Coach Inc - Case Study

Operating Strategies Case Study: Coach Inc.

Market

The world luxury goods market was worth over $105 billion in 2005. Italian, French, Swiss and US luxury goods companies dominated the market and shared 27%, 22%, 19% and 14% of the industry sales respectively. The industry was expected to grow 7% in 2006. The growth of the industry was attributed to increasing wealth in Eastern Europe and Asia and changing buying habits in the US. Traditionally, the industry customers were from the top 1% wage earners. There was a growing desire for luxury goods by the middle-income consumers.

Coach Strategy

Coach created the accessible luxury category in women’s handbags and leather accessories by matching key luxury competitors on quality and styling, while beating them on price by 50 percent or more. Coach also invested in making their retail stores attractive and providing high levels of customer services.

Coach had very large distribution channels, consisting 218 full-price company-owned stores, 86 factory stores, 900 department stores in the US, 118 locations in Japan and 108 international locations outside Japan. Their owned stores and factory stores strategy was very successful to meet different needs of latest-stylish customers and price-concerned customers.

By 2006, Coach had become the best-selling brand of woman’s luxury handbags and leather accessories in the US with a 25% market share. It was the 2nd best-selling brand of such products in Japan with an 8% market share.

Coach Performance

Coach sales in Japan increased from $144 million in 2002 to more than $420 million in 2006. At the same time, the company market share in the US had more than doubled to 25% from its 12% in 2002.

Coach market performance had translated into superior financial performance. Their 2006 profit of $797 million was almost a double from their 2004 profit of $408 million just within 2 years. Their profit margin, measured by profit over sales, kept growing from 31% to 34% and...