Coach knows the value of the showcase.
By opening its own fleet of stores around the country, the brand can highlight its vast array of merchandise.
The company operates 345 full-price stores
and 143 factory outlets throughout the U.S., and some 87 percent — $3.62 billion — of its annual sales of over $4 billion come from its own direct-to-consumer initiatives.
The plan is to continue to add to that number, focusing primarily on new markets in major metropolitan areas across the country.
“We believe the long-term opportunity [for full-price stores] in North America is in the 500-plus range,” said Michael Tucci, president of the North American retail division.
In the past several years, Coach had added stores aggressively, but the recession prompted the company to scale back a bit.
“We had several years — from 2004 to 2008 — where we were expanding tremendously, adding 30 to 40 stores a year,” he said. “But now we’ve dialed that back to 10 to 15 a year. And we see that growth rate being maintained in full-price and outlet for the next three to five years.”
He said the new retail reality is “all about pace. We recognize the current environment and we’re being more selective” on location choices. Coach is also willing to wait it out “as we let the consolidation at the malls play itself out. So, our growth will be more measured. We’ll open 100 stores in seven to nine years, instead of three. We’re managing growth over a longer time horizon.”
Tucci said the rollout plan, albeit slower, calls mainly for new stores in new markets.
“We’re already well-positioned in dominant metropolitan markets,” he said, but there are still plenty of cities without a Coach store. Salt Lake City, for example, is on track to get its first store in the new City Creek Center next spring, and is a market that can handle two units, he said.
At the same time, Tucci said the company is exploring its current real estate portfolio to see how it can expand the percentage of its men’s merchandise. While Coach is adding a handful of men’s-only stores, Tucci believes the opportunity is even greater to better enhance the men’s offering in existing stores.
“Men’s may give us an expansion opportunity by taking our existing real estate and building men’s into it,” he said.
When that’s not possible, Coach is looking into opening adjacent men’s and women’s stores.
This spring, Coach will open its first dual-gender concept in Pentagon City in the Washington, D.C., market. The store, which will measure 3,300 square feet, is larger than Coach’s standard store, which averages 2,400 square feet. There will be separate entrances for both product categories and a pass-through within the store. The overall message of both sides of the store will be complementary.
“Men’s has to work with women’s to create a cohesive brand experience,” Tucci said.
While Coach is “significantly skewed to vertical retailing,” Tucci said the wholesale component of the business is also vital to the company. Coach is sold in nearly 1,000 wholesale locations and is “a very big business for us, and growing. But that business tends to be only handbags.”
He said the “department store partners are an important anchor” for the company’s handbag business, but “our stores offer a wider, more significant assortment outside of handbags.” And they also showcase Coach’s high-quality customer service and merchandising techniques.
Tucci said Coach’s wholesale customers do not have an issue with the company’s own stores, and in fact, “our best malls tend to be the best malls for Macy’s and Nordstrom, too.” He said some shoppers are “department-store loyal,” while others prefer the specialty store experience, and one “complements” the other.
“It’s about giving the customer the opportunity to see everything Coach does,” he said.
And because Coach’s own stores are not promotional, its wholesale partners do not have to worry about being undercut on price. “The pricing is very consistent in all our channels,” Tucci said.
Handbags still represent 60 percent of Coach’s business, with small leather goods another 20 percent. The other 20 percent is “everything else,” he said. “It’s a very category-driven business.”
Going forward, Tucci said it’s “important to develop fragrance, jewelry, eyewear” and other product categories, but at the end of the day, “we make our bones in handbags and small leather goods,” and those categories will continue to be the backbone of the company’s business.
Tucci also pointed to the firm’s Web site, which was recently revamped, as another strong revenue producer for the company.
“Our fastest-growing channel is e-commerce,” he said. “There’s a tremendous opportunity to market to the customer in a distinctive and segmented way.
“And it’s very profitable.”