3) Industry Market Analysis

Porter five forces Model

https://www.trefis.com/stock/coh/articles/205735/coach-through-the-lens-of-porterfive-forces/2013-09-13

Coach occupies around 28% market share in the U.S. handbags market, and competes with
industry players including Louis Vuitton, Gucci, Longchamp, Vera Bradley, Fossil, Chanel, Guess, Marc
Jacobs, Juicy Couture, etc. ((Duking It Out in Womens Handbags, Barrons, February 23, 2013))

In North America, Coach is increasingly facing intense competition from upcoming fashion
companies such as Michael Kors, Tory Burch and Kate Spade. The North American sales growth of these
new players was recorded at 64.5%, 55.1% and 47.6% in 2012 respectively, and this significantly
outpaced Coachs 6.6% growth. [1]

We believe the rising competition in the North American handbags and accessories market is an
overriding concern for Coachs stock in the near term. Its comparable stores sales declined in the last
quarter and we believe this could continue in the near term.

Coach is undertaking a transformation strategy to evolve into a global lifestyle brand anchored in
accessories. However, we believe this transformation will take at least a few more quarters to reap the
desired results.

Increased private label offerings by wholesale customers also increases the competition for
Coach.
Bargaining Power Of Customers

Coach sells through both, the direct-to-consumer channel and the wholesale channel. The direct
channel, which includes Coach operated stores and e-commerce sales accounted for around 89% of its
total sales in fiscal 2012.

Since wholesale customers account for only around 10% of the total sales, we believe their
bargaining power is limited.

We think the bargaining power of end-customers is moderate. Coach has positioned itself as an
affordable luxury brand and enjoys strong brand recognition due to its high quality products. However, its
North American consumers are increasingly gravitating towards newer fashion brands such as Michael
Kors. Hence, Coach is losing some of its exclusive appeal to these upcoming brands.

We believe that the customers bargaining power will remain moderate in the future as Coachs
efforts to reinvigorate its brand appeal will be offset by rising competition in the market.
Threat of New Entrants

To start up a new brand, significant capital expenditure is required for marketing and floor space.

Brand recognition and loyalty are among the main factors that drive middle-to-high income
earners towards luxury companies such as Coach. A new player would find it difficult to achieve this
position without making significant investments.

However, the internet business has low barriers to entry and new players selling apparel,
accessories and footwear online can emerge in the online sector.
Bargaining Power Of Suppliers

Coach does not manufacture its own products. Instead, it relies on manufacturers located in
various countries such as China, Vietnam, India, Philippines, Thailand, Italy and the United States.

In fiscal 2013, there was one vendor that contributed around 12% to Coachs total units. We
believe this player holds some bargaining leverage as there are high switching costs involved in changing
suppliers.

However, no other individual supplier provided more than 10% of Coachs total units in fiscal
2013. Hence, their bargaining power is limited.

We believe the increased costs of raw material and labor are usually shared by suppliers with
their end customers. Hence, Coach sources its products from various geographies to limit the impact of
inflationary pressure.
Threat Of Substitute Products

Coachs products are purchased by people in the middle-to-high income group. As consumers in
this income group like to wear high-end luxury brands to display affluence, the demand for brands like
Coach will continue.

However, counterfeit products represents a grave threat for the company, especially in emerging
markets such as China. As the quality of counterfeit products has been improving over the past few years,
we believe this problem has the potential to dilute the companys brand value. Hence, this is an area of
concern for the company.

Opportunities and threats

1. 9. Market analysis the UK and Irish market
2. 10. Value and price-consciousness Technology developments Particular features Role of the
Internet 37% population purchase online Ethics trends Handbag market trends
3. 11. Luxury brands Department store Clothing retailers Specialist in accessories Lot of
independent designers Lot of competitors

4. 12. Optical fiber fabric By Lumigram Lamp handbag : by Lexon Threat of substitute products
5. 13. According to the PESTLE Analysis In Europe, the handbags market is expected to
increase by 2015 Non-food retail sector : increase of 15% within 5 years The luxury sector
is expected to grow over 50% by 2015
6. 14. Opportunities Threats -Internet, Smartphones and e-commerce continue to growth up
-Technology and innovation are in the trends -Ethic market -Non-food retail and luxury sector
are not affected by crisis -Large segment market -Strong competition with lot of big
competitors -Established competitive brands -Substitutes products at low cost -Short Product
Life Cycle
7. 15. Segmentation, Target and Positioning
8. 16. SEGMENTATION Segmentation by gender, age, income and purchase behavior
9. 17. TARGET Sell opportunities 25-50 years old Middle class Focus on practicality,
originality, quality and ethics
http://www.slideshare.net/audreyjaspart/launch-a-new-handbag-brand-in-the-ukand-ireland

For pricing

2. Pricing for Market Penetration

Penetration strategies aim to attract buyers by offering lower prices on goods
and services. While many new companies use this technique to draw attention
away from their competition, penetration pricing does tend to result in an initial
loss of income for the business.
Over time, however, the increase in awareness can drive profits and help small
businesses to stand out from the crowd. In the long run, after sufficiently
penetrating a market, companies often wind up raising their prices to better
reflect the state of their position within the market.

http://quickbooks.intuit.com/r/pricing-strategy/6-different-pricing-strategies-whichis-right-for-your-business/