In this exclusive extract from Ragtrader's recent print edition, Tapestry executive Ian Bickley reveals the rise of Coach in Australia. For more in-depth content like this, subscribe here.
Coach entered the market in 2003. That was actually with Duty Free Sydney down in The Rocks. The whole concept then was not about the Australian consumer but it was about Japanese tourists. At that time, there were no Chinese and the Japanese were the ones travelling in big numbers to Australia.
We had a strong presence with the brand in Japan, which is still today our second largest market. Then we entered the domestic market around 2005/06 and started working together with True Alliance in 2011. That’s really when we saw the dramatic growth of the business.
From having just a handful of stores to today having 21 locations in Australia, including full price, our concessions in David Jones and outlet. We have nine standalone and two locations in New Zealand.
When we do our estimates of the market, we now think we are around the 7-8% range and we believe we are one of the top five bag and accessory brands.
Consumers had, for a long time, other choices, mostly domestic brands. I think we have now given them an alternative for an international brand but with incredible quality and style but with prices that are very comparable to what they are getting for.
In 2011, we did some consumer research here before we started working with True Alliance. We did some consumer research to understand the market, we’d been here for several years and the brand hadn’t really gotten much traction.
So what does the landscape look like? What is the Australian consumer segment for premium bags and accessories? What do they think about handbags in general? What are the key purchase drivers for them? What do they think about Coach and our competitors?
What we found at that time was very low brand awareness for Coach. They didn’t really understand what the brand stood for and at that time they also thought it was a brand mainly meant for tourists who were shopping here. It wasn’t really a brand for locals.
We also recognised that the $600 to $700 AUD price point was a key psychological price point, where at or around or below which you would be more inclined to make an impulse purchase.
That’s a sort of price that we want a big part of our range to be in. We had stuff above it, we had stuff below it but that is what we sort of saw as a sweet spot that we needed to focus on.
That’s pretty much stayed at the level. Obviously if you look at our Rogue and especially our more embellished ones, they go up to $1,200 – $1,500.
Those go up high but we are giving that customer a choice and an option. But still the opening price points, the smaller bags, they are very important to us in terms of getting share of mind.
We always look at pricing the market by market first of all, secondly we are always focused very much on the local consumer, then we obviously look at our competitive set.
We try to stay 40-60% below the traditional luxury European brands, in terms of price.
Then we balance that with where we see the local and the international accessible luxury brands as well.
That $600-700 sweet spot for a big part of our range is something that we’ve always tried to stay around and it has always worked with our formula.
I definitely think over time, in the past, brands have had higher prices in Australia or higher differentials in Australia than the rest of the world. Over the past three to five years, with the prevalence of eCommerce, the transparency of global pricing, and I think just with the weaker Australian dollar, those premiums have come down, I would say versus overseas.
One of the things that has become so important is, you think about Coach and you think about its global scale, we are a $4 billion brand. Obviously we have, and I think on global scale, about 10-12% of the global market share.
The global market is around $42 billion. There is obviously always the risk of ubiquity. I think consumers today, more and more, especially the millennial consumers, they want something that is more tailored toward them.
We estimate the market in Australia, the premium bag and accessory market, to be around $800 million and you can do the maths on that.
We have, since 2011, increased the business seven fold here. A big part of that has come through building brand awareness with the local consumer.
Because when we started, most of our business was with tourists, it was a small business, today we have a significantly larger business and we have a much larger share of local consumers that are brought into the brand.
Really the strategy for us has been, first and foremost, to significantly invest in the bricks-and-mortar stores and really build some key flagship stores.
Over the last two years, we have made some very significant investments here.
We opened up a shop in Emporium in Melbourne, we opened up in St Collins Lane, our flagship store there. We also renovated our store in Chadstone and expanded it and we opened a new Sydney site most recently.
We already had a location in QVB but if you take some of the key shopping precincts in Sydney and in Melbourne, we’ve invested in real estate there and the presence.
We’ve also upgraded all of them, with the exception of Emporium in Melbourne which will be done soon, but with this new luxury store design.
That was obviously a very big part of how we built the brand awareness.
Secondly, we really stepped up our marketing activities here, especially in PR and in digital. We were also able to leverage some of the stuff we were doing globally, here in Australia.
For example, when we started doing the runway shows in New York, all of that content that was coming from the runway shows, we could really leverage it on different platforms here in Australia, from a creative content perspective.
Obviously, we invested in traditional vehicles as well. The Selena Gomez campaign is a good example. Selena Gomez was a global strategy that was all about: look at this amazing job we’ve done in transforming the Coach brand. To elevate it, to make it more fashionable, to upgrade the quality and craftsmanship of the product. We are still only reaching a small percentage of people to tell them that story.
Tying up with Selena, who as you probably know, has 130 million Instagram followers, and leveraging her to help to broadcast that message, that was really the key strategy behind that. And of course we leveraged the Selena tie up here in Australia, I think quite effectively.
She has a very strong following in Australia. With the Selena Grace bag globally, it had a 90% sell through. Within 10 weeks, all the bags, it comes in three colours, they all sold out.
In terms of the desired impact of the campaign, we got something like over six billion digital impressions globally. And during that period, our own Instagram following went up significantly, by around 300,000. And we are talking 300,000 on a base of 2,000,000. So 15%, that’s a pretty big deal.
Our overall business in Australia has also been growing. It has been growing at double digit and is continuing to grow at double digit. Our eCommerce business is also growing at double digit, at a slightly faster rate, I would say twice the rate of our brick-and-mortar business.
Today we have mainly two platforms, one is Coach.com and the other is our eComm with David Jones.
We all know Amazon is coming into the market, that is a big wake up call for a lot of the domestic players. But we see eCommerce as a very important part of the whole customer experience here and building definitely in the next chapter of Coach’s transformation, how we really strengthen our digital flagship.
We absolutely believe we are going to see serious growth on eCommerce.
Yet, as a share of the business, it’s very small today, probably less that 5%. To other regions outside of the main ones, it’s only representing about 10-15% that we ship to. But I think what the platform does is allow us the engagement, understanding and education of the consumer, who then a lot of times drive into store.
They may not always be purchasing and converting online but we do get the consumer who comes and says “I saw that online.”
That builds brand awareness.
About 50% of eCommerce transactions are done on mobile devices. That for us is interesting because we are also starting to reach out to a more digitally native, digitally engaged consumer, with the brand and giving them that possibility.
We are going to continue that as both a global strategy and here in Australia.
If we think about the next chapter of Coach’s transformation in Australia, there’s definitely some work to do in terms of renovating and updating our existing fleet. And really focusing on how we drive even greater consumer engagement and productivity in our existing stores through the customer experience.
In addition to that, we will definitely be looking into new distribution opportunities, selectively. The ones the that make sense for us.
The department stores are an important channel for the Australian consumer. Being present there is still a very important way of developing brand awareness. For us it is a multichannel strategy.
It will be more product innovation, upgrading the fleet, new distribution expansion and stepping up our efforts in marketing.
There’s probably some shopping precincts that we are not present in today too. For example we don’t have any, other than
David Jones, stores in Western Australia. I know the economy out there has been hit over the last several years. But there is an opportunity there that we should be looking at.
If we look at Sydney and Melbourne, not only the key commercial areas but if we also look at some of the suburbs, there are still potentially opportunities to reinforce the brand awareness.
We will definitely build our the eCommerce aspect, as we build our digital flagship, replicating that for the local consumer here will be really important.