Coach is set to thrive in both the luxury and discount markets. The handbag and accessories company believes that its discount business will not affect its status as a purveyor of “accessible luxury”.
In the past five quarters same-store sales from outlets outperformed full-price store sales. The company’s top discount outlet in 2005 was at Woodbury Common, outside New York, and generated about $20 million in sales. This year it should generate $25 million, the same amount as Coach’s flagship store on New York’s Madison Avenue.
The company has positioned itself as “accessible luxury”, with prices ranging from $138 to $798.
Nevertheless, many shoppers aim for bargains by shopping at outlets. “Women in the US have been trained to expect to be able to find a bargain if they either go through the hunt or wait for a point late in the season or are willing to buy something after the season,” chief executive Lew Frankfort told WWD.
In response to industry concern over the dilution of the brand name as a result of discount sales, Coach says that research has shown that discount shoppers and those who purchase full-price items represent two different demographic groups. The full-price customer is generally 35 and a single or newly married working woman. The outlet shopper is usually in her early-to-mid forties and a professional mother with two children.
“There is no question it is a very different mindset,” Lori Wachs, portfolio manager and retail analyst at Delaware Investments told WWD. “The one wants fashion first and the other is a discount shopper.”
Discount shoppers spend 80 percent of their Coach purchases in outlets and less than 20 percent in regular stores, says Coach. The same goes for the full-price shoppers. This means that there is less than 20 percent cross-over and the full-price items do not lose ground.
Meanwhile, the company also pointed out that full-price and outlet stores never display the same range of products.
Frankfort is bullish about Coach’s position. “We are regulating the growth of factory so that our full-price business continues to lead,” he said. “We are allowing factory for now to grow at a somewhat faster rate than full price and we can expect that to level off in 2007 or so.”