By now you likely know that Coach is struggling. The New York-based brand, which was quite successful in the 1990's and 2000's, has hit a rough patch (to put it lightly). Consumers are shunning its loud logo-covered goods in favor of its fast-growing accessible luxury brand rivals, and the result is an erosion of marketshare and a corresponding decline in sales, particularly in North America. As of late last month, sales were diving even further, "in a spiral that shows no signs of stopping any time soon," as the Wall Street Journal put it. So, like any good brand, Coach has responded by working to revamp its image. It is upping the ante in terms of advertising (enlisting top models and photographers), bringing in a new creative director (Stuart Vevers, who came from LVMH-owned brand Loewe), upping prices, closing a bunch of low-performing stores, and largely cutting out the “C” print that long-dominated its offerings and over-saturated the market. Coach is also taking additional steps to re-brand itself as the relatively high end brand it once was. This includes filing a lot of trademark infringement lawsuits (think: 100+ lawsuits last year alone), and filing more lawsuits, as recently as this week, against an array of counterfeiting parties.
Sure, Coach has been awarded some big judgement amounts. Last year, the brand was awarded $257 million in damages in one case, and $44 million in another - just to name a couple. But, as we have told you in the past, the damage awards in online counterfeiting cases are almost never collected in any meaningful manner. In the U.S., government initiatives, such as “Operation In Our Sites,” have been put in place to recover funds (such as money in the defendants’ PayPal accounts), but even these do little to collect large sums of money, as these parties have learned to outsmart and thus, anticipate such actions. Moreover, the chances of any of the PayPal accounts associated with these counterfeit-hawking websites having as much as a million dollars in them is slim. So, one of the key benefits from these lawsuits seems to be injunctive relief (meaning the websites must cease operations) and ownership of the domain names on which the infringing goods were being sold.
As for why Coach has really ramped up its anti-counterfeiting litigation, there are two obvious reasons. One: It is the trademark owner’s duty to police its trademarks (aka locate and investigate unauthorized uses of the mark, although there are services to help with this process) in order to ensure that the mark does not lose its distinctiveness and does not become diluted by widespread unauthorized use. Such genericization of a trademark interferes with its ability to serve as an identifier of its source (part of the underlying theory of trademark law) and is essentially the equivalent of an abandoned trademark.
Two: In addition to the aforementioned legal basis, it is crucial for Coach to reign in such rampant unauthorized use of its trademarks because the existence of an enormous amount of fake “Coach” items on the market (in addition to the number of authentic Coach items) has created a sense of market saturation, which undermines one of the key sentiments of luxury fashion: exclusivity (or at least a sense of it in this case, as Coach is more of an accessibly luxury brand than a high fashion one, and so, the rules aren’t quite as strict, so to speak). Without some sense of unattainability (mixed with appealing design, of course), what is the incentive to buy from Coach as opposed to Michael Kors or any of the other affordable luxury brands? This is where Coach struggles, and where, given the market forecasts, Michael Kors will likely find itself in the not-too-distant future.
Thus, Coach has some work to do. In addition to protecting one of its most valuable assets, its intellectual property, Coach has to rebrand itself and shed the “mall couture” (as we call it) connotation that is now heavily associated its brand. But what may seem like a battle that was lost before it even started, I’m not sure that’s the case here. Vevers is certainly capable. He seems to be just what Coach needs: a solid resume of high end experience. He has designed for LVMH brands, Bottega Veneta, Givenchy, Louis Vuitton, and most recently, Loewe. And also completely reinvigorated leather-goods brand Mulberry, which was what the Los Angeles Times called “a fusty British relic” when he arrived in 2005. Also, with some time, some strong logo-free designs and some outstanding advertising, Vevers may be able to pull this off. My guess is that it will not be as difficult in metropolitan areas, where the truly tacky Coach designs of the early 2000′s are ancient history, save for Canal street. As for whether consumers will be shelling out the “$5,000, $2,000, $3,000″ for a Coach bag as the brand’s CEO Victor Luis hopes, it certainly isn't happening now.
The Wall Street Journal reported late last month that the company’s newly designed handbags, shoes and clothing, "while showing some early signs of winning over new customers in the three months that ended Sept. 27, aren’t offsetting the lost sales as the company scales back discounts and are costing more to produce, which is eating into margins." The company has said it will need at least through next summer to turn things around. So, stay tuned …