New Delhi: The year 1941 was an important one in US history. Japan attacked the naval base in Pearl Harbour on 7 December, a date President Franklin Roosevelt said “will live in infamy". The attack dragged the US into World War II, a consequence it was meant to pre-empt.
In the same year, in a Manhattan loft, six craftsmen were making leather goods in a small workshop that later would become the “American house of leather". Coach Inc. started with small products like wallets and billfolds. It made the first handbag in the 1960s and today, the brand is known for its bags, other leather goods, footwear, outerwear, sunglasses and more.
“Our heritage, DNA is in leather and craftsmanship," says Ian Bickley, president (international group) at Coach. “To this day, it remains a very important part of who we are even though we have evolved from being the original American house of leather into a global luxury lifestyle and accessories brand."
Bickley, 53, has been with Coach for the last 24 years and has risen through the ranks. “When I joined the company, it was clocking annual net sales of about $300 million," he says laughing. In the quarter ended 31 December, it posted net sales of $1.32 billion. Bickley, who was in New Delhi recently for the opening of Coach’s second flagship store, spoke in an interview about the luxury retail space and the company’s future plans for India. Edited excerpts:
What made you come to India when many other brands are being cautious about entering the market?
Everything we do has a long-term purpose. I have actually been thinking about coming to India for almost 10 years. This is a funny story. I was initially supposed to come here about eight-and-a-half years ago. I was booked into the Taj Mahal Palace hotel in Mumbai for a global luxury conference and then the terrorist attack happened. So that trip got cancelled. One week before the event, it was called off and I missed the chance to come here. Two years after that I made my first business trip here. I wanted to understand the consumer, the markets, the retail infrastructure and the competition. So I spent about a week in India and visited Delhi, Mumbai and Bangalore, and my conclusion was that the market was not yet ready for Coach. Or let us say, we weren’t ready for the market.
There were several reasons: a number of luxury brands had entered India around 2008 and several malls were built but the results were not up to people’s expectation. I also observed that the malls didn’t have much traffic. The feedback regarding brands’ performance in accordance with the rent they paid was not encouraging. So it didn’t make economic sense to have a store in a mall then. And I did not see a pipeline of retail infrastructure to support future growth. So I made a decision to put our India plans on hold and instead focus on China and Japan. China was huge strategically and we had recently bought some businesses there, and in Japan we already had significant business.
Fast forward to two years ago. Our local partners in India at Genesis Colors persuaded me finally to visit India again and I took another trip. I did the same trip as the last time and I felt that things had changed. Malls were busier, brands were clocking better numbers, consumers were buying luxury items and there was a pipeline of new malls in various cities across the country. So it looked like there was potential. So we made the decision to come. What I can tell you is that we did not come to India thinking this could be the next China tomorrow but we came here with a long-term strategy.
How are you doing in India so far? How has the response been?
Demonetization aside, we have done pretty well and exceeded expectations. I can’t divulge numbers but I can say that first-year sales figures from the Mumbai store are more than encouraging. Also, we have been very encouraged by the Indian consumer’s acceptance of our products.
There are two schools of buyers here. There are people who knew about the brand but had a different perception of it. When they see our products, they get surprised by how different we actually are and those are the customers who are hooked immediately. The other group of consumers are the new millenials.
The interesting thing about sales is that there seems to be enough demand for our new, more fashionable products as well as our more classic and entry-level products. So that tells me that we could be relevant to both segments, the luxury consumer who already has several other bags in her closet as well as consumers for whom Coach is the entry-level product and the first luxury purchase. The second I think is the more lucrative market for us.
What are your plans for the country?
Going ahead, we definitely plan to open more stores across the country, both in the cities we are present today and in other cities. I can’t give you names and numbers, but I would be disappointed if we are not able to open 10 stores in the next five years.
What is your target clientele and price range?
I think Coach has something that will be appealing for everyone, both in terms of age and socio-economic strata. The thing that surprised us all was the demand for our men’s range. As it is, men’s accessories account for only up to 20% of Coach’s business. We didn’t think at the time of the Mumbai launch that men’s business will be so big in India. In fact, at one point and given the size of our store, we were considering doing away with the men’s section altogether but I am glad we didn’t. In terms of actual sales and area in the store ratio, it over-performed. As a result, our Delhi store has a larger area dedicated to the men’s section.
In the US, the entry price point for our handbags is $300-400 but I would say the sweet spot is between $300 and $500. Then we have a $500-1,000 range. It is the above $400-500 bags that are our fastest selling range today because it fills the void between the entry-level luxury and the European luxury brands whose price starts at $2,000.
What is your USP? What differentiates Coach from other luxury brands?
Our DNA is in leather and craftsmanship. But we are slowly transforming into a global luxury lifestyle and accessories brand. So what has changed? We have identified two important pillars that differentiate us from the other competitors in the market. The first is building much greater fashion credibility, which we didn’t have when we started. About 80% of our products are for women. So fashion credibility is one of the key attributes that impact their purchasing decision. For that, we brought in Stuart Vevers as our creative director four-and-a-half years back. With Stuart, we started the runway shows, which have been one of the biggest leverages for us in terms of building fashion credibility.
After the runway shows, we get about 1.5 billion digital impressions which are not generated through our own media network. Stuart has also elevated the fashionability of our core products apart from introducing things like outerwear and footwear. So our handbags are more fashionable now than before.
The other pillar is to continue telling the story of our heritage and unique leather craft. Many of our competitors don’t have that advantage.
All of our flagship stores across the world have a dedicated craftsmanship bar. So at those stores, we offer leather cleaning services, bag repairs, special customization and monogramming services, etc. It is a unique experience that gives the consumer the look and feel of what we do.
Roughly speaking, about 80-85% of our business is women’s. About 60% of our business is handbags, about 20% is leather accessories. And we are the only American luxury brand in our category.
You keep talking about modern luxury. What exactly is modern luxury?
The consumer today has more choices than ever before. The market is crowded and the competition is not only in our category, it has gone beyond. So we are not only competing with European luxury houses and other American luxury brands but we are also competing outside the category to create different and possibly the best overall experience for the customer, which is now becoming the deciding factor in making purchasing decisions.
People today have more money than ever but at the same time, they are more discerning about how they spend their money. At every level, they are more value-conscious. They want to make smart decisions. So we try to provide the best value proposition in the best price range. That for me is modern luxury as opposed to the traditional definition of luxury, which is all about a badge or a status symbol.