A Tale of Two Luxury Brands Headed In Different Directions

Michael Kors announced this week that it plans to shutter up to 125 stores in the next 24 months on the news that sales fell 14.1% in the second quarter of 2017.  Not a lot has gone right for Kors recently as a luxury band. Problems for the company began to surface last August when Kors announced it planned to reduce inventory at several major department stores because of excessive discounting that tarnished its brand. Kors also told Macy's that they could not include Kors products in coupon promotions or annual sales.  Kors realized, perhaps too late, that allowing its brand to be constantly on sale confuses customers and diminishes the brand's value as a luxury purchase.

Conversely, Coach, which acquired Kate Spade a few weeks ago for $2.4 billion, has seen its fortunes turnaround by becoming proactive in protecting its brand image. That turnaround started by exiting 250 U.S. department stores last fall and establishing minimum sell prices for department stores in which the product remained available.  Coach also realized that selling its brand at discount factory outlets resulted in a short-term boom in sales but long-term damage to its reputation as a manufacturer of high quality elegant leather goods.

Coach CEO Victor Luis understands that less is going to be more for Coach as he attempts to create a luxury fashion empire in the U.S.  Luis started his tenure in 2014 by closing 20% of Coach's stand-alone stores in order to better focus on high-performing locations in key markets.  He cut the number of online sales events in its factory store business and expanded the merchandise mix beyond shoes and handbags to include outerwear and apparel. 

Luis is spearheading efforts to improve customer experiences by remodeling many of the Coach locations, incorporating a sleek look that is more luxury focused and creating craftsmanship bars to showcase the workmanship that goes into Coach products.  The efforts to reduce discounting and improve product quality have proven effective.  Fortune magazine reports that handbags that cost more than $400 generate half of all handbag sales, an increase of 30% from a year ago.  Luis told Fortune, "We are, at the highest levels, moving from the lowest common denominator in pricing to a more innovative, more emotional positioning that provides consumers something they can't find elsewhere."

The lesson for decorative plumbing and hardware is that it is virtually impossible to be viewed as a luxury brand if products are allowed to be discounted unchecked.  Sales professionals will eventually gravitate away from a brand that has to be severely discounted in order to be competitive.  Luxury is about telling compelling stories and delivering meaningful experiences.  After all, no one who comes to a showroom wants to tell their dinner party guests that they purchased a cheap item cheaply.