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How Coach is applying its brand restructuring strategy to Kate Spade

Tapestry is taking what it’s learned from Coach’s turnaround efforts and applying them to Kate Spade.

On Tuesday, Tapestry CEO Victor Luis laid out a plan for the women’s brand, which the company acquired in 2017. It includes better controlled inventory, a new strategy for capitalizing on growth in China, faster design and production cycles, and improved customer targeting and services using the Tapestry customer database, which holds 120 million profiles.

“Over the long term, I don’t see why Kate Spade wouldn’t be at the levels of Coach,” said Luis, during a call with investors. “We’re doing a lot of work across categories, and across Kate Spade and Coach together, around initiatives like global growth and inventory management. So we foresee that turning into profitability.”

Sales at Tapestry were up by 35 percent for the second quarter of the company’s fiscal 2018, to $1.79 billion across the Coach, Kate Spade and Stuart Weitzman brands. Luis accredited organic growth and the success of the Kate Spade merger to the jump, which beat out industry estimates.

When Coach acquired Kate Spade, leading to the company’s renaming to Tapestry in September, the goal was to buy up the brand’s millennial customer set. The brands were also experiencing similar problems in the current retail climate, as contemporary-luxury brands were getting squeezed between fast-fashion and high-luxury brands.

Over the past three years, Coach has proven it can successfully turn around a dwindling heritage brand, and now it plans to do the same for Kate Spade. What that strategy looks like for Kate Spade starts at the store level and expands to the brand’s global footprint. As more stores open worldwide — there are plans to open 50 more Kate Spade stores in Europe and Asia — stores at home are getting an update. Sales inventory will be moved online and minimized in retail stores; improved customer service elements, like customization, will play a bigger role in the in-store experience; and overall inventory will be more tightly controlled. In China specifically, Tapestry is buying back operations of Kate Spade in order to better manage production and distribution in the region.

“Coach’s turnaround in China was about maintaining luxury there,” said Jessica Ramirez, retail analyst at the firm Jane Hali & Associates. “Now they’re doing that with Kate Spade, and they’re working very quickly. We’re seeing innovation happening fast.”

Speed and agility are playing a role in Kate Spade’s production cycle going forward. Luis spoke to the company implementing 3D modeling and other technologies in production development and design, and working directly with vendors to make the process more efficient. This is taking place across brands, as well as categories.

“We’re digitizing the brands, from the back to front ends of the process, with a focus on improving speed,” said Luis. “Continue to see more innovations from us within the supply chain in order to get faster.”

Finally, Tapestry has built a better customer profile for Kate Spade, modeled after the work it’s done with Coach. The company’s 120 million-customer database is strengthening a more personalized approach to customer service, marketing and production, according to Luis.

“You can see that their understanding of the customer has improved, and that’s a real competitive advantage today,” said Ramirez. “They’re moving in the right direction.”

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