I walked into a Coach store in Santa Barbara and nearly had a heart attack when I saw that everything was marked down. There were even clearance signs! However after a brief moment, I realized that I was in one of their outlet stores.
It only took a few more moments to notice that something else was unnerving. Everything was kind of .. well.. cheap and ugly looking. Where was all the great Coach stuff that sells in the full price stores. Where was the Francine and the Ergos? Where was the great French purse that I bought my wife? None of it was to be found. There was of course the signature pattern everywhere and all kinds of hideous patchwork bags. There were some rather plain looking leather bags and some of the little cheap looking canvas bags.
The main thing I learned was that the outlet stores are by no means a discounted version of the full price stores. The product was completely different and not nearly as nice.
So what the hell is Coach doing with these stores? Sure they are going to sell a lot of bags to people who want to wear Coach but can't afford it. But is that it? Is there a real strategy with these stores? How does this help the Coach brand? Will these people ever come into a full price store and upgrade to the Francine at $798 after buying a canvas signature for $159. Somehow I doubt it. I think they will just keep visiting the outlets.
You are so wrong - unsold stock from full price stores is transferred to Coach outlets. My Francine came from a full price Coach boutique and even had the orignal boutique tag on it -
It is true that outlets also sell a Factory Outlet brand - maybe that is what you are thinking of.
In Lew's interview in the WSJ he implied that Coach is pursuing a strategy that may make sense. They appear to be selling their signature and patchwork more in the lower income areas (even Queens!) and selling their newer, more subtly decorated bags in the higher income areas. The idea is that rich people don't go to poor areas and so won't see the unwashed masses with their signature/patchwork bags. It won't matter anyway since her bag will look different from theirs. It will be interesting to see whether they can pull this off. Lets hope.
You people baffle me.
It is all about getting that brand into the public... the more people see the brand, them more it becomes engrained into peoples heads. ICONIC
It should not be exclusively for the rich.
Brand recognition becomes stronger when it crosses socioeconomic barriers... just look at NIKE.
And if you think outlets are hurting Coaches' returns, look at their ROIC for the last 12 months. My god, it's 50%. Which is tops for any retailer in the US.
So don't be so arrogant as to think you know how Coach can best maximize returns, 'cause you are wrong.
The outlets are helping us during this downturn, and the effects will be especially profound when the economy gets stronger. IE... the women who bought a $150 bag at an outlet will buy a $400 new model when she can better afford it.
Do you not believe that there is such a thing as saturation? There was a time when everyone wore Reebok shoes. Then they peaked and people got tired of seeing them on everyone else. Even a great company cannot always prevent changes in fashion that disfavor their brand.
hmmmm.... Dave, I have been married over 20 years and have not one clue what my wife likes when it comes to a handbag (other than the name) but I know she likes COH and the outlet stores, too. You may want to inteview some of the women coming out of the store before going with your gut on this one.
Or just look at COH's sales numbers though they no longer are going to seperate the outlets from the direct sales numbers so I guess that is the point of your observation to begin with.
Its transitional inventory (discontinued prior year (who knows, maybe more than that in some cases) will be different than direct stores - that's the point. What one finds there is not in the direct store and would not look like what they got in the direct store.
I will say this - they move the stuff at a still hefty 60+ margin as I understand it and they move more of it than direct at 72GPM so they make a lot of green on those outlet bags.
That's the bottom line.
I know the outlets are profitable. I have posted on that in the past. My question is about the future. These outlets appear to be pumping out primarily signature and patchwork bags and at a discount. These are the most visible of Coach bags. I was at the mall today and while standing in line at Panda (yes Panda not Prada) , I noticed there were seven women around me and all seven had coach bags! I am a Coach shareholder. However I am starting to worry about the fact that Coach is everywhere. It is starting to look like the top of the fashion cycle for Coach. How much longer can this go on? Will everyone carry three Coach bags at once. I am in LA so I am hoping it isn't quite as bad everywhere else. I was in Chicago a few weeks ago but still saw tons of Coach bags.
So my question about the outlets is, do they hurt earnings in the long run by making Coach bags too common. Do they reduce the perceived luxury nature of Coach. My impression by actually visiting the outlet was yes. It made my Coach purchases seem less exciting. Why not just stick to the regular Coach stores and maybe the upscale Coach Legacy stores. Why try to capture this frugal shopper market? If we can't grow sales in the US, so be it. Grow them overseas. At the very least we need to maintain the integrity of the brand. We can't get too common that people snicker when Coach is referred to as a luxury brand. It is getting that way already.