‘We Have To Bet Long On Emerging Markets’
New York-based accessory maker Coach thought twice before venturing into the Indian market. But barely months after it launched its first store, the company sees India as an ‘opportunity to build on’
Photo Credit : Umesh Goswami
United States-based luxury accessories manufacturer Coach opened its first store in India at the Palladium Mall in Mumbai in July this year. The brand, which is celebrating 75 years of its existence, has entered India in partnership with Genesis Luxury.
Ian Bickley, president, International Group, Coach, who is responsible for all international direct retail businesses spread across more than 200 locations in over 20 countries, talks about the importance of emerging markets and why Coach decided to enter India at a juncture when several international brands were already here. In a free-flowing conversation with BW Businessworld, he also spoke of the attributes that differentiate Coach from its competitors in the market. Excerpts of the conversation:
How important are emerging markets like India for Coach? To what extent would emerging markets contribute to the company’s revenues over the next few years?
Emerging markets have been and always will be important for Coach. Take a market like China, which is today a $600-million business for Coach. That for us, ten years ago, was an emerging market. Today we are present in 60 cities and have close to 150 stores across China. So we have to take a long-term view on emerging markets and make strategic choices about when we start and when we invest in those markets. I think that’s very important. If we remain focused on what these markets will bring us in the immediate short term that may make the choices different. Emerging markets are all about planting the right seeds at the right time. Even though we have planted the seed in India now, our expectations over the near term are not that this is going to be a huge business. But we recognise the strategic importance of India, the long-term potential that India has and we felt that this was actually the right time to come into the market with the right partner.
If you take the actual contribution of the markets we are investing in today to the overall revenue, it’s tiny.
A large number of brands are already here. Why did you decide to enter the market now?
Five or six years ago, there was a tidal wave of luxury brands that came into India. The reality is that when they were launched, many of them experienced difficulties in the market. I think this happened for a variety of reasons. One, I think the market was not yet evolved. The consumer was not ready. Two, the retail infrastructure was not there. And I think there was a very large disparity between the cost of doing business here relative to the profits that you could generate. It was completely out of sync.
After the initial tidal wave, there was a period when brands changed their partners, some of them closed stores. My first trip to India was around that time and I actually made the decision not to come to India. I didn’t think the market was ready and that we would be successful. I came back to India a second time about three years ago and came away with the same point of view that the market was not yet ready.
I came back to India a third time a year ago, primarily because Genesis encouraged us to come back. They knew we had considered the market before and had decided against entering it. But they asked us to come again and take a look. A few things impressed me. Number one, the malls that I had visited on the previous two occasions, for the first time I thought they were vibrant and had serious shoppers there. And what we heard from brands in terms of their performance was very different from what we had heard previously. Secondly, I felt that the economics were now more in balance and that it could be a successful business for us and our partners. And thirdly, I also saw for the first time that there was more investment in the retail infrastructure with new malls being planned over the next three to five year time horizon. So, for me, it was very clear that now the fundamentals had changed for us to take a bet and take the first step into India.
You have set up your first store in Mumbai. What are your expansion plans?
Our first priority was to open a store in Mumbai and another in Delhi. Our hope is that sometime in 2017 we can open the second store in Delhi. We are very happy with the location we found here in Mumbai. We feel it is the right mall. The response we have received has been very encouraging. It tells us that the foundation is good, but there is also a large opportunity to build on. For example, right now most of the consumers coming into the store are already aware of Coach. But we have a tremendous opportunity with people who are not aware of Coach. We have also learnt a lot in terms of product. We were surprised to learn that the best-selling products that we have are not just the opening price points. Some of our elevated styles and more embellished products are also in our bestsellers and we didn’t have enough of them. We sold out of them pretty quickly. It tells us that we have an opportunity here to do well on the product side.
At the end of the day it all starts with a single transaction with a single customer at a single store. If we can get that right then we can really expand and scale.
How important is digital and social media marketing for you?
Very important. In fact, when we look at our global marketing strategy we are moving investment away from traditional media platforms towards digital and social media. The power of social media is such that when the story and relevancy of your brand is being communicated by word of mouth, it’s much more impactful and credible as compared to a brand’s advertising.
Even here as we build the brand, as part of our social media strategy we plan to build a strong base of people who can talk about the Coach brand in a really authentic way.
We always prefer what we call the outside-in approach instead of the inside-out approach with digital. So that it’s less about us advertising and more about us earning digital credits. That’s really important. For example, we believe one of the biggest marketing investments that we have made over the last 24 months has been in developing the fashion shows. Not that we are going to sell a lot of ready-to-wear, but the impact of that on social media and the number of positive impressions that it creates for us globally are in the hundreds of millions. That’s very powerful because it’s all being done through word of mouth.
Do you think it is the right time to bring your ready-to-wear collection to India?
We will select what are the right products for India. At the end of the day it comes down to store size and what we can have here. The relevancy of the category to the consumer matters. But definitely, our bread and butter is accessories and that is where the biggest focus is going to be. We have been surprised by the response to our men’s collection in India. It’s a small part of the store, but it has generated a lot of attention. It has contributed more than its weight in terms of the space it’s getting versus the business it is generating. It also tells us that we have an opportunity in the market with regard to the male consumer, who is looking for great design, style and a quality product.
Globally, which ranges do better?
Globally, the men’s collection contributes 15 per cent to our total business. But our goal is to build it to a billion dollar business over the next few years.
How many markets are you present in across the globe?
We operate in 40 countries across the world. We are in North and South America, Europe, Middle East and Asia. We have not ventured into Africa yet. India is the newest market we have entered into. The new markets we are looking at right now are Russia, Turkey and South Africa.
The global accessories market is very cluttered. How does Coach create a standing for itself?
The global accessories market is very competitive. There are many players. So there is a need for brands to cut through with a differentiated positioning. We are focused on fashion. Coach is a fashion brand. But at the same time we reinforce and tell the story of our unique leather craft. We are a 75-year-old brand with a heritage and roots in New York. When these stories are juxtaposed, they make for a strong statement that differentiates us from other accessible luxury brands, because they don’t have the history and heritage. It also distinguishes us from the European luxury brands because while they have the heritage, they don’t have the accessibility or approachability that Coach has.