Tapestry, the newly rebranded Coach, Inc., wants to become America’s first luxury conglomerate. To do so, it’s uniting the global customers of the company’s three brands — Coach, Kate Spade and Stuart Weitzman — into a combined database to drive growth.
During the announcement of its first quarter earnings of fiscal 2018, which showed net sales increasing 24 percent year-over-year to $1.3 billion, company CEO Victor Luis spoke to a continued emphasis on increased synergy across the three brands, following the acquisition of Kate Spade, which Coach bought for $2.4 billion earlier this year. This applies to the entire manufacturing process and supply chain for Coach, Kate Spade and Stuart Weitzman, as well as how the company takes in customer data. Right now, the database captures data from 80 million U.S. households and 120 million global households, according to Luis.
“Our strategy and data analytics team is chomping at the bit as we take the data from all the brands and bring it together,” said Luis. “We’re currently looking at opportunities to take the information in our database and leverage it effectively across each brand.”
Tapestry is pulling in customer information from its branded e-commerce stores and social media accounts, and from direct connections through email subscribers and loyalty programs. It’s starting to funnel in data from newer initiatives, as well, including Coach Create and the Kate Spade Make It Mine program, the brands’ customized product platforms that require customer sign-ups either in stores or online. Finally, it’s using what data can be pulled from its wholesale partners, as the company restructures its relationship in order to maintain tighter control over product pricing and positioning.
As Coach continues its broader restructuring plan, begins applying facets of that restructuring (like decreased promotions) to Kate Spade and attempts to establish Tapestry as a luxury house to be reckoned with, knowing who its customer is, what they’re buying and where there’s room for growth is essential.
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“The two things you’ve got to do in this complex time for luxury retail is get a much closer and tighter understanding of the customer, including the ones buying, what’s being bought and how they want to interact with you,” said Antony Karabus, CEO of HRC Retail Advisory. “Then you have to determine what markets make sense for customer growth, and get them to buy across channels.”
For Tapestry, growth opportunities include targeting younger customers, as well as international customers. When Coach acquired Kate Spade, part of the strategy behind the deal was to get insight into Kate Spade’s valuable millennial customer set. According to Luis, 60 percent of Kate Spade’s customer is millennial, and the brand has better footing with the 15- to 25-year-old customer as well. Coach’s current brand ambassador, Selena Gomez, is a clear play to reach younger customers. The star is the most followed person on Instagram.
“A company needs to have those customer data points, but what’s important is learning how to analyze them. There are clear synergies: Kate Spade has the millennial customer, and Coach is gunning after her,” said Jessica Ramirez, a retail analyst at research firm Jane Hali and Associates. “The millennial is important because it’s a clear view of where the customer is now, what price points they gravitate toward and where they’re going.”
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Ramirez added that the millennial-geared Gomez campaign resulted in a halo effect, and Coach saw an older customer going after what she was promoting, too.
As the company also looks for opportunities to expand internationally — currently, 32 percent of its sales are international — it’s looking at the Chinese market as a testing ground for new methods of communication and customer relationships. After shuttering its Tmall store in 2016, the company went all-in on the platforms WeChat and Weibo, where it built one-to-one messaging platforms to connect store associates to customers, as well as in-app loyalty programs to collect more customer data. This will become a model for growth in other regions, like Japan and Europe.
“We’re gearing up and spending a lot of time internally discussing how we set ourselves up for technology and innovation growth by collaborating with third-party platforms,” said Luis. “China, and our work with Weibo and WeChat, has led us here with the Coach brand, and now we have opportunities to use what we’ve learned there in Europe and other markets.”
As the company builds out a more robust customer database, a focus on figuring out how to apply that information to other areas of the business will result in competitive advantages, like quicker speed to market, said Ramirez. When the brands are picking up on what’s performing well or not so well with customers at a faster clip, they can manage their supply chains more efficiently.
It’s notable that, as Tapestry is on track to save $115 million over the next three years thanks to synergizing efforts across the brands, Michael Kors Holdings Limited is taking a much different approach to Michael Kors and Jimmy Choo. During a call with investors on Monday, Michael Kors CEO John Idol said there would be little to no synergies between the two brands.
“What’s happening there is that Michael Kors and Jimmy Choo are after two different target customers. Meanwhile, Coach has been trying to take on millennials for a long time, and that’s the core Kate Spade,” said Ramirez. “It’s not in Kors’ best interest to try to combine large parts of their businesses, when price points and customers are so different.”
But she noted that no attempts to gather, compare and link customer data between the brands would be a miss.
“Any overlap counts, and the more data you have about your customer, the more you understand the ways you can grow. Retailers are still wrapping their head around this,” Ramirez said.
