Coach Global Chairman: Luxury should be at your fingertips

Standing on the 492-meter-high Shanghai World Financial Center floor, American Lew Frankfort's favorite thing to do is to stand in front of floor-to-ceiling windows overlooking the Huangpu River. The architectural rhythm of the buildings on both sides of the strait makes him often think he is in New York. For this illusion, Frankoff thinks this is Coach's gospel in China.

“My main visit to Shanghai this time was to host the opening of the Coach Shanghai flagship store, and then I would return to the United States for a short stay. Three weeks later, I will come to Shanghai to see the Expo.” Frank's global chairman and chief executive is accelerating his visit to China: "Shanghai's sense of fashion is getting closer to New York."

Frankford understands that after more than a decade of European luxury goods represented by LV, PRADA, GUCCI, etc., the understanding of luxury goods by Chinese consumers has obviously been severely "European", that is, simply thinking that Luxury goods are expensive and expensive. On the contrary, Frankford is trying to pull down luxury goods from the altar of worship.

Coach sets a benchmark for the business community in the ups and downs of the US economy. In the financial report for the month ended March 27, the net sales of the company reached US$2.657 billion in the first nine months, an increase of 8% over the first nine months of fiscal 2009, and its net income increased by 11% over the same period to reach 539 million yuan. In addition, the Board of Directors has raised the standard to an average of US$0.60 per share by doubling the Cash Dividend Scheme, and has promised to issue it to shareholders in July.

Although the company's performance is excellent, Frankoff is clear that Coach's global performance structure is uneven, it will be tomorrow's worry. "Coach has a contribution of up to 70% from the North American market, while Asia and Europe are the company's future direction of adjustment." Frankoff decided that the focus of work in 2010 will be to expand Coach's weight in these two markets.

We will return!

In 2008, the financial crisis broke out in the United States, which frankly caused Frank Fowler to suffer a cold sweat.

On December 27, 2008, Coach's performance plummeted, net income dropped by 14% to just $217 million. Frankford had to publicly say: "This is the most difficult time for my 30-year tenure in the company." Fortunately, Frankoff has not been abandoned by investors. "As far as Coach is concerned, if Frankoff can't lead the company out of the trough, no one can succeed." The affirmation from investors is an effective stimulus to Frankfort's confidence.

Frankoff has experienced countless corporate crises in the past 30 years. The most typical one is twice: one is to "sell" Coach; the other is to "lose" Europe. "Every crisis is always a blessing," Frankoff said.

"Sell" Coach happened more than 30 years ago. At the time Frankoff switched from a government employee to a Coach company founded by Lillian Cahn and Miles Cahn, Coach was nicknamed "Mum's handbag" in the fashion industry. In order to change his position in the fashion industry, Frankfort did two things: first, changing the design of handbags to colorful, introducing fashionable elements to be younger, and opening the first store on Madison Avenue; Persuaded the founder to sell the brand to department store giant Sara Lee, and Sara Lee chose to obtain development funds on the one hand, and on the other hand to maintain the brand's independence and freedom under the authority of Sara Lee not interfering with its brand operations. These two strokes later became the basis for the founding of the Coach salted fish, and Coach began the journey of luxury goods.

Frank Flake understands that if Coach wants to gain a foothold in the global luxury camp, he must knock on the European Wall. It is not easy for American brands to want to survive in Europe where they have luxury speech rights. Coach declared his failure in Europe in just 10 years. However, Frank Fu said: "We will return!"

Returning to the United States, Frank F. thinks, how to find a way that suits himself?

Frankoff found that Americans have a greater need for innovative products, which has become Coach's competition direction. "Demand is not only applicable to ordinary civilian goods, but also in the American consumer mindset, luxury goods should be the same." Frank F. once again reformed the definition of the Coach brand and proposed the "3F concept", namely Fun (fun), Feminine (Feminization), Fashionable, and thus the original focus on color design has risen to the commercial nature of consumer demand. In 2000, Coach ushered in another milestone. This year, Coach was successfully listed on the market out of Sara Lee and formally proposed the concept of “luxury that is easily available”.

In the following nine years, Coach successfully surpassed LV in the local market. Its annual sales increased to over US$3 billion and became the world's largest brand of handbags and leather goods.

However, Frankoff understands that investors who give him confidence today may leave tomorrow, and they care about your profitability.

Anti-luxury business paradox

In 2009 alone, Frankoff returned investors with beautiful results. Explaining why he could resist the decline in consumer confidence and the downturn in the market during the financial crisis, Frankoff said: "The growth we have achieved has highlighted the ability of Coach to flexibly conduct business."

What is the specific content of the so-called "flexible business management capability" and how is it applied to actual combat?

