and/or opening up their own counters within those stores. (That first article is here: http://www.businessweek.com/articles/2014-10-09/why-prada-is-getting-into-the-tannery-business)

It's an interesting read in its own right, but I mention it primarily because it set me onto a different link, not discussing tanneries, but rather this change in interaction with department stores. That next article, from early 2014, is here: http://www.businessweek.com/articles/2014-02-12/prada-gets-even-more-elitist-and-it-pays-off )

One highlight from that article:


And that, in turn, leads to yet another article, humorously titled, "Prada CEO Explains Why Department Stores Can't Have Nice Things," which is here: http://www.businessweek.com/article...s-why-department-stores-cant-have-nice-things .... (that article also goes on to mention some other companies too ... JCP, Gap, Kors, etc.).

Quote from that one:


I realize that's Prada, not Coach, but it seems to be the same phenomenon, and if Coach is indeed trying to run with the "big boys," then there is some relevance. It's interesting reading on the topic, if nothing else.
.

Thanks for posting all of these articles, it is interesting reading!

As far as Coach trying to run with the Big Boys, they still have a very long way to go with brand cachet because they're using that sales model in mainstream dept stores like Macy's and Dillards & not the high end ones, ex., Neiman Marcus and Saks. Sort of like how the BCBG Max Azria sections in the mall dept stores are run by their company employees and not dept store employees. Definitely should help with turning around the "meh it's always on sale" perception for people who shop dept stores instead of FP for Coach.

A step in the right direction but I think the true test is how Coach handles the outlet monster that they've created...