Analysis of Accessories and Gifts Manufacturing Industry: Coach, Inc Company - Assignment Example

?Analysis of Accessories and Gifts Manufacturing Industry: Coach, Inc. Company Introduction Coach Inc. was founded in 1941 as a household based leather handbag manufacturing workshop in Manhattan, New York City. The reputation of Coach-made leather handbags steadily grew during the preceding years owing to the excellence in product design, quality, function and durability. In 1985, the company was purchased by Sara Lee Corporation. In October 2000, Coach Inc. shares were first publicly traded at the New York Stock Exchange, under the symbol COH at 16.00 dollars per share (FAQ). The current share market value of Coach ranges between 2 and 3 dollars each (Wikiinvest). It is now recognized as a leading luxury goods producer in America with the brand image affordable luxury. The company’s current product line consists of Coach Handbags, Accessories, Wearables, Footwear, Jewelry, Sunwear, Travel Bags, Watches and Fragrance (Coach). Market Size Currently Coach Inc. is recognized as a large, profitable and growing American manufacturer of accessories and gifts for men and women. It owns approximately a 30% market share of the accessories and gifts manufacturing industry in the world. Coach Inc. has a significant influence on the accessories and gifts manufacturing industry in America. Net income and gross profit of the company amounted 353 million and 1.09 billion dollars respectively as at the end quarter of 2012 (Wikiinvest). Moreover, Coach Inc. employed approximately 18,000 people on a full and part time basis as of June 30, 2012 (Coach). Market Growth Rate Coach sales marked a sharp drop during January 2013. The company’s sales dropped by 2% in markets located in North America. North America is considered the largest market location of Coach Inc. It is listed as one of the largest companies in the S&P 500 stock market index. In January 2013, Coach Inc. was the largest declining company in the S&P 500 list. The company also failed to achieve the sales targets set for the same month (Cheng). Nevertheless, the company management is optimistic about the future sales because the yearly performance in 2012 recorded positive growth. During 2012, the price of the company shares rose by 20.9%; net sales increased by 14.5% to $4.76 billion, direct-to-consumer sales rose by 16.1% to $4.23 billion, comparable sales in Coach’s North American stores increased by 6.6%. Moreover, Coach opened 9 new retail stores and 26 new factory stores and brought the total number of retail and factory stores to 354 and 169, respectively, in North America. Another 10 factory stores were also expanded. Coach China opened 30 stores in new locations, bringing the total number of locations to 96. Coach Japan opened 11 new locations, bringing the total number of locations to 180 towards the end of 2012. Thus at this stage, it is impossible to determine whether the Coach Inc. market is declining or growing (Cheng). Score of Competitive Rivalry The company’s products are sold in over 20 countries in the world including North America, Japan, Hong Kong, Macau, China, Taiwan, and Singapore. Coach products are directly sold to the customers via company-operated stores in these countries. Direct-to-consumer is the prominent marketing strategy of Coach Inc. The company is also engaged in indirect marketing, i.e., sales to wholesale customers, distributors, licensed firms and web based marketing. For Coach Inc., the world is the market. Thus, the opportunity for obtaining the benefits of economies of scale is a major advantage for Coach Inc. However, it also faces issues relating to trading across borders such as loss in fair value, earnings or cash flows arising from adverse changes in interest rates or foreign currency exchange rates. The company’s policy focuses on reinvesting the profits earned abroad in the same country. Furthermore, Coach Inc.’ Annual Report 2012 reveals that the company uses the following distinguished marketing strategies to remain its annual sales revenues: (1) Distinctive Brand: Coach offers distinctive, easily recognizable, accessible luxury products that are relevant, extremely well made and provide excellent value. (2) A Market Leadership Position with Growing Global Share: Coach is a global leader in premium handbag and accessories. Each year, as company market share increases, the leadership position strengthens. In North America, Coach is the leading brand. In Japan, Coach is the leading imported luxury handbag and accessories brand by units sold. (3) A Loyal and Involved Consumer: Coach’s consumers have a specific emotional connection with the brand. Part of the company’s everyday mission is to cultivate consumer relationships by strengthening this emotional connection. (4) A Multi-Channel International Distribution Model: This allows Coach to maintain a critical balance as results do not depend solely on the performance of a single channel or geographic area. The direct-to-consumer channel provides immediate controlled access to consumers through Coach-operated stores. The indirect channel provides access to consumers via wholesale department store and specialty store locations in over 20 countries. (5) Innovation and Consumer-Centric Focus: Coach listens to its consumer through rigorous consumer research and strong consumer orientation. Coach works to anticipate the consumer’s changing needs by keeping the product assortment fresh and relevant (3). Number of Rivals in the Industry The handbag and accessories industry is considered highly competitive across the globe. Manufacturing of premium handbag product category has steadily grown during the past years while encouraging the entry of new competitors and increasing the competition from existing competitors. The main competitors of Coach Inc. include European and American luxury brands and private label retailers. For example, Michael Kors, Tory Burch and Kate Spade are steadily increasing the market share in the industry (Cheng). Nevertheless, well established brand loyalty is the biggest advantage of Coach Inc. Moreover, its manufacturing technology and experience in the industry date back to 1941. Compared to the new entrants and other companies which are manufacturing similar products, Coach Inc. has such distinguished marketing advantages (Coach). Increasing competition in the industry also supports increasing product quality and innovations. According to Coach’s Annual Report 2012, customers’ brand loyalty, superior customer service, distinctive newness, innovation and quality of products distinguish them in the market (11). Number of Buyers in the Industry Market segments of Coach consist of local and international buyers. The company adopts sophisticated visual merchandising strategies as well as simple e-mail based communication to reach the potential customers in distant geographic locations. Continuous market research, customer surveys and likelihood assessments of product success in the market help Coach Inc. thrive in the market. Coach has developed an extensive customer database which compiles consumer feedback relating to specific products. In 2012, Coach Inc. customers’ contacts amounted to above 1.4 billion while the company has spent over 89.2 million dollars on national, regional and local advertising during the same year. The company’s strategy for reaching potential customers includes building brand awareness and web based marketing. E.g., coach.com and reedkrakoff.com websites provide a virtual showcase environment and strategic sales offering the latest styles and colors. Such promotional strategies increase the traffic to virtual showrooms and enable the collection of customer data. According to Coach’s Annual Report 2012, the company database consists of approximately 22 million active households in North America and 6.6 million active households in Japan. Moreover, the company has sent approximately 1.2 billion emails to strategically selected customers to stimulate purchases and build brand awareness during the same year. Thus, the success story of Coach Inc. can be related to the extensive use of Internet based promotional campaigns (8). Works Cited Cheng, Andria. Coach’s Market Share Slipping Out of Its Hands? Rivals Including Michael Kors May Be Snatching Away Customers. MarketWatch, January 23, 2013. Web. 9 March 2013. http://articles.marketwatch.com/2013-01-23/industries/. Coach. Annual Report. Coach Inc., n.d. Web. 9 March 2013. http://www.coach.com/online/handbags/genWCM-10551-10051-en-/Coach_US/CompanyInformation/. Frequently Asked Questions. Coach Inc., n.d. Web. 9 March 2013. Wikinvest. Coach (COH). Wikinvest, 8 March 2013. Web. 9 March 2013. http://www.wikinvest.com/stock/Coach/. Read More