Coach’s Todd Kahn on Reinventing a Heritage Brand
Todd Kahn has mastered the art of juggling. As chief executive officer and brand president of Coach, he oversees a heritage business that dates back more than eight decades. But in order to keep the business fresh — and its bottom line profitable — he has had to find ways to make it both modern and relevant to a younger consumer as well.
And he has accomplished those goals.
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Since fiscal year 2019, Coach has added $600 million in sales and grown operating income by 300 basis points. Overall, in fiscal 2022, Coach’s sales hit $4.9 billion, up 16 percent from the prior year and 15 percent versus pre-pandemic.
Kahn, who just arrived back in the States after a nine-day trip to Tokyo, Japan; Seoul, South Korea, and Singapore, said: “Despite what you might hear, consumers are alive, they’re excited, they’re out there — and brands are winning. I came back so enthusiastic.”
Over the past 81 years, Coach has built a strong reputation as it grew from its humble beginnings as a family-run workshop for leather goods to an international powerhouse company that also produces apparel, footwear, eyewear, fragrance and other products on top of its signature handbags and small leather goods.
Kahn said that within days of taking over the helm of the brand in March 2020, he had to close all of the company’s North American stores because of the pandemic. But rather than looking at it as a negative, he searched for the silver lining.
“We really didn’t know what was going to happen, but we also recognized there was a unique opportunity to reset the customer expectation.”
He said when he started to explore how customers were greeted when they arrived at a store, particularly an outlet, he said they were welcomed with a 20 percent off coupon.
“So our dialogue with the consumer was all about discounting instead of the greatness of our product,” he said — the perfect opportunity to reset.
So with the blessing of the company’s parent, Tapestry Inc., Coach changed “almost everything about our company,” he said, a strategy that led to the jump in sales.
The reset involved doubling down on what he called “customer-centricity.”
“One of the things Coach has always been proud of is we balance magic and logic. But too often the magic came from the business side. And you want a little bit better equilibrium.”
So Coach focused on understanding the needs of its customers, which allowed the brand to raise its average retail prices and update its product offering.
Step two was to focus in on innovation. In fashion, Kahn said, designers and merchants start working on product a year or more before it actually shows up in stores. So by the time it hits the selling floor, “they’re bored with it,” he said. “In my 15 years at Coach, I’ve seen the same bag called four different things. Of course, there were tweaks, but we force our designers and our merchants to constantly change when it was still fresh to the consumer.”
So instead, Coach worked to extend the franchise of its existing products rather than just replicating what was already available “and calling it something else.”
The company also identified growth opportunities such as men’s and other products that extended the full lifestyle offering of the brand.
The third arm of the reset centered around digital. In fiscal year 2019, digital represented 6 percent of sales globally, he said, but that number has jumped to 30 percent. “It’s where the consumer wanted to go. We all know that today’s consumer is an omni-consumer — they start their journey, they end their journey in different places. And you have to show up really well in all of those places.”
But the focus on digital should not take away from the physical store experience. Coach operates some 1,000 stores and Kahn said they remain “the best expression of your brand. That’s where you can have the most interactions with the customer.” So figuring out ways to make those two channels work together is incredibly important.
Internationally, Coach is successful in Asia as well as European countries such as the U.K. and Germany, its two largest markets, but the growth is not coming from opening High Street locations. “That’s not modern,” he said. Instead, much of the growth is coming through digital and wholesale channels. “As I’ve said in my tenure at Coach, stores are not marketing vehicles, stores have to have four-wall profitability.”
The luxury and premium market overall represents some $195 billion in sales, he said, so there’s a wealth of opportunity for Coach. “But if you target everyone, you target no one. If you focus on every element of your business, you won’t succeed.”
So Coach chose its lane and that was the Millennial/Gen Z customer. Seventy percent of the buying by fiscal year 2025 will come from this younger demographic, he said, “and if you’re not growing with them, you will not succeed.”
Once that was established, Coach identified the segment of this consumer group it wanted to target — and it was the “timeless part,” he said. “This doesn’t mean this is our only consumer. This means this is the place where we can win the most.”
Coach conducted thousands of hours of research on their buying habits and thought processes and identified one common denominator: As you grow from teenage years into adulthood, you really want to focus on your confidence.” Their choice of clothing and accessories are all intended to make them feel confident, so Coach targeted its marketing to this group.
But it’s not that simple. Kahn said everyone has three ages: our chronological age, the age we look and we age we feel. “So even though our marketing and our storytelling will focus on this younger generation, we know there’s a halo aspect.”
So in addition to Jennifer Lopez, who Kahn said is timeless, Coach tapped a “constellation of celebrities to really tell the story across all age groups.”
Kahn said he thinks of Coach as a company with several chapters. The first is an immigrant couple in a loft in New York that used baseball glove leather to create a brand. The second chapter was the Bonnie Cashin era. The company’s first design director took everyday items and made them luxurious. The third was what Kahn referred to as the “modern age when we first went public, and Coach invented the term accessible luxury. It was the idea that you didn’t have to spend an extraordinary amount of money to buy a high-quality bag.”
This messaging worked well for a decade, but then the field got crowded. But after Stuart Vevers joined as the company’s second creative director as a public company in 2013, “we become part of the fashion dialogue.”
But the brand wasn’t growing. So last month at the company’s investor day, the company launched a new idea: expressive luxury.
“What we like about this idea is that for the modern consumer, it’s about self-identity, it’s about individualism, it’s about authenticity, it’s about courage. The courage to be real. Our product is real product. It lasts multiple lives. And this idea to be courageous is not just a marketing ploy.” In fact, the company initially used the idea as an internal call to action. “The idea was to be courageous on design, on marketing and have real honest conversations about whether we were being authentic to the brand.”
And being authentic is key, Kahn said. “To just say you’re going after Gen Z, just saying you’re sustainable, just saying you believe in inclusivity, if it’s just a veneer, it’s not going to work. It has to be absolutely real.”
Last month, Coach took that new mantra and brought it to its customers through its Courage to Be Real campaign and the introduction of a new brand ambassador, Lil Nas X.
“We have 40 different faces of the brand, we’re a global brand, we transact in 50 different countries, we have millions of customers,” so one ambassador can never connect with everyone, he said, but “Lil Nas was courageous. He was one of the first rappers to show that he was fluid in his sexuality, in his approach to masculine and feminine ideas in his music, and his crossover abilities from rap to country to R&B,” Kahn said.
Coach used him in its first Courage to Be Real campaign and also dressed him and his dancers for his 20-city tour with more than 1,000 different pieces of clothing. “So the cool factor is great. But his audience was black, it was white, it was straight, it was gay. And as a large brand like Coach that really has to speak to a wide audience, he was really the perfect next representative and brand ambassador.”
And while this new association may eventually show up in a sales bump, the initial engagement numbers are strong. As a result, Coach will continue mining this campaign in the future, he said, and hopefully it will “usher in the next exciting period for us and lead us into the next golden age of Coach.”