Affairs

Coach, Kors, and Kate Spade – Commodified, directionless, and slowly bleeding out.

In 2015, Business of Fashion New York reporter Lauren Sherman posed a poignant question, and one that we are prone to chewing on here at Lean Luxe: Do “accessible luxury” brands — notably Coach, Michael Kors, and Kate Spade — have natural expiration dates?

Rather telling, she wrote, were the then recent (underwhelming) fiscal performances for this trio of brands. The figures, based on financials available on August 2015, painted a grim picture. At $1 billion, Coach’s revenue for its fourth quarter that year had fallen by 12 percent from the year before, and it profited only $11.7 million versus the $75.7 million for the same quarter in 2014. At Kate Spade, shares by August 2015 had fallen by 35 percent since the start of 2015. And at Michael Kors, in-store sales had tapered off, which then led to a fall in profit for the second consecutive quarter.

The global luxury market is growing, but these brands have hit trouble. How do we explain this? We can start by pulling at the root: As mass market, accessible luxury labels, Kors, Coach, and Spade are really just cheaper versions of Louis Vuitton, Gucci, and their ilk. This, ultimately, is their fatal flaw. That is to say, that in deploying the same status-driven glitz, glamour, and, yes, bloated pricing structures relative to the actual quality of the item — as their more expensive counterparts do — they are not set up for a proper, long term go.

The real storyline here, the red thread, is that constant growth has proven to be the ultimate measuring stick for Kors, Coach, and Spade. And in luxury, that’s an express line to commodification.

Furthermore, these are generalized brands, not really specializing in anything, not really attaching meaning or context to why these products, or even to the brands themselves, exist. As with Louis Vuitton, they are ubiquitous, and in trying to be all things to all shoppers, they end up as meaningless. They’re not optimized for the long term; instead, they’re powered by getting into as many hands as they can — right now. In effect, their goods become commodified and devalued, rather goods that people cherish and hold dear. They become, merely, instruments of status, as opposed to items that shoppers acquire with the intention of keeping and using for a long time.

The good news, writes Ms. Sherman, is that “the accessible luxury market is expected to grow €150 billion ($164 billion) between 2014 and 2021, reaching €685 billion ($747 billion) by 2021, according to a report by Boston Consulting Group and Altagamma.” The bad news for Kors, Coach, and Spade, however, is this: While it may be true that the accessible luxury space is primed for growth, consumers aren’t necessarily seeking the accessible luxury that this trio represents, due to, as Ms. Sherman suggests, their “diluted brand cachet and over-distribution.” What shoppers may be inclined to support instead are specialty labels in the same price range that have more to say, that are specialized, and that are less widespread — in other words, modern luxury brands.

Mario Ortelli, senior luxury goods analyst at Sanford C. Bernstein, a financial research firm, might have assessed the situation the best. “Accessible luxury brands enjoy a lot of success, but only for a limited period of time. Most of them expire after a few years, but they try to keep on going as long as possible,” he explained. “True luxury brands usually have greater heritage, more brand equity and are therefore more stable and resilient. Accessible luxury brands tend to be more volatile, but can deliver faster growth in the early stages of development.”

And therein lies the point to all this. The real storyline here, the red thread, is that embracing unbridled growth — constant, endless growth just for the sake of growing — at the expense of focusing on the virtue of product, has proven to be the ultimate measuring stick for accessible luxury companies like Kors, Coach, and Spade. And in luxury, that is always going to be a myopic strategy. It’s an express line to commodification, and that is never a good thing for a luxury enterprise.

So in short, the answer to Ms. Sherman’s question is “yes.” Accessible luxury brands that think of their goods as pure commodities, and that focus primarily on ubiquity, will always experience difficulty over the long term, and find themselves troubled by an inherently limited lifespan.

Two modern luxury alternatives to Coach, Kors, and Kate Spade:

1. Cuyana (for bags)
2. Linjer (for watches)

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