How do you successfully scale a fashion sneaker business in 2020? In a saturated market, it’s a complex question that many executives are pondering at the dawn of a new decade.
As Coach launches its most ambitious footwear initiative in years — the CitySole kicks collection — the team is confident it has all the right ingredients to make sneakers happen.
Original technology. Sharp price points. Star-powered marketing. Unexpected retail distribution. Digital domination.
“Everyone has a sneaker. We knew we had to come up with an exceptional product,” said Coach CEO Josh Schulman, who slipped on one of the lightweight CitySole styles for the first time during a recent FN cover shoot alongside creative director Stuart Vevers. The designer, a self-professed kicks fanatic, said he rarely wears anything else.
Likewise, consumers continue to show unbridled enthusiasm for sneakers as other areas of the footwear market suffer. The momentum around the category fueled the duo’s decision to put CitySole at the center of its footwear plan. “As we conceptualized different opportunities for growth at Coach, we focused on shoes as being a natural driver for us,” said Schulman, who previously ran Jimmy Choo. “The idea is to establish CitySole as the anchor.”
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The collection has three distinct styles: the Court takes cues from basketball sneakers with a triangular toe box; the Runner draws inspiration from the silhouettes of running shoes with grooved details on a sturdy heel for added traction; and the Lowline is a minimalist take on a classic low-top.
The team worked with Italian technology specialists to develop the components for the collection, which plays up flexibility and comfort, and retails for $125 to $250. “We spent the last 18 months focused on getting the product and the price/value component right,” Schulman said. “Price alone doesn’t sell something. You need to be fashion relevant. When we’re at our best, we’re touching a broad spectrum of customers. We have [people] who wear luxury and buy Coach, and then customers who are also buying other brands in our space.”
CitySole will roll out globally in about 700 Coach stores as well as in 175 Macy’s locations. Bloomingdale’s 59th Street in New York is making a splash with a pop-up and store windows dedicated to the product. And in an unconventional move for Coach, the label also is working with Foot Locker for the first time as the retailer ramps up its own fashion lifestyle business. “We want to build footwear credibility outside of our normal distribution,” Schulman said.
Foot Locker will have a temporary CitySole space inside its Time Square location in New York through the end of the month. Outside, the throngs of commuters and tourists strolling through the area will see rotating images of campaign stars Jennifer Lopez and “Just Mercy” star Michael B. Jordan on the athletic giant’s huge digital screen.
“Pop-ups tend to have a bit of a multiplier effect because of social media that’s generated,” Schulman said. “We’re also doing some interesting things digitally, whether it’s on TikTok, Weibo or Instagram Stories.”
Lopez — fashion’s most sought-after spring ’20 face —and Jordan have already appeared in spots for the label this season. But the footwear-centric ads signify a major investment in the category for the first time since Coach took shoes back in-house two and half years ago.
“You haven’t seen shoe marketing from us, and that’s been somewhat deliberate,” said Schulman. “We’ve been working to get the assortment to the place where we felt we could be as authoritative in the shoe category as we are in leather goods.”
The executive is quick to point out that Coach was actually a pioneer in the sneaker space, more than a decade before the athleisure revolution took hold in the industry.
“If you go back to [the mid 2000s], the Coach logo sneaker was one of the first branded fashion sneakers. It was an enormous success back then. That was all done under license. But the brand, and particularly the shoe category, got overextended and had significant presence in the off-price channel,” he recalled.
A lot has changed since then, and a healthy Coach brand is parent company Tapestry’s standout performer during a challenging period for the company, which has struggled to overhaul Kate Spade and experienced uneven results at Stuart Weitzman.
That’s why it’s critical for the company’s flagship brand to tackle new territory, according to market watchers.
“Product innovation is essential, especially for Coach, which is focusing on enhancing their relevancy and excitement to the consumer. New products are a way of capturing interest and market share,” said Dana Telsey, CEO of Telsey Advisory Group.
