Take a good look at this picture. Because you’re not going to be seeing as much Coach product in department stores as you’re used to. The handbag manufacturer is cutting back on department stores. Big time.
In a move that is certain to frustrate consumers used to grabbing discounted bags at their favorite department stores, Coach is taking “surgical” steps to boost its overall margins.
And with approximately 500 of its own retail and outlet stores, Coach has plenty of ability to control its ticket price on its own terms. And that means aiming for more full-price sales.
Coach announced it would no longer sell items at about 25% (or 250 stores) of its 1,000 wholesale locations like Macy’s and Lord & Taylor. It will also clamp down on the ability of discount-happy stores to slash prices on Coach items, according to a report in Forbes.
“We do want that channel to treat the brand rather consistently with the way we’re doing it with our own retail [stores],” said Andre Cohen, Coach’s president of North America and global marketing.
To boost its presence at higher end department stores like Saks and Nordstrom, Coach launched the Coach 1941 collection.
On an analyst/investor call, Coach CEO Victor Luis said: “While we understand that consumers may use department stores for trial and shopping across brands, the high level of promotional impressions created negatively impact our long-term brand health, while generating confusion across channels.”
…AND KORS TOO
Coach isn’t the only handbag company looking to dial down its department store presence and/or discounting.
In its recent earnings report, Michael Kors Holdings CEO John Idol told analysts that “come February, the accessories brand will no longer participate in department stores’ broad-based friends and family sales, or accept coupons for its products there.” According to CNBC, department stores represent an estimated 40% of its revenue.
Putting a stop to such discounting and promotions is all part of efforts to stall the brand damage that’s been done.
“It’s creating confusion in the consumers’ mind relative to the value of the Michael Kors brand when it’s being seen so often on sale in so many different places,” Idol said. “We have to correct something that we think is actually having a negative long-term effect for the brand.”