Coach takes risk with men's line
By Susannah Ware, Kshitij Shetty, Laura Haslee, Brian Bizjack and Juliana Figueiredo
As Coach Inc. launches its men’s-only shop in New York City, it is taking a big risk by deviating from its established image in affordable women’s luxury goods. However, its efforts seem to be paying off at least in the eyes of one reviewer responding to the new store, “I really like this shop because ... it's perfect for gift-giving purchases. … Who’s gonna argue with a nifty Coach card holder or bucket hat?”
With the launch of a new men’s line, Coach is acknowledging changing market trends within the fashion industry. In the last five years, men’s designer clothing has sold at twice the rate of women’s clothing. Also, sales of men’s designer products are expected to increase by about 35% in developing countries like India and China, which shows the potential for future international growth. There is also research strengthening Coach’s decision to venture into the men’s segment that suggests men plan to spend 3% more on consumer goods than they did in the previous year. In contrast, women intend to spend 1% less than they did previous year. This year’s Black Friday spending research confirmed an average increase in male spending of $100 compared to female spending.
Coach’s specialty men’s store in New York City intends to capitalize on the promising trends mentioned above by catering to men interested in fashionable accessories. Research shows an increase of 3.3% to 17.8% in global menswear market share over the past 4 years. This increase is attributed to changes in demographics and societal behavior that show men marrying and having children at older ages, which has increased their disposable income. Coach Men’s is a strategic move toward the stylish and affluent men (see Appendix, Figure 2). Coach is expecting a good response by placing its first store in fashion-conscious New York where the fashionable male resides.
With men becoming more fashionable, companies have had to adjust their views on male-driven fashions. Several brands have already capitalized on this by re-targeting their brands to younger men (between 18 and 35 years old). Those brands saw an average of 25% increase in sales. Metrosexual men are one segment of the male demographic that play an important role in fashion. These men can be of any age, are focused on trends, and are very fashion-oriented.
Men have become more comfortable with shopping for clothing, but differ from female customers in their shopping objectives. Research shows that 60% of men who take something into a fitting room will purchase it, whereas only 25% of women will. Men are also more concerned than women about buying items that are high-quality and will last beyond one season. The quality, durability and traditional style of Coach products will appeal to male consumers, because of their preference for longevity. Additionally, a store that caters exclusively to men presents an opportunity to provide assistance to individual male needs. When shopping for apparel, 28% of men, compared to only 19% of females said they would be willing to pay more for service. Coach has created an environment within which male consumers can access exactly what they desire in products and a shopping experience.
The “shop-the-store” online store is designed to feel like the Coach Men’s store in New York and provides detailed products views and suggestions for complementary products. Enhancing the online shopping experience for the male clientele aligns with increased usage of online recommendations by consumers. The importance of the online experience is highlighted through the difference in online behaviors between men and women. “Men spend more time online, conduct more searches on a daily basis, and do not mind seeing ads....Most are not put off by the companies and brands they find [online].” Coach wisely targeted the online men’s market further with promotions in which it, “gave away free cologne ($85 value) to the first 200 customers who checked into the [newly opened Men’s] store on Foursquare. 10% of the traffic to the store that weekend came with Foursquare check ins. Causation or correlation is tough to say, but it looks like the promotion helped drive awareness and buzz for Coach’s first Men’s store launch.”
Ralph Lauren, Coach’s main competitor, has been able to enhance the experience of male shoppers through their online design process, which allows men to custom design polo shirts to match their personal color combination and fit preferences. However, Coach’s online “shop-the-store” format goes beyond Ralph Lauren’s site by providing male consumers the benefit of an online ‘shopping experience’ with product suggestions and fashion tips. This format will appeal to men who want a convenient and easy shopping experience that also provides them with pairing examples and options to suit their styles.
There is room for improvement in this online feature. Some items cannot be selected or viewed in shop-the-store, which is frustrating for consumers. Coach has also not given consumers the freedom to make color or style customizations like Ralph Lauren does, which could be a potential negative. If Coach hopes to engage its male clientele in its shop-the-store online space, it must ensure full usability and potentially create new features for individual style customization.
Coach is taking a sizable risk with its new men’s line. Demand in the men’s segment is primarily driven by eyewear and watches, and only 10% of Coach’s product line falls within these segments. The failure to address the increased demand in this accessories segment could reduce profit margins unless Coach plans to increase its product line. The company has also placed a lot of capital behind developing an entire line of men’s accessories, opening the New York City store and planning the launch of other stores in Paramus, New Jersey, and Boston. Even though Coach is a popular brand for women’s luxury accessories, there is no guarantee that men will embrace Coach. Coach’s strong reputation with women could even hurt its ability to create a masculine brand extension. Coach items may not appeal to men simply because they see it as a brand for their girlfriends and wives. Coach’s challenge is to convince men that its new line is masculine with pieces that could not be confused with the women’s line.
Yet, Coach’s men’s line currently has several similarities to the women’s line. Men’s bags have small Coach “dog tags” dangling from the handles, some items have the signature C patterns, and the items often use the horse and buggy logo. Having these similarities is a gamble. From one perspective, Coach has a strong reputation for quality, style and luxury and wants to transfer those qualities to the men’s line. From another perspective, if the items look too similar to the women’s items, it could push men away.
Coach Men’s faces challenges, but targeting a new gender can be successful and profitable for a company. Quiksilver, an action sports apparel company, focused solely on men until 1990 when it decided to create a women’s line of surf-inspired clothing. At the time, the company feared that developing a women’s line could hurt the Quiksilver brand, so it created Roxy as the women’s brand. Quiksilver’s expansion into women’s clothing with Roxy has been a huge success as Roxy currently contributes about a third of Quiksilver’s nearly $2 billion in yearly sales. Quiksilver/Roxy has set a precedent that Coach can follow for a successful transition from selling to one gender to both.
While there are a number of potential challenges, Coach has many reasons to remain optimistic about Coach Men’s. CEO Lew Frankfort recently said, the men’s store will give Coach a, “laboratory to work on emerging collections and merchandizing techniques.” 
In the last five years, accessories and designer clothing have sold to men at twice the rate as to women. In fact, even during the recession, men are not reducing their shopping habits to the extent that women have. “Men tend to see shopping as less of an indulgence than women...In a survey of the wealthiest 10% of U.S. households conducted by the American Affluence Research Center in October, men said they planned to reduce spending much less than women on designer apparel and fine jewelry and watches.” Studies have shown that men are even different types of customers than women: men buy, women shop. Clearly Coach is capitalizing on this new market with great potential for expansion and opportunities to cater to the male shopper.
With strong brand loyalty from women, Coach is likely to see a positive response from its current consumers who want to purchase items for the men in their lives. Gifts include multiple accessory options such as bags, coats, wallets, gloves, key chains, scarves, belts, sunglasses and watches. Giftable products, affordable pricing and high quality are competitive advantages for Coach and these strengths will transfer to the men’s line.
Further optimism in the success of Coach Men’s stems from the fact that since January 1, Coach’s stock price (NYQ:COH) has increased from $36.53 to $57.42 at its most recent closing price. This is almost a 65% increase. (see Appendix, Figure 1). Through its position in the market and skill in targeting the male shopper, Coach will use current competitive advantages to successfully compete with established players with its new men’s line.
Source: Yahoo! Finance December 11, 2010.
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This report was a group project for the Global Strategy class of Thunderbird School of Global Management Professor Nathan Washburn, Ph.D.