affordable luxury strategy

SCHMOOZY FOX in FT's Business of Luxury edition

On June 6, 2011 he Financial Times' Business of Luxury supplement featured an article about diffusion brands and affordable luxury (you might need to register with FT to view the article). The article addresses benefits and possible disadvantages of introducing the so called diffusion brands -- a strategy often used by luxury brands to cash in on their well-established image and boost revenues by positioning a new, more democratic, child brand as affordable luxury.  An example of this strategy is the luxury brand Armani launching its more affordable diffusion brand Armani Exchange. I was interviewed for this article, and you can read my views there. Whereas launching affordable luxury brands as diffusion lines is often practiced by luxury companies, creating an affordable luxury brand from scratch is also possible, and in many cases very successful. An example is Victoria's Secret in the United States.

Coach finally comes to Europe

Snapshot of the Coach web site

Coach and Affordable Luxury brand strategy

Coach -- a brand of hand bags from the US -- has frequently featured in class discussions during my marketing courses.  One could argue that its phenomenal brand success story can be attributed to a carefully orchestrated strategy of affordable luxury -- selling high quality bags at high prices, and at high volumes. In fact, its success has been so big that it has posted sales of $ 3.5 billion in the United States in the last financial year.

I knew about Coach not only from my nerdy MBA books.  I visited a Coach shop for the first time during my first visit to the US, back in 1994.  I went to a Coach shop again in 2000, when I was studying in Boston.

Both times, I was almost mesmerized by the almost magical effect that this brand seemed to have on those who visited its stores.  American women looked happy and proud to leave with a new status symbol in their hands.

But to the Europeans, spoiled by  a massive choice of high quality brands of hand bags, Coach has been literally unknown. With the competition so fierce, no wonder Coach waited for so long before entering Europe.

Coach in Europe -- lessons for other American brands

And finally, here it is. It chose to open its first European shop-in-shop in Paris -- a logical choice of the iconic capital of European fashion and style. The grand opening took place at Printemps on August 31st.

The distribution strategy that Coach will adopt will play an extremely important role for the degree of its brand success in Europe.  Provided it is able to compete with many European brands in the same product category, it will establish a good pathway for other American affordable luxury brands in Europe.

A specific US brand with a successful affordable luxury positioning is Victoria's Secret.  A sure winner on the US market, Victoria's Secret is likely to face a challenge of many established lingerie brands on the European market. It should closely watch Coach and learn lessons from its brand strategy in Europe.