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00:00Pleased to say that Lou Frankfurt joins us right now, the chairman emeritus over at Coach Brand and the author of the new book,
00:06Bag Man, the story behind the improbable rise of Coach. Great to have you here.
00:10And kudos to whoever came up with that title. Was that you or was that your editor?
00:13I think it was.
00:14All right. Well, I mean, it's fitting because when you think about the evolution of what Coach, what we know Coach to be,
00:21you kind of forget it started out very small. It was a local here in New York, relatively niche brand, wallets, other small leather goods.
00:29How do you take something like that and think to yourself, I can make this into something that is for everybody?
00:36I think you need to start with belief in possibilities. You need to have imagination.
00:42You need to have immersive curiosity and you need to really focus on your the women and men that are buying the product.
00:52And even before I started at Coach, while it was very small, it had a very devoted following.
01:01And some people even felt it had a cult following. And that intrigued me.
01:06When you started to look at the customer base, I read that you spent a lot of time trying to figure out sort of what they wanted,
01:15trying to create, I don't know if data is the right phrase to use, but the idea of trying to be a little bit more systematic
01:21in assessing who the consumer is and what they want.
01:25How did you do that in the 1980s relative to today where you have much more access to data?
01:30Well, from the very beginning, we interviewed consumers in stores at our factory.
01:41We did quantitative research and we combined that with understanding where they would want to shop.
01:50So through today, the leadership is focusing on where did consumers shop yesterday, where do they shop today,
02:00and where will they shop three years from now and what do they want to buy?
02:04And from the very beginning, I was focused on giving consumers the opportunity to purchase products in whatever channel they wanted.
02:15And we opened a catalog. We were a wholesale business when I started.
02:20Within the first year, we opened a consumer catalog.
02:23And then a few months later, we opened the first coach store, a small store on Madison Avenue.
02:31In the first 12 months, it did over a million dollars, which would be...
02:35And when you say that was a small store, I mean, we're talking like 400 square feet or something.
02:39Exactly.
02:39But not everybody was on board with that. A lot of people thought that you were crazy.
02:42Well, I was told by a colleague, could I get my job back in city government?
02:47Because the founder was fickle.
02:49And what happened in the first few months, we had, during the holiday season, we had lines out the door to the corner.
02:58And I wound up having staff give people candies and drinks.
03:04And when we had three channels, we called ourselves a multi-channel business.
03:09Today, they're called omni-channel.
03:11And again, you need magic and logic.
03:16So the logic comes in with having a mindset for the greater good, being value-driven.
03:25Metrics are really important. Numbers don't lie.
03:29And we walked between magic and logic.
03:32And today, Todd and Stuart and the team continue to do that.
03:38Todd Kahn is now the coach brand president.
03:41Right. Magic and logic. I do love that pairing there.
03:44It is interesting. I mean, you think about when you started at Coach, the accessible luxury segment.
03:49That exists now. That's well-established.
03:51You, of course, were one of the pioneers of it.
03:53And I wonder just about the genesis of that.
03:56When you think, of course, not just about channels, but price points.
03:59How did you identify that as really an area for growth?
04:02That's a great question.
04:03And in fact, we coined the term accessible luxury before we went public in the year 2000 when it was still a single lane.
04:11But we thought it could turn into a superhighway if we continue to listen to consumers and be there when they got there with the right product, high customer service levels and enhanced environments.
04:25But again, we're a country of immigrants.
04:28And in 1980, there was mass and there were a small number of small brands, somewhere between mass and luxury.
04:40And luxury at the time, the European brands only had a small number of stores in major cities.
04:47But we had a growing middle class, and women really valued their bags.
04:52And I've always believed in democratized luxury.
04:57The concept, that's about America.
04:59It's a melting pot.
05:00And I wanted to bring a product to market that would appeal to the growing middle class.
05:07And we targeted top 20%.
05:09I am curious, though, too, because around this time that you were doing this, I mean, we talk about LVMH.
05:13I mean, Louis Vuitton was a relatively small company at the time, a brand, I should say.
05:18So what was the difference between where Louis Vuitton went and where Coach went?
05:24Well, I studied Louis Vuitton and admired them from the beginning and still do, of course.
05:31They make a great product, and the service levels are very high.
05:35What attracted me about LVMH is that they control their destiny.
05:39They only sold in their, at the time, they only sold in their own stores.
05:44And we had, when I joined, we only sold in wholesale.
05:47So I had a vision that if we could open our own stores, staff it with knowledgeable, empathic people who would provide good service,
05:57we would be able to build a business that would really effectively be a lane in the middle.
06:06And that's what we did, and the team continues to do that.
06:11And I have to imagine that was an area where magic plus logic comes in, because the logic is there.
06:16Women value handbags, and you want to democratize the access there.
06:20But, and this isn't just for handbags, too.
06:22You think about brands across categories, across industries.
06:25Once you go down in price, it's easy to sort of degrade the value of your brand.
