Coach builds brand of affordable luxury goods

by Kanako Takahara

Twenty years ago, at the height of the bubble economy, Coach Inc. started out small in Japan, selling its products at the Mitsukoshi department store in Yokohama.

At that time, the Coach brand was just starting to become popular in its home market in the United States, but it was still far from well-known in Japan.

“When we opened our first stores in Japan, of course we had a little bit of awareness,” said Victor Luis, president and chief executive officer of Coach Japan Inc. “But among those people who hadn’t traveled (to the U.S.) from Japan, the awareness was small.”

But after 20 years of marketing and promotion, Coach is now a prominent luxury brand in Japan, and is especially known for its handbags and accessories.

The company has 149 stores nationwide, including eight flagship stores, in Sapporo, Sendai, Tokyo, Nagoya, Osaka and Kobe.

The United States still accounts for 70 percent of Coach’s worldwide sales. However, the next most important market has become Japan, which accounts for about 20 percent.

“One of the keys is our accessible luxury position,” Luis said in a recent interview.

Coach, which will publish the book, “Coach: An Evolving Brand,” next Tuesday in Japan, sets its product prices at about half those of traditional European brands.

To create a friendlier atmosphere at Coach shops, sales assistants say “hello” instead of the more formal “welcome” when they approach customers.

The brand became popular after Coach, a traditional leather goods firm founded in 1941 in New York City, transformed itself into a more fashion-oriented name at the start of the new millennium. The move was well received worldwide, including by working women in Japan, who have strong purchasing power.

In 2001, Coach launched its Signature Collection, selling handbags and other products with the signature “C” monogram. In the same year, its designer, Reed Krakoff, was named Accessories Designer of the Year, which increased recognition of the Coach brand in the fashion industry.

2001 was also a turning point for the Coach brand in Japan. The U.S. company created a 50-50 joint venture, Coach Japan Inc., with Sumitomo Corp., increasing its presence in Japan. Coach Japan became a 100 percent subsidiary of Coach Inc. in 2005.

As the company’s transformation has gradually taken effect, sales in Japan have shot up from ¥10 billion in the business year to June 2001 to ¥65.4 billion at the end of last June.

In 2002, it opened its first flagship store in the exclusive Ginza district in Tokyo.

Luis noted that the lifestyle of Japanese women has changed dramatically over the past two decades, altering their purchasing behavior as well.

“During the bubble years, women depended a lot more on status symbols, so they would purchase products based on the badge,” said Luis, who also served as CEO of Givenchy Japan Inc. from 2000 to 2002.

But as more women continued their careers, he said, they began to be more independent and confident in making purchases. Women no longer relied just on status symbols but on the quality, function and other elements of the products, he added.

Now Japanese are some of the most demanding consumers in the world from product quality to customer service, he said.

Coach views the trend as an opportunity to review its products and services.

“We believe very strongly that if we can reach the expectations of Japanese consumers, we also learn for ourselves how to be successful in other markets,” Luis said.

The Japanese market is unique in that the amount of information an average person has is considerable and that information travels quickly, he added.

This means fashion trends change very quickly in Japan, Luis said.

To grasp Japanese market trends and lifestyle changes, Coach interviews about 20,000 Japanese women a year via various consumer surveys.

“Our strategy is to be really focused on the consumers, to understand their needs,” Luis said.

This strategy has been and will continue to be the basis of Coach’s business, he stressed.

“Every consumer is looking for a product that really fits their lifestyle,” he said. “Our goal is to provide just that.”