With bags still the vast part of Coach’s overall business and ready-to-wear a growing priority, shoes are still emerging. The category accounts for about 5% of overall revenues, with the goal to grow that percentage to 9% in fiscal 2023. Overall, Coach’s revenues were about $4.3 billion for fiscal 2019, representing 71% of total company sales.
As the company intensifies its focus on footwear, Schulman is making key hires to bolster the executive team. Most recently, he tapped Susan Pellish-Thaler, who was a top exec at Camuto Group, as VP of wholesale for North America. “She has a deep history in footwear, and we’ve also added merchant and design talent with experience from [companies] as diverse as Balenciaga, Sam Edelman and Adidas. Having this type of shoe experience in-house has allowed us to sharpen our focus.”
While much of the action has been behind the scenes so far, shoes are now being featured more prominently in many of the label’s stores, which have undergone a refresh to adapt to shifts in the market and a rapidly evolving consumer. For example, at the Hudson Yards boutique, downstairs from Coach’s offices in New York, the layout takes a gender fluid approach. “The shoe room is pink, and a few years ago, you would have thought that men wouldn’t shop in a pink room,” Schulman said. “We haven’t had one comment about it. It’s eye-catching and we’re rolling it out in other regions.”
For both Schulman and Vevers, Coach’s mission to be an inclusive brand — both internally and externally — is critical.
The label has aligned itself with fashion activists such as Billy Porter, who performed at the Macy’s Thanksgiving Day Parade on the Coach float in an animal print shearling coat and over-the-knee platform boots.
“After the parade, we sold a lot of those coats to both men and women,” Schulman noted. “We also had a lot of traffic with people looking for the platforms.”
Porter is clearly comfortable in the label, which has become a go-to style choice for him during awards season. Most recently, the performer was trending at The Grammys wearing a crystal-embellished lampshade hat and matching Coach boots.
“We want to be inclusive and welcome people,” Vevers said. “That’s a big part of what Coach is.”
The Road Ahead
Schulman is particularly excited about launching the new CitySole collection in China, where the brand has been focusing much of its attention.
“Notwithstanding disruption from geopolitical issues, China remains the largest growth opportunity for Coach globally. We have a terrific team on the ground that has deep experience navigating the various political and business cycles. We have to be nimble to react quickly,” Schulman said.
More immediately, the executive and the rest of the Tapestry team are monitoring the coronavirus situation, a concern across the entire industry.
“While it is too early to assess the potential impact on business, we are [watching it] closely. Our focus is on the health and well-being of our China team, their families and their local communities,” Schulman said.
Longer term, the CEO said Chinese consumers continue to be hungry for fashion. “We often find that Coach is among their first premium purchases,” Schulman said, noting that after it debuted on Alibaba’s Tmall platform, more than 80% of customers were buying the label for the first time.
With more than 200 stores in China, Coach is targeting a growing subset of consumers. “We have a target population north of 100 million people [who have a household income of $10,000 or more], and each year this group is growing by 8–10%,” he said.
Coach is also banking on further acceleration in Europe, where Schulman said the business is underdeveloped. “While our business there has historically been heavily influenced by tourists, we have seen an inflection with local customers during the past year as we have built a symbiotic network between retail, wholesale and e-commerce,” Schulman said, noting that Indonesia, Thailand and India are also top of mind.
The North American market has been more challenging for Coach, like many other fashion players, as traffic declines across the retail sector. It hopes to invigorate its own stores with the expansion of Coach Originals, a bag collection and experiential pop-up shop concept that celebrates the brand’s heritage and is curated by Vevers.
Schulman, former president of Bergdorf Goodman, also believes there’s still potential in the department store sector. “They’re getting a bad rap. Obviously, there are big secular and structural challenges in the industry,” he said. “But there are lots of examples of stores that aren’t just reacting well to the digital age but thinking proactively about how people are going to shop in the future.”