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Transformation has been on Victor Luis’ mind for some time.
Coach Inc.’s current president and chief commercial officer, Luis is the New York-based accessories firm’s incoming chief executive officer who deigns to fill the shoes of Lew Frankfort, who many regard as the brand’s second founder.
Luis called Frankfort, who will remain executive chairman, a “mentor” and “friend,” as he reflected on Coach’s past, as well as its next evolutionary phase to becoming a lifestyle brand.
“I’ve spend the vast majority of my professional career — 15 years — working in the Asia region across a different number of luxury brands,” said Luis, noting that he joined Coach in 2006 to run its Japan business. “Coach has a unique American story, and personally one I’ve identified with as a first-generation American.”
Having emigrated from Portugal with his family, Luis rehashed his international experience, which has positioned him to lead Coach to its next phase of expansion abroad in China, other parts of Asia and beyond, including in Europe, where the brand sees significant growth potential.
But before delving deeper into the strategy behind the brand’s big push to reclaim some of the market share it lost to rivals such as Michael Kors, Luis spoke of Frankfort.
“He authored our second chapter, taking Coach from a house of American leather to a leading international luxury accessories brand. Indeed, the number-one accessible luxury brand in the world,” Luis said of his predecessor. “He took the brand to $6 million to today over $5 billion. From a U.S. department store resource to 1,000 directly operated locations on four continents….Lew is a hard act to follow.”
Luis spoke of the “prologue” that he’s been working on writing with Frankfort before the ceo moves to his post as executive chairman in January. That prologue includes the hiring of Stuart Vevers as executive creative director. Vevers, who served as creative director of LVMH Moët Hennessy Louis Vuitton’s Loewe brand, was hired to succeed Reed Krakoff, another Coach legend in his own right.
Drawing a parallel between Krakoff, who was 32 when Frankfort hired him, and Vevers, who is 39, Luis said the new designer is his “partner in the next chapter of Coach.”
Vevers, who started in September, will be responsible for product design, as well as the look of Coach’s ever-evolving stores. Although his first collection won’t make its debut until fall 2014, Vevers already has his hand in many consumer-facing elements, such as in-store displays, packaging, merchandising and marketing.
Although Luis credited Vevers as “one of the world’s leading accessories designers,” he admitted that breaking out from the “highly competitive” accessories market will be a long road.
“Our transformation will not be easy. Our transformation is not as simple as flipping a switch,” he said. “I understand that there is skepticism about our transformation, and I also understand that there are concerns about intensifying competition. I know it will be a journey. As somebody who enjoys the occasional long-distance run, I get that it’s a marathon and not a sprint.”
But Coach is resilient and has been through growing pains before.
“It was not so long ago that we were in a similar situation,” Luis said, pointing to the late Nineties, when the brand was being squeezed from competition from “above and below.”
In order to combat its then-stagnant growth, Coach modernized its product offering, reinvigorated its retail environment strategies and accelerated its speed to market, bringing in fresh product on a monthly basis versus quarterly. Coach also revamped its marketing and communications strategy, as well as its international business model and production.
New categories to complement its bags and small leather goods remained central to its evolution then, Luis said.
“We evolved along with our consumer, but we remained true to our core equities of quality and craftsmanship, never losing sight of the fact that we were selling products individually, one at a time, to consumers,” the incoming ceo said. “But of course then we did so in the face of skepticism, and not more than a few naysayers.”
When the brand opened its first retail store on Madison Avenue, critics called it “the beginning of the end,” Luis said, explaining that the industry thought Coach would cannibalize its department store business, among other things.
Many were also skeptical that Coach could become an international brand, especially a premium one. They also doubted its factory-store strategy, believing it would be harmful to the company’s brand equity. Coach has been criticized in recent weeks — including by retail legend Leslie Wexner — for opening too many factory outlets.
But Luis responded to the criticism by pointing out that in more than 30 countries, the bag maker has a stronger retail business than its department store business, and its multichannel strategy has been “emulated” by many of its competitors.
“We grew with incredible efficiency,” he noted. “For a decade, we were virtually unchallenged in the accessible luxury segment. We led a shift in spending from apparel to bags and accessories, and we drove dynamic category growth.”
From 2000 to 2012, Coach’s sales grew more than 20 percent and its earnings more than 30 percent, he said, adding that its market share expanded to about 30 percent in North America and to about 15 percent globally.
“Simply put, we thought we were unbeatable,” the executive said. “Over the last few years, we’ve seen other brands — attracted by the growth and profitability of the category — provide some healthy competition for Coach, notably in the U.S., and using our very own playbook — and they’ve done well.”
Admitting that a “complacent” Coach was “slow to respond to the evolving competition,” Luis said he and the brand are now ready to reclaim what is theirs.
With a burgeoning and “vibrant” accessories category as the backdrop, Coach is taking a page from its old playbook and ramping up the fashion quotient in its bags and small leather goods. Additionally, it is building out its men’s and women’s footwear, ready-to-wear, outerwear and jewelry and watch offering, and it is cycling in quarterly capsule collections comprised of higher-priced head-to-toe looks.
The brand is also focusing on the look and feel of its stores via in-store renovations, upgraded signage and merchandising strategies, as well as flashier yet more refined marketing and advertising campaigns.
“There will be more naysayers and challenges we have not even yet imagined, but our team is ready not only to transform but to make the conceptual leap in creating a vibrant Coach brand and growing Coach Inc.,” concluded Luis. “We have the strategy, we have the team and we have a proven culture of execution through successful reinvention at multiple junctures in our past. Few if any brands in our space can make that claim.”