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Coach Outlet Online chases Gen Z as Tapestry seeks $8 billion revenue

Accessible luxury is out, “expressive luxury” is in. That’s the latest from US accessories and fashion brand Coach, which is shifting its positioning in a bid to court Gen Z consumers and meet parent company Tapestry’s new 2025 growth targets.

Tapestry, which also owns Kate Spade and Stuart Weitzman, today announces a three-year roadmap to drive “sustainable, profitable growth”. This includes plans to hit $8 billion in revenue — a compound annual growth rate of 6-7 per cent compared to current earnings — and return a total of $3 billion in capital to shareholders. The group is banking on the repositioning of Coach — its biggest brand — to help it achieve growth amid challenging global conditions.

Sustainability and self-expression, it says, will be crucial to attracting younger consumers and fuelling financial growth. Coach’s move to an “expressive luxury” positioning reflects a new crisis among consumers: how to balance their values around sustainability with the desire to express themselves through fashion. Combined with a more cautious approach to discounting and attempts to distance itself from allegations made last year that the brand destroyed and discarded unsold handbags, Tapestry hopes this will elevate Coach in the eyes of its Gen Z customer base.

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Coach is repositioning from “accessible luxury” to “expressive luxury”, with a new focus on attracting Gen Z consumers.

Photos: Juergen Teller, 2022

Coach has a revenue target of $5.7 billion by 2025, representing mid-single-digit growth compared to its current position. In its last full-year financial report, Tapestry said Coach had seen gains after select price increases and its move away from discounting: net sales hit $4.9 billion in 2022, up 16 per cent year-on-year and 15 per cent versus pre-pandemic. Kate Spade and Stuart Weitzman are slated to achieve $1.9 billion and $450 million in revenue respectively in the same period. The targets are conditional on the value of the US dollar remaining consistent, a continued gradual recovery from Covid-related disruption in Greater China, and no material worsening of inflationary pressures or consumer confidence.

Tapestry CEO Joanne Crevoiserat tells Vogue Business that “the ability to evolve the concept of luxury” and “keep pace with the rapidly changing landscape and consumer preferences” are crucial to the long-term survival of brands.

Leaning into expressive luxury

Coach, which was founded in 1941, has already pivoted several times. It adopted the term “accessible luxury” in the early 2000s, as an evolving middle class sought a compromise between price and quality. “That tapped into a white space in the market,” explains Joon Silverstein, SVP, global and North America marketing and sustainability at Coach. “Over time, accessibility became more about price than it did about luxury.”

The term “expressive luxury” might not mean much to consumers, but it was devised from focus groups and consumer surveys to reflect broader changes in what they want from brands. “It is a shift from brand expression to self-expression, exclusivity to inclusivity; from status and ownership to emotions and values,” explains Silverstein. 

In more tangible terms, this means the brand is exploring circular business models. Consumers care more about participation than ownership now, she continues; they want to regularly switch up their self-expression instead of investing in one item, worn the same way for life. “We’re seeing consumers make trade-offs that prioritise affordability and trend over sustainability, and increasingly recognise the dissonance of those choices,” says Silverstein.

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In line with the new positioning, Coach will focus its sustainability efforts on upcycling, repair and training the next generation of craftspeople.

Photos: Juergen Teller, 2022

“Soon, Gen Z and millennial shoppers will represent the majority of the luxury market, and they will continue to influence the interests of older generations as well,” explains Crevoiserat. “Expressive luxury represents our vision of this future as well as our heritage, and is core to the accelerated growth strategy we’ve defined for Coach.” Coach is almost entirely direct-to-consumer, so staying relevant is an existential challenge, she continues.

The company has invested heavily in consumer feedback and ethnographic research in recent years, the results of which have informed this new positioning. According to Crevoiserat, Coach has acquired nearly eight million new customers in North America in the last two years.

Balancing sustainability with growth

The timing of Coach’s repositioning is no coincidence. It’s almost a year since the brand received intense backlash after a viral TikTok video alleged it was destroying unsold handbags. Silverstein responded at the time, saying that Coach was already working towards zero finished goods destruction, but the practice was widespread in the fashion industry. The destroyed goods accounted for less than one per cent of the brand’s global sales, she added. Burberry faced similar criticism in 2018 after reports claimed it was burning unsold inventory, and quickly committed to stop the practice.

“At the time, we were already thinking about new circular business models, to tackle the challenging problem of giving damaged and unrepairable goods a second life,” Silverstein explains. Just six months earlier, in April 2021, Coach had launched its pilot for Coach (Re)Loved, a circular fashion initiative covering repair, recycling and resale. The initiative was already available in approximately 40 per cent of its North America stores, but has since been expanded to 100 per cent, with Asia and Europe to follow soon.

Through Coach (Re)Loved Exchange, customers can bring their unwanted Coach items into the store and trade them for credit, worth $10 to $200, depending on the item’s original value and condition. These bags will then be recycled or upcycled and resold. Refurbished bags retail for $125 to $2,000. Coach says its craftspeople have repaired or upcycled over 120,000 in North America alone since the programme’s inception. Coach Create offers customisation and personalisation for customers who want to keep their existing products.

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Coach says it is “flipping the hierarchy” from a brand dictating a vision to a tool for consumers’s self-expression.

Photos: Juergen Teller, 2022

While the trend for upcycling has accelerated hugely since the pandemic, applying the method to luxury requires a particular skill set, which Coach says the industry isn’t prepared for. The wider (Re)Loved programme also includes craftsmanship bars, where consumers are invited to instruct in-store craftspeople on the upcycling of products. Going forward, Coach will evolve many of its in-store craftsmanship bars into Coach (Re)Loved workshops, allowing more consumers the chance to participate in the process. Hoping to accelerate a commercial-standard upcycling workforce, Coach has developed a craftsperson apprenticeship programme and circular design scholarship. Coach says it has trained over 400 people through these programmes in the US and China. “We want to build circular capabilities for the industry as a whole, not just for Coach,” says Silverstein.

Coach (Re)Loved is the first stage of the brand’s sustainability rehabilitation, but there is a long way to go, says Silverstein. “Giving products a second life is extremely important, but it’s not impacting the upfront impact of our process,” she explains. “We are investing in research and development to understand how we can craft products for circularity from the outset.” The brand is expected to unveil a broader circularity initiative in Spring 2023.

The question many companies are reckoning with is whether it is possible to meet financial growth targets sustainably. Silverstein insists that Tapestry’s financial targets are not at odds with Coach’s sustainability aspirations. “Impact is correlated with scale,” she explains. “But, to really transform our impact, we need to transform the system overall, from linear to circular. The opportunity with circularity is to decouple financial growth from the extraction of new virgin materials and the problem of waste.”

While the brand considers systems change fundamental to its sustainability efforts, the repositioning is less groundbreaking. “It’s an evolution,” says Silverstein, “not a revolution.”