With a tanking luxury market and rapidly declining department store sales, luxury handbag manufacturers and retailers had some self-reflecting to do. In a bid to turn around sales, many have recently decided to go back to their roots with a “less is more” approach. They figured that producing less merchandise and not discounting it will lead to more sales.
On the retail level, that translated to launching fewer new handbag styles and brands last quarter, with Nordstrom dropping 23% and Bloomingdale’s shedding 3%, a recent report from fashion analytics company Edited shows. Barney’s dropped new handbag launches even more aggressively, cutting 41% according to the same study.
“Reducing the number of products, making sure they are choosing their products really smartly, can help make sure they’re getting full-price sales rather than discount,” Katie Smith, senior fashion analyst at Edited, told Bloomberg.
For manufacturers, the approach means streamlining. At Coach, the days of deep discounts and over saturation of product are over. Instead, they’ve turned to exclusivity and scarcity to move inventory—a strategy that’s already resulting in higher sales.
In August of this year, the company reported net sales for fiscal 2016 totaling $4.49 billion, an increase of 7% on a reported basis and 9% in constant currency from fiscal 2015. Gross profit totaled $3.05 billion on a reported and non-GAAP basis, an increase of 5%. Gross margin was 67.9% on a reported basis and 68.0% on a non-GAAP basis. This compared prior year gross margin of 69.4% on reported basis and 69.6% on non-GAAP basis.
Almost across the board, handbag brands are scaling back on the number of product lines they’re offering and combining bridge lines into their parent labels. Most notably, Marc by Marc Jacobs was folded into its designer name parent brand Marc Jacobs; Sonia Rykiel shuddered its Sonia by Sonia Rykiel line and Paul Smith went from four labels to two labels, to name a few.
Designers are also listening to consumers’ changing tastes. As millennials come of age, their spending habits are proving to be polar opposite of their predecessors. Logos are not in favor for the generation, as they crave sartorial individuality. And their mobile-driven and tech-heavy lives demand tech accessories and handbags that keep their hands free for texting and social media.
These shifts in product assortment and branding are pointing to a profitable way forward for both retailers and manufacturers and with many luxury retail reports being released tomorrow, all eyes will be on them heading into the holiday season.