Group 4:

Module 3: Coach Bag Case Study

March 7th, 2021

“I think there is something about luxury- it’s not something people need, but it’s what
they want. It really pulls at their heart.”
- Marc Jacobs

1.) Please describe the forces that drive competition in the luxury goods industry.

Porter’s Five Models drive competition in the luxury industry as well as any other
goods industry. These five forces are threat of entry, the power of suppliers and buyers,
the thread of substitutes and rivalry amongst existing competitors. Market Watch had
stated that the market size was $58.3 billion in 2018 and is expected to reach $89.9
billion by 2026, registering a growth of 5.6% from 2019 to 2026 (MW News Dept,
2021). According to the case study, the desire for luxury goods grew in the early 2000's
due to a few different reasons. These include effective advertising, television
programming, and the day-to-day rigor of middle-income consumers. These consumers
wanted to reward themselves by purchasing luxury items. The introduction of places like
Walmart made it possible for consumers to buy every day items for cheap prices, leaving
them more money to spend on luxury items.
In Europe, the growing population and expansion of wealth from middle to upper
class made the continent account for nearly 35% of share of the luxury handbag market.
Additionally, China and India’s emerging economies have created more disposable
income which has in turn made them the target market for Coach. Premiumization also
played a huge role in the growth of this market. The superior quality and design
customers are looking for, while having the accessible funds, has made this market boom.
The threat of new entry is a strong driving force in the luxury goods industry. Certain
brands such as Gucci, Louis Vuitton and Prada have all already made names for
themselves and thus a new entrant to the same industry would find it hard to compete
with them. Coach is a threat because it is a substitute for all of these high end brands.
Coach's business model has set them apart from all of these other brands by marketing
"affordable luxury.” Their products are high end quality at an affordable price to
consumers.





 2.) What competitive forces seem to have the greatest effect on Coach's product
attractiveness? What are the competitive weapons that Coach's competitors are
using to try to outmaneuver one another in the marketplace? Is the pace of rivalry
quickening and becoming more intense? Why or why not?

Buying power has the greatest affect on Coach’s attractiveness. Coach was able to
make a product and market it in a way to compete with luxury competitors like Gucci,
Prada, etc. They also stayed highly competitive by offering new products monthly, while
most competitors updated products seasonally or quarterly.
Coach’s expansion of products outside of just handbags accounted for 23% of the
company’s sales by 2006. They contracted with companies like Movado to create
watches, and created men’s and women’s accessories to increase their profits. Coach was
also strategic with their store placement. They maintained partnerships with luxury retail
stores like Bloomingdales and Sak’s Fifth Avenue, but also created factory stores 50
miles outside of these retail stores that sold their older products at heavily discounted
prices. Coach’s factory stores outperformed their full-price stores in terms of comparable
sales growth, and made up about 20% of their business.
Each brand in the industry is trying to outmaneuver one another by selling the
highest quality items. Competition is growing in this crowded market and as stated in
“Even for high-end bags, overexposure is a problem”, “[It’s happening] faster, therefore
the lifecycle of a bag is becoming shorter and shorter,” says Mario Ortelli, a luxury
analyst at Sanford C. Bernstein. “The bags that are probably evergreen are Hermès and
the 2.55 for Chanel, but it’s difficult” (Sherman, 2016). We feel that Coach’s strategies
and marketing tactics have been ahead of its time and will continue producing to keep up
with the demand for the fast paced and crowded market.

Cited Sources:

Americas EY. 11 growth drivers fueling the evolution of the luxury goods industry. EY.
https://www.ey.com/en_us/consumer-products-retail/11-growth-drivers-fueling-
evolution-luxury-goods-industry. Published April 29, 2019. Accessed March 7,
2021.

Luxury Handbag Market Size 2021: Covid-19 Impact Analysis: Business Outlook, Growth,
Trends and Forecasts 2026. MarketWatch. https://www.marketwatch.com/press-release/
luxury-handbag-market-size-2021-covid-19-impact-analysis-business-outlook-growth-
trends-and-forecasts-2026-2021-02-19?mod=mw_quote_news. Published February 19,
2021. Accessed March 7, 2021.

 Kadam A, Deshmukh R. Luxury Handbag Market Size, Share & Trends: Research Report
- 2026. Allied Market Research. https://www.alliedmarketresearch.com/luxury-
handbag-market-A05997. Published February 2020. Accessed March 7, 2021.

Porter, Michael E. (2008, January) “The five competitive forces that shape strategy” Harvard
Business Review. https://aggie-horticulture.tamu.edu/faculty/hall/EAGL/
Strategy_readings/Five_Forces_Update.pdf

Sherman L. Beyond the 'It' Bag. The Business of Fashion. https://www.businessoffashion.com/

articles/luxury/beyond-the-it-bag. Published April 4, 2016. Accessed March 7, 2021.