06:31So, I mean, how do you protect against that?
06:34And when you take a look across industries right now, where that has happened, you discount,
06:38and then maybe you lose some of your value and your magic there.
06:42I mean, how would you guard, how do you guard against that, basically?
06:46Well, in several ways.
06:48First, intrinsically, the product you're offering has to represent good value.
06:56So, from the very beginning, we offered a product made out of natural leather that actually burnished, got better over time.
07:03We priced it in a very accessible way.
07:07And during tough times, you need to manage inventory, anticipate that,
07:13so you're not in a situation where you have too much inventory.
07:16You also have to find other ways to dispose of excess product, and there are always opportunities to do that.
07:26But going on sale to reduce inventory broadly is something that can stay in people's minds,
07:36and I caution everyone not to do that if they can avoid it.
07:41We talk about the growth of Coach from a multimillion-dollar business to a multibillion-dollar business,
07:47but, of course, that's not in a straight line, never is for any company, particularly in the retail and apparel space.
07:52I'm sure you're aware of the resurgence that we've seen in interest for the Coach brand,
07:56particularly amongst younger consumers right now.
07:59What do you make of it?
08:00I mean, particularly not only the job that Todd is doing as Coach brand CEO and Joanne is head of Tapestry,
08:06but also just the idea that it's back in the zeitgeist, sort of what drove that,
08:11and how do you maintain that going forward?
08:14They are in the sweet spot.
08:16Coach is in the sweet spot.
08:17I'm thrilled that it's going through maybe its fifth renaissance.
08:22I've transformed the business multiple times, and you need to keep your eye on the consumer.
08:29And Gen Z today may only represent 15% or 20% of spend and accessories,
08:35but in 10 years it will represent 40%.
08:38And people who follow Gen Z's lead, and Gen Z, as you well know, they're into authenticity.
08:47They're into sustainability.
08:50It's really, in many ways, back to the future by reinterpreting who we want.
08:57We have product like the Brooklyn bag today that is a 21st century version of bags we had in the 1960s and 70s.
09:09Where does growth come, though, from in the luxury industry?
09:11This has been a big issue with the European brands, the idea that they're kind of tapped out,
09:15that basically anybody who wants a Louis bag or a Gucci purse or whatever probably already has one.
09:21With Coach, and I know it's a slightly different category,
09:24do you worry at all that there might be sort of a cap to just where you can grow and how much you can grow?
09:30The short answer is you worry about everything,
09:34but however you try to put it in some form of perspective.
09:38So there are 25 million bursts each year in markets where coaching thrives today,
09:47and those are target consumers.
09:50There's second world countries such as China with an incredibly burgeoning middle class,
09:59and Coach, we tapped into it 25 years ago,
10:03and Coach has over 300 locations, and the business is growing more.
10:08You also innovate, and under Todd Kahn's leadership,
10:12recently Coach introduced coffee shops, Coach coffee shops, next to Coach stores,
10:20and that really builds community because you spend 30 or 40 minutes in a store,
10:25and then you go next store, and you look at everyone's bags,
10:28most people carrying Coach.
10:30They're part of the same community.
10:31The coffee shops are profitable, I'm told,
10:35and sales in the stores have grown on a like-for-like basis significantly
10:41because of the extra time people are spending.
10:45So you need to reach consumers wherever they are,
10:48and young people are looking to shop immediately,
10:52and they're much more channel agnostic, whether it's TikTok, YouTube,
10:56wherever they go, they would like, you need to be there when they get there.
11:03And I think innovation, curiosity, thoroughness,
11:08recognizing that you need to always run scared,
11:13no matter how well you're doing is critical.
11:16Complacency has no place at Coach, and I recommend any company.
11:23You cannot be complacent.
11:25Always run scared.
11:26That is certainly what I do.
11:27I do want to talk a little bit about some of the other brands
11:29that you're involved with as well.
11:31You're the co-founder and CEO of the Benvolio Group,
11:34have been since 2014.
11:37When you take a look at where the opportunity set is right now,
11:41what are some of the brands that really stick out to you
11:44as they're doing it right?
11:46Brands that we invested in?
11:47Certainly.
11:48Sure.
11:48Well, our current brand is Veronica Beard,
11:53and they are, as you know, they're a contemporary women's brand,
11:57and we invested at the very beginning,
12:03shortly after they went to market,
12:07and we're very active with the Veronicas,
12:10and they have done a fabulous job in building a loyal consumer franchise.
12:17Yeah.
12:18It's anchored in jackets.
12:19One of the things that attracted us is that women's jackets
12:23is the third most loyal category.
12:27Intimate apparel first, bag second, and jackets third.
12:31And even through today, 35% of their sales are jackets,
12:37and that anchors the brand.
12:39And you want imagery that works,
12:42and they are very consumer-focused, brand-focused.
12:46They are product-focused.
12:48And you want imagery that works,
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