About Coach, Inc
Coach, Inc in New York, NY is the most recognized luxury American brand manufacturing women’s handbags and purses. It was established as a family-run workshop in 1941 and incorporated in Maryland (Manta). The SIC Code is 3171, and the NAICS Code is 316992. Besides women's handbags and purses, it also produces women's accessories, travel bags, outwear, personal leather goods, apparels, belts, scarves, and men’s business cases, wallets, and purses. In 2010, Coach, Inc. employed approximately 13,000 people and had an estimated annual revenue of $3,230,468,000 (Coach, Inc. 10K, 2010). Although Coach does have men’s handbags and so many products, it mostly concentrates on women’s handbags and purses. Another marketing strategy is that Coach focus on women, not teenager girls. The luxury brand tends to market to high income, professional females. The older females also show higher brand loyalty. International market
Coach has 463 stores in the United States and Canada, 161 stores in Japan, and 41 stores in China. Coach also has stores in over 20 countries including South Korea, Taiwan, Singapore, Malaysia, Indonesia, India, Thailand, Vietnam, Mexico, Bahamas, Saudi Arabia, UAE, Bahrain, Greece, France, Russia, New Zealand and Australia. As of 2010, Coach’s total net sales were $3,607,636,000. Net sales in Japan were $720,860,000, which was approximately 20% of the total net sales. In the other international market, the net sales were $352,404,000, about 10% of the total net sales. In short, Coach depends on around 30% international customers (Coach, Inc. 10K, 2010). Major determinants of demand
1.Price: Coach’s Price Elasticity is very high. Being a luxury brand, the price is very elastic. Compared to other luxury brands such as Gucci, Louis Vuitton, Fendi, Dooney & Bourke, and Prada, Coach in fact is much more affordable. All these branded bags are price elastic. However, the substitution goods of Coach are mostly extreme elastic. Coach therefore becomes the first choice when people want to buy a branded bag. 2.Income: A Coach bag usually cost $200-300. It is almost impossible for the people with low income to buy a Coach bag. We can see that U.S., Japan and Canada have more Coach stores because the average income in these countries are higher. The GNP per capita in U.S., Japan, and Canada are $43743, $38,984, and $32,546, respectively (Students of the world). There is not any Coach store in Ethiopia, Somalia, Liberia, and Rep. of Congo. Their GNP per capita are $156, $136, $135, and $120, respectively. 3.Tastes and preferences: While Coach has a large market share in U.S., Japan and Canada, it actually does not sell well in Europe. Established in U.S., Coach represents a lively image of American culture. Canada is the closest neighborhood, so it shares the similar taste and preference. Japan has a relationship with the U.S. after World War II. It therefore follows many American experiences. Europeans do not like to play baseball, but Japanese do. Same thing here with Coach. Price elasticity
Coach, Inc. sells two primary kinds of products: handbags and accessories. In these two categories, handbags are the major source of their income. According to figure 1, handbags made up 62% and 63% of Coach’s net sales respectively in 2009 and 2010 (Coach, Inc. 10K, 2010). Consequently, we selected handbags to examine whether a change in price affects consumers’ demand.
Figure 1 Coach’s Annual Net Sales 2009, 2010
Based on Coach’s 2010 10-K report, the company defined two market segments: direct-to-consumers and the indirect segment. The direct-to-consumers division includes retail and factory stores in North American, Japan, China, etc. Consumers are able to search for high quality products in the direct-to-consumer division more than the indirect segment. So, most of net sales came from the direct-to-consumer division, at around 87% of the 2010 net sales (Coach 10K, Inc., 2010). In...