Demand for American design and craftsmanship has been growing around the world, so it should come as no surprise that Coach, a brand with a 75-year history and authentic style, has seen its sales grow exponentially over the past two decades.
“With international, we’ve been very strategic with the sequence of markets we’ve entered,” said Ian Bickley, president of the international group at Coach.
When Bickley joined the company in 1993, it was owned by Sara Lee, and international accounted for $20 million of the brand’s total $290 million volume at the time.
International at the POS level contributed about $2 billion to the company’s total of nearly $5 billion last year.
“The first place we needed to go was Japan,” Bickley said. “It was emerging and they were spending overseas. For the first 10 years, Japan was our main focus.”
Coach’s work in Japan paid off: The brand has the second-highest recognition of any accessories label there.
As Coach has gained experience in Japan, the company has made products more relevant to consumers by tweaking assortments. Japanese women, for example, prefer smaller, cuter bags and trends.
Coach in 2008 bought back its business in China. “We were one of the top three brands, but still had very little brand awareness — only 22 percent as of last year,” Bickley said.
Coach operates stores in 65 of about 200 Chinese cities with populations of one million or more. “There’s an emerging middle class,” Bickley said. “The rate of the emerging middle class is growing. There’s a lot of runway left in China.”
The anticorruption crackdown by the Chinese government to reduce graft has played into Coach’s positioning as an affordable luxury brand.
“Coach is not conspicuous consumption,” Bickley said. “I actually think that the anticorruption campaign changed the value perception of the Chinese. It’s an authentic brand with very strong leather and craft heritage and a much stronger emphasis on fashion. We created a new value proposition. We look at China and the Chinese customer globally. We have an opportunity for more stores, 20 to 25 new stores in 2017.”
The reason for the rate of openings over the next few years is that Chinese customers will be traveling in greater numbers. “It’s important to note that 120 million Chinese are traveling overseas,” Bickley said. “By 2025, that number will be 200 million.”
China accounts for about 20 percent of Coach’s global business. Bickley sees short-term volatility in Hong Kong and Macau.
“We believe in the opportunity in China,” he said. “We’re looking to open flagships in capitals.”
Coach has opportunities to grow internationally beyond new stores. The men’s category, for instance, is a $700 million business, which could be $1 billion, Bickley said. Asian markets are also keen for more footwear and Coach plans to bring it in-house, elevate the product, introduce men’s footwear as well as outerwear.
“There’s a whole footwear opportunity in the wholesale channel,” Bickley said.
If Japan is the most mature market, Europe is a blank slate. Coach entered Europe just five years ago, in 2011. The company was more eager to build its business in the Far East than compete with Europe’s many strong homegrown brands.
With Coach’s positioning as a new modern luxury with accessible price points gave the brand a point of difference. “We started the journey to get to $500 million [in Europe],” Bickley said. “We finished last year with $135 million, with 39 directly operated stores and 400 points of sale. A half a billion is very achievable.”
Europe commands 15 to 20 percent of the global accessories market, Bickley said. With a London store on New Bond Street, a Coach House is opening on Regent Street this month. It will be the second Coach House in the world after Fifth Avenue in Manhattan, and will offer the most complete expression of the brand.
“We’re targeting key fashion capitals such as Paris; we’ll open our first flagship in Milan on Via Montenapoleone in the spring,” Bickley said. “The U.K., we see as a larger opportunity. We’re starting to open locations outside London such as Edinburgh, Leeds, Birmingham and Manchester.”
Then there are nascent retail markets in Southeast Asia such as Thailand, Indonesia, Vietnam and Cambodia. “We believe in the middle class consumer,” he said.
The Middle East, including Saudi Arabia, Kuwait, the United Arab Emirates and Bahrain, also holds promise.
India is more of a long-term play.
“Four years ago, we realized we didn’t see a lot of development on the horizon,” Bickley said. “A year and a half ago, we went back and saw the malls are full. This is the right time to dip a toe in the water. We opened a store in Mumbai in the summer and our second store in New Delhi. We were pleasantly surprised that the consumer has a real appetite. India is something to watch. We’re also looking at Russia and South Africa.”
What geographies to enter is all a mater of focus. The Internet helps promote the business and provides data for where consumers live. “The Internet is a promotional business,” Bickley said. “It’s not the most important channel to develop. We have e-commerce in Japan, China and the U.K. We’ll roll out e-commerce to France, Germany, Italy and Spain.”
What the Internet does do well is provide digital content about Coach as a fashion brand.
“It’s the DNA,” Bickley said. “It’s Stuart Vevers’ creative direction, which is right for these times.”