The Secret of Coach Jumping from Second-tier Brand to First-tier Brand

Six years ago, the Coach bag was still an old brand that suffered a crisis, and its revenue and profit plummeted. Executive Chief Lew Frankfort had also joked that anyone who knew Coach would think that the brand was for the old lady. When the Coach brand was to be separated from the American parent company Sara Lee (underwear, hot dog, cheese cake, etc.), the whole company was not optimistic about this establishment in 1941, and only pushed several dark browns a year. Bags, no well-known sub-brand outside the United States.

However, six years later, Coach became the “legend” of luxury brands on Wall Street in the United States. Its stock price has risen 14 times from the $2 it listed in 2000 to today's $30. The brilliant performance has also allowed the 60-year-old Frankfurt to be ranked sixth in Forbes’s highest salary (including dividends) in the United States last year, with a total of 86.5 million US dollars a year.

The investing public all over the world are asking: How can this brand create this achievement in just a few years?

Targeting luxury brands that can be easily owned

Key: Significantly reduce costs

The key to the change is that the CEO of Frankfurt decided in 1999 to give this brand a new position and become an “affordable” young luxury brand. At the same time, he changed production logic, drastically reduced production costs, and made Coach able to Drop and reconfigure resources to strong branding.

For example, Ian Bickley, president of Coach Overseas Division, said: "The formula for Coach's success is "balance magic and logic!" (in other words, "low price"). , "Luxury" The two sides of the original conflict.

In general, luxury brands insist on handcrafting in order to maintain their noble brand image, and their price is also noble. A small banquet bag, LV (LVMH Group's main brand) about 5,000 yuan, equivalent to a college freshman two months salary. And Coach is half the price of LV. However, when it opened the financial statements, its gross profit margin was not pulled down because of the price; since 2001, Coach's gross profit margin was 64%, which was higher than LVMH's 62%, and it has been climbing all the way up this year with a gross margin of 77%.

The "logic" behind it is to reduce production costs by moving factories to Asia.

According to the British "Financial Times" report, since 2000, Coach has gradually moved more than 90% of its factories to cheap labor countries such as China, Indonesia and Turkey. “Over the past five years, the gross margin has been immediately drawn from 64% to 77%.” Moving outside Asia, Frankfurt has also boldly abandoned the traditional manual tradition that Coach prides itself on and began semi-mechanized production.

Changes in production logic have caused Coach's operating cost ratio to drop significantly from 42% in 1997 to 22% in 2006.

Accurate pricing and market demand

The key: doing consumer interviews globally every day

Compared to brands such as LV, they insisted that they would not set up a production base in China and were afraid of “Made in China” to reduce their brand appeal. Coach spends US$5 million each year and conducts a market survey of more than 20,000 consumers worldwide. Accurate market figures to manage brands. Therefore, Coach can plan the type of design needed for the next year and the amount of demand for each consumer market one year ago. Maybe even careful to speculate about different ages of women in each country, will buy several bags a year? What is the average unit price? Digital management allows it to accurately price and control costs.

Coach does not compromise on quality at the same time as cost control. In leather processing plants in New York, only the top 10% leather fabric with good quality is selected, and 38 supervisors do more than 20 strict control and inspections. .

At the other end of the spectrum, Coach is using a generous budget to create a high profile image. Over the past five years, the average annual gross profit has increased by 37% into “sales, advertising, and design.” In other words, for every additional 100 yuan of gross profit, we will use 37 yuan to sell the brand, especially the Asian market.

The camera turned to Japan. This is the world’s largest boutique market. Chanel was the top ten of the top ten boutiques in the Japanese boutique market six years ago. Since Coach established a Japanese subsidiary five years ago, it was ranked second in the top ten boutique brands in Japan last year, second only to LV. In the past five years, Japan’s revenue has grown from a single digit of the company’s overall revenue to 22% last year.

Seize the huge spending power of the Asian market

Key: Shop by LV

In addition, continue to expand and clenching LV. It is the main reason why Coach can be popular in Japan.

Coach, one-tenth of the LVMH revenue, dared to open the flagship store next to the LV at the same high rent; Coach was the fastest one in all boutique brands to open stores in Japan. It opened a total of 104 stores, including Seven flagship stores, these sales stores or flagship stores are all close to LV. According to the Coach 2003 financial report, each exhibiting store in Japan would cost US$ 6.56 million. Open the store next to the boutique leader LV, consumers will shape the impression of the same level with the LV, but the price is mostly as long as 1/3 of LV.

In order to tie in with the new listing every month, Coach will also be synchronizing the global exchange of new store furnishings such as sofa positions, planting plants, etc., and will be planned by the global headquarters. Every month, the decoration package will be sent out, and there will be a map showing the focus and furnishings of the month. Even music must be unified globally.

"Kneading the charm of quality and new production and marketing logic will allow Coach to cultivate a growing group of new consumers in the emerging Asian market," Bicker pointed out.

According to Goldman Sachs' 2004 global boutique market report, the Chinese market has already accounted for 12% of the world's finest industrial sales, and will reach 20% after two years, and it is expected to become the world's largest boutique single market in 2015. In Europe and the United States, which has a long tradition of quality products, the first-line brands and second-line brands are clearly divided. However, in emerging Asia, consumers are new, and all wars are started from scratch.

It was precisely because of Frankfurt's decision that even the LV president did not dare to make a decision to open an Asian production base and seize the potentially explosive market in Asia. This allowed Coach to start brand recognition from Japan, China, and Hong Kong and Taiwan and become a locomotive for coach growth. . Taking Japan’s revenue as an example, it grew by 722% from 2001 to 2006 to US$420 million, which was a 25-fold increase in Taiwan in the same period.

As long as the second-tier brand is able to transfer core competencies and find out new development logic, it still has the opportunity to stand up and even rank among the bosses. Coach's transformation shows everything.