In Frankoff's strategy, instead of adopting conservative practices such as layoffs, cost savings, closing stores, etc., it breaks down the business paradox of this particular industry, luxury goods.

In the luxury goods industry pioneered by Europe, there has been a century-old traditional sense. It is the design and sale of luxury goods that completely disregards consumer demand, and the style of goods pursues new principles throughout the year, rejects mass production and innovation, insists on rare and expensive prices, and uses the wealthy class as the ultimate consumer. However, the financial turmoil came. The original purse strings of the luxury consumer groups directly hit the interests of global luxury goods companies.

Consumers are too narrow and do not pay attention to consumer demand – this is Frankoff's most resentful European luxury goods business. In his view, it is not only necessary to insist on breaking the business paradox, but also to insist that Coach has surpassed LV in the United States.

Frankoff anti-luxury business opinion has three key practices:

First, as opposed to “design and guide consumption,” production is entirely in accordance with the “consumptive guidance design”; second, contrary to the emergence of new ones in the four seasons, breaking the seasonal limit, launching new models every month to stimulate consumption; third, and insisting on the original production Differently, the supply chain will be allocated to developing countries and regions to reduce procurement costs and accelerate market supply.

In terms of consumer guide design, the most representative of Coach's Poppy series is the financial crisis. Frankoff's explanation is: "In the financial crisis, many people produced pessimism and negative emotions, and Poppy's products jumped in color, printed graffiti was its feature, and locked the target population at 16 to 25 years old, but it also stimulated 25 45-year-old professional woman."

In fact, the market power of the Poppy series lies in two areas: first, to capture the psychological needs of the consumer group, and carry out color marketing; second, due to the younger design of the product, the average selling price of handbags is reduced from 325 US dollars to 260 US dollars. Consumption.

Frank Fu believes that the Poppy series is a product that has a "curative effect" on people during the financial crisis. "Because people who see it are smiling." Frank Fu said: "In the past 6 months, Poppy products have become a company. The important revenue platform, global growth of 12% to 13%, currently accounts for about 20% of the entire product system, and the trend is very strong."

As for the new monthly launches, Frankoff mentioned that the company has a project called "consumer research."

"Consumer research" is actually the core of Coach's business. The main task is to analyze consumer behavior to finally determine the needs of the target woman, thus providing Frankoff and his team decision-making. In fact, the new monthly launch of anti-luxury regular business is the report from “Consumer Research”.

"Every month the new launch, the frequency of actual and consumer patronage is basically synchronized. This practice has become an important reason for revenue growth in the past 10 years." Frank F. said.

In addition, the supply chain will be transferred. Frankoff believes this is a global trend of controlling costs and accelerating the pace of company operations. “Considering that our product line update rate is accelerating, we have stepped up efforts to purchase fabrics from new countries, such as purchases from textile factories located in China and India. This allows us to reduce costs while also accelerating market supply. The speed.” Frankoff said Coach currently has production bases in more than 11 countries.

"Japanese model" transplanted to China

As far as the global performance contribution structure is concerned, changing the status quo in the North American market is the next direction of Frankoff’s efforts.

Coach's global revenue is actually 70% from the North American market. In addition, the only contribution that can be made is the Japanese market, where its products have exceeded 15% market share. Whether or not the "Japanese model" can be transplanted to more markets is the most pressing thing for Frankoff.

Undoubtedly, China, the world’s second-largest consumer of luxury goods, has a luxury spending totaling US$9.4 billion, and a huge market share of 27.5% (as of December 2009) is Frankoff’s dream. But how to challenge?

Frank's approach is to transplant the "Japanese model" to China. Coach's "Japanese model" is to build an agent first, wait for the agent to be stronger and bigger, then invest in the acquisition, and finally control the business control. In China, Franck repurchased mainland business rights from the Hong Kong agent Junsi Group in April 2009, paving the way for its own operations. Obviously, Frank was not satisfied with Coach's share of the only 3% luxury market in China. He set a goal for Coach in China: to increase 3% to 10% in the next few years and enter The top three. At the same time, Coach was required to open 50 flagship stores by the end of FY2013.

Now, after waiting a year and a half, Coach China has finally found a treasure on the most prosperous Huaihai Road in Shanghai. Its flagship store also exceeds Coach's store in Japan. Frank ambition is not small.

“Next, we will be the first to open a store in Paris, France, the center of European luxury goods, in June, and in the next 12 months, we will also enter Spain and the United Kingdom. The future plan is to open 13 stores in Europe.” Frankoff is not Candid defeat in Europe 10 years ago.

This time entering Europe again, not only does Frankoff prove Coach's value, but, more importantly, as in the Asian market, the European market is another focus of Coach's global strategic restructuring. Frankfort now believes that for the slow recovery of Europe from the economic crisis, "handy luxuries" should be easily accepted by the general public.