PRINT THIS STORY:

CHANGE TEXT SIZE:

PRETTY IN PINK

Coach finds colorful ways to reach out to younger shoppers

BY MAURA K. AMMENHEUSER

People inevitably mention the pink stuff.

Mary Beth Moroney, 21, of San Diego, knows a pale-pink suede handbag won’t stay in style long. She’s tempted to buy it anyway. “It’s so cute,” she gushed.

Moroney is a regular customer of Coach, the New York City-based purveyor of what used to be a collection of brown and black leather purses, luggage and accessories. Coach always meant top quality, but its designs were conservative, staid — not the goods 20-somethings long for.

What’s Coach touting now? Handbags still, but also shoes, scarves, sunglasses — and all in lots of blue, red, nearly neon green and, yes, pink.

Heather Sparks, 17, of Cypress, Calif., recently browsed through Coach for the first time after a friend received a Coach tote for Christmas. “I liked the pink ones a lot,” she said with a smile.

“Their merchandise is so playful,” said Cathy Kleeman, senior marketing manager at Westcor’s 1.8 million-square-foot Scottsdale (Ariz.) Fashion Square, where Coach has 1,500 square feet. Kleeman admired this spring’s bright green and hot pink in the Coach windows. “The colors are so luscious.” (Coach still carries basic black attachés, at the back of the store, past the lime shoulder bags, cream-and-pink bucket hats and cornflower-blue quilted jackets.)

“Just gorgeous,” said Leslie G. Love, CMD, senior marketing manager at General Growth Properties’ 1.5 million-square-foot Willowbrook Mall in Houston, whose anchors include Dillard’s, Foley’s, J.C. Penney and Sears. Coach has 1,850 square feet there and last Christmas sold red and black patent leather bags. This spring “they have suedes in every sherbet [hue] you can think of,” said Love. “That’s not the Coach I knew growing up.”

Coach’s Technicolor makeover, which involves trendier styles along with the brighter palette, began in the late 1990s. Sources credit mostly Reed Krakoff, formerly a designer at Ralph Lauren and Tommy Hilfiger who joined Coach in 1996, for the new look. Krakoff is now Coach’s executive creative director.

Coach’s store at the upscale Americana Manhasset mall on Long Island, N.Y.

Coach declined interview requests from SCT. But industry sources describe a company that has gone public (spun off from Sara Lee Corp. in 2000), revamped its image, broadened its merchandise and customer base and achieved huge sales gains in a remarkably short time.

“A number of years ago, Coach was a pretty quiet brand,” said Rick Caruso, president and CEO of Los Angeles-based Caruso Affiliated, which developed The Grove, a 600,000-square-foot outdoor center in Los Angeles. “The new team who took it over … really energized the brand. They elevated themselves to the level of a Gucci.”

The comparison with Gucci, which during the 1990s also shed an outdated image to recapture the hearts of wealthy customers, is frequent. And it’s no accident. Coach now dubs itself “affordable luxury” and shrewdly aims for a subniche of the upscale market, says Lori Wachs, vice president of portfolio management at Delaware Investments, Philadelphia, which invests in Coach. That subniche includes those who are devotees of designer goods but can’t or won’t buy the costliest ones. Coach is pricier than Nine West or Liz Claiborne, but more affordable than Gucci, where shoppers easily spend $500 or more on a purse, notes Yumi Koh, a senior research analyst at AIG SunAmerica, another Coach investor. Coach’s leather, suede and fabric bags, many adorned with its double-C logo, range from $158 to $458.

Coach’s competitors “would be anyone from Louis Vuitton to Gucci,” Kleeman said. “But [Coach’s] price point gives them a distinct advantage.”

The designs now attract shoppers who are still in their teens as well as those decades older.

“I see every age [at Coach],” said Love. “It’s something teen-agers look for. I’m 40, and women my age go in there.” Heather Sparks’ mom, Karen, gave her mother a blue Coach handbag last Christmas.

Once you could pick any color at Coach — so long as it was black or brown.

As the company’s demographics widen, its coffers fill. Sales reached $953 million in fiscal 2003 (which ended last June), according to Coach’s most recent annual report. That’s up 32 percent from $719 million the year before and nearly double 1999’s $501 million in sales. Overall, U.S. comp-store sales were up 15 percent in 2003.

Mall store sales average $750 per square foot, says Richard B. Hodos, president of Madison HGCD, a New York City-based retail brokerage that works with Coach. The chain’s toniest streetfront shops do $1,000 per square foot, says Faith Hope Consolo, vice chairman of retail brokerage firm Garrick-Aug Worldwide, also based in New York.

Observers say Coach’s closest competitors are Dooney & Bourke, which sells high-end women’s accessories through department stores, designers Kenneth Cole and Cole Haan, and anyone else with designer-label handbags, such as Chanel and Gucci. Moroney and her friend Christi Smith, another 21-year-old Coach fan, also like Nordstrom and Kate Spade merchandise.

Coach was founded in 1941 and became known for classic, quality leather goods. According to its annual report, today the company sells its wares in more than 200 retail shops and 76 outlets in the United States, in department store boutiques here and in 18 other countries, especially Japan, and by Web site and catalog. Coach expects to open 20 U.S. stores annually over several years, most of them in existing Coach markets. (The company says it believes that the country can support between 300 and 350 stores.)

The company will consider a variety of locations, including enclosed and outdoor centers, says Hodos, though his company was hired to pursue streetfront and lifestyle center sites.

Coach has “taken giant leaps in terms of real estate,” said Consolo. It has leased in such premium spaces as New York City’s Madison Avenue and 57th Street in recent years as part of the rebranding effort.

And Coach isn’t done experimenting, either. It is embracing not just new styles but also new product lines, many of them seasonal, a change from its dark-but-in-style-forever designs of the past. Last Christmas, for example, Coach carried evening bags and children’s clothing for the first time.

“They’ve done a good job with new products we didn’t know we needed,” said Kevin Kelley, a partner at Shook Kelley, a design and branding consulting firm in Los Angeles. He was referring to watches in a greater variety of styles, key chains, even dog leashes.

“They’re looking at new concepts,” said Hodos. “They have some women’s-only stores, some shoe stores.” Coach is also making a deliberate effort to broaden its price range.

But Kelley cautions that the company must not become “too pervasive,” as he calls it. “They’ve got to be careful so they don’t murder the brand.” Hodos agrees, pointing to the risks of “overdistribution” and counterfeiters.

Meanwhile, though, shoppers continue to revel in the colorful new Coach. Michael Baltierra, of Long Beach, Calif., whipped out his Coach wallet to show off its rich, blue leather interior, a novel twist on its brown cover.

And Karen Sparks, with a closet too full of black purses, said, “I need to go to other colors.” She, too, noted specifically the pink goodies in Coach’s window, then sighed. A pink bag won’t match many of her clothes.

“But I have to move out of black — seriously,” she said with a laugh. “Probably … beige.”

© 2008 ICSC. All rights reserved. | Terms and Conditions | Privacy Policy | Contact ICSC | ICSC Home |