Speculation about the Coach and Kate Spade deal is all over fashion media right now. In this year of major shakeups, it’s easy to see why the Coach brand is taking the time to strategically court brands that will help diversify their customer base and boost profits.
The first blog in our Coach mini-series focused on why a Kate Spade acquisition would be mutually beneficial, but we’ve got our eye on the bigger picture, and so we have to ask: what brands could Coach go after next?
The Coach Brand as a Conglomerate
Whether or not the Kate Spade deal goes through ultimately may not impact Coach’s path towards building a fashion conglomerate, like LVMH, to ensure that the brand keeps its foothold in the fashion market. Building their own fashion conglomerate could, without a doubt, absorb some of Coach’s competition and give these brands a stronger, unified presence in the fashion market.
Though a bit outdated, Trefis created a telling report in 2013 and revealed that Coach held about 28% of the market, with the biggest competition coming from brands like Michael Kors and Kate Spade. This information could shed some light on a few other motives Coach may have to absorb companies like Kate Spade.
J. Crew is known for promoting a classic and cool preppy style, which loyal customers have been loving since 1989 (though J. Crew has been around under different names since 1947).
Upheaval has been brewing since 2015, when journalists widely reported of slumped sales, problems reaching their target audience, and a large lapse in quality. It was then that J. Crew fired the head designer of the women’s line, Tom Mora, and had many employees escorted from the premises while the company shuffled its structure. It seemed like J. Crew was on the path to recovery until this November, when J. Crew ended its much-loved bridal line and signaled an uncertain future for the company.
But the biggest shock came when Jenna Lyons stepped down as the creative director of the company after 26 years at the helm. When Mora was fired in 2015, it was assumed from Lyons would step down as well, allowing J. Crew to take the brand into a more successful direction, but she maintained her position through J. Crew’s current decline.
With all of this going on, the long-term consequences for the J. Crew brand are unclear, making it a great brand for Coach to potentially acquire. With such a renowned history, J. Crew could earn back the trust (and purchases) of customers through the use of the Coach brand’s resources.
If creating a fashion conglomerate is in Coach’s plans, one company they may also have their eye on is Ralph Lauren. In 2017, the brand has released multiple press releases that address their need to return to “sustainable and profitable” business.
Similarly to J. Crew, Ralph Lauren is undergoing some massive changes in command. As of May 1st, Stefan Larsson will be stepping down from his position as Ralph Lauren’s CEO after he replaced Ralph Lauren himself in 2015. Perhaps even more telling of the brand’s troubles is the fact that they are closing down many physical stores, including their flagship store on 5th ave. in New York. The lull in department stores is also negatively impacting Ralph Lauren, as customers are simply not coming in enough to make the company profitable.
After achieving massive popularity since the brand’s beginnings in the 1960’s, it’s clear that Ralph Lauren is dealing with the financial problems that come with modern customers struggling to identify with the classic brand.
If Ralph Lauren were to be absorbed by the Coach brand, it’s likely that the restructuring would continue to pull Ralph Lauren out of the retail outlet and department store slump that it’s in and reinvigorate the brand’s image to bring more customers back into the fold.
It seemed like Michael Kors became a mega-hit overnight. Around since 1981, strategic adversing and even a mention in a pop-star’s song can be counted towards Michael Kors’ sudden rise in popularity.
Since then, the Michael Kors brand has gone through the same growing pains that many brands do once they hit a certain level of popularity and begin to lose control of their image. To take advantage of their popularity, outlet stores and department store deals were put into place so that more people could get their hands on the coveted bags, wallets, and watches.
The problem? The market became oversaturated with Michael Kors and, once again, these quality products ended up on the shelves of retail outlets with a huge discount. News outlets even wrote articles declaring the brand officially uncool, pointing to a huge shift in the media’s attitude toward the brand.
Since Coach has come out from the other side of a similar problem, it’s possible that Michael Kors would be a perfect addition to their conglomerate. After all, popular culture still believes that the Michael Kors name is synonymous for modern luxury.
The rumors surrounding a potential Coach and Burberry merger emerged late last year. And we even covered it in a blog post titled Why A Coach Burberry Merger Might Be Great, which detailed the benefits of such a business move. As time has gone on, it’s clear that rumors are sometimes just rumors.
However, we’d like to consider a future Coach-Burberry merger as a distinct possibility as financial shifts come to England following Brexit and as the Coach brand looks to expand and globalize their brand.
While all of this is just speculation, it’s clear that the Coach brand has a lot to gain from a Kate Spade acquisition and that it’s unlikely that they’ll stop there. With many brands expected to fail, regardless of their popularity, in 2017, there will be plenty of renowned brands for Coach to pick up and resurrect– profitably, as they did with Stuart Weitzman.