Tapestry Inc – Modern Luxury Update – 12 May 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Sonali Vanjani (SV)
Former VP, Business Integration & Strategic Pricing at Tapestry Inc
Agenda:
1. Strategic update across Tapestry's (NYSE: TPR) key brands – Coach, Kate Spade and Stuart Weitzman
2. Modern luxury trends and consumer stickiness
3. Digital strategy and e-commerce growth
4. China expansion strategy
5. Supply chain pressures and margin outlook
Contents
Q: Could you give an overview of the luxury accessories and fashion industry and its main drivers? Who
would you classify as the top competitors to Tapestry and its brands?
3
Q: Were there any other important pre-coronavirus trends? How have they changed since the pandemic? 4
Q: Could you outline Tapestry’s business lines and strengths? How does the company break down
geographically? Is it stronger in some markets? Why do you think it has that market influence?
Q: Where do you think the next demographic opportunity is for Tapestry?
Q: How does Tapestry connect to the young consumer? How is it strategically successful in doing so?
Q: What are the difficulties in penetrating China’s market? How did Tapestry overcome those difficulties?
Why do you think it was successful in doing so?
4
5
5
6
Q: You mentioned a social-media approach and targeting influencers in the US. Is that a strategy in China as
6
well, or is there more nuance to that approach?
Q: How do companies such as Tapestry take advantage of the digital landscape? What makes a brand
successful in being digitally focused? How digitally focused does a brand have to be to attract its preferred
clientele in China?
7
Q: What was the largest challenge you faced when trying to expand Tapestry in China?
Q: Who do you think is driving price discrepancy or sensitivity for the US consumer? Is Tapestry doing an
adequate job at controlling pricing? What could it do better?
Q: What are your thoughts on the wholesaler and retailer approach to promotional activity? Do you think
Tapestry should have more control over its distribution footprint and pricing?
Q: When do you think Tapestry decided to take a data-driven approach? What were the reasons for doing
so?
7
8
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Q: How do the Kate Spade and Stuart brands fit in with Tapestry’s overall strategy? What are the challenges
in maintaining and scaling these brands?
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Q: Could you elaborate on what it means to be a lifestyle brand? Do you think that definition is consistent
across the industry, or does everyone have their own take on what it means to be lifestyle?
Q: How would you say the digital shift has impacted marketing spend and ROI? What are the challenges of
successfully marketing your product when the consumer is no longer in front of you?
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Tapestry Inc – Modern Luxury Update
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview, entitled Tapestry Inc – Modern Luxury Update. I’m Nyree
Hinton, and I will be facilitating today’s Interview with Mrs Sonali Vanjani, former VP, Business Integration &
Strategic Pricing at Tapestry Inc.
Sonali, before we get started with today’s Interview, please state I agree or I disagree to the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information, or any other information which is confidential, during this Interview.
SV: I agree.
NH: Thank you. Could you start by giving our audience an overview of your background, and the various roles
you’ve held in the industry?
SV: I’ve spent over 15 years in the retail industry, mostly in direct-to-consumer. I spent most of my career at
Coach, and then Tapestry. I’ve held various roles across my career at Coach, starting out in marketing, but
most of my experience has been in merchandise planning and inventory planning. I’ve worked across many
different regions and different business models within the Coach brand, so direct-to-consumer, North
America, Japan. I worked in China, as well, when we bought back the business from the distributor. I’ve
worked in international wholesale, so got a different experience in terms of working with third-party
distributors all over the world. I also held a Global Merchandise Planning position, where I oversaw all
categories and all regions, and worked directly with each of our regional buyers as well as our global design
and global merchandising team.
The last two years of my career at Tapestry, I moved out of Coach over onto Tapestry, where I got exposure to
the Kate Spade and Stuart Weitzman brands, and in that capacity, I took on a Strategic Pricing role, where I
worked with our merchants on the home base price as well as our prices all over the world, and what that
architecture should look like. Then, in my last nine months at Tapestry, I moved into an analytics role. I was
still doing the pricing role, but I moved over into an analytics role, where I worked really closely with our data
science team and our product engineers to help with the acceleration programme, in terms of how we use
better data to make everyday business decisions, more from a merchandising and planning and assortment
perspective.
[00:02:59]
Q: Could you give an overview of the luxury accessories and fashion industry and its main drivers? Who would
you classify as the top competitors to Tapestry and its brands?
SV: Obviously, most of my experience has been at Coach and Tapestry. From a global fashion accessories
luxury market, I see three windows as it relates from a Tapestry perspective. You have the high-end luxury
players that Coach and somewhat Kate Spade and Stuart Weitzman look at, and look at in terms of same-
consumer shopping, like LV, Gucci, Burberry, Prada, that are really in the fashion accessories, handbag space.
Then, you have people like Michael Kors and Tory Burch that sit somewhere in the middle, more of these
aspirational luxury players that sit more with Coach and Kate Spade. Then, depending on the region that we’re
looking at, there are other players that have come into play that Coach or Kate Spade would consider
competitors. Furla is also extremely important in Japan. The handbag space is really the main driver, as well
as accessories, but there’s obviously, over the course of the last few years, a lot of these brands are competing
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on becoming lifestyle brands, so expanding into ready-to-wear apparel, footwear, as well as other accessories
like jewellery and watches, etc. With the pandemic, I think this changes a lot, and I think there’s a lot of
increased confidence that a lot of these players and the industry itself are rebounding, but it’s because they’ve
pivoted very quickly. It took a little time, but they’ve pivoted more to digital and really focusing on that area.
When you listen to all the reports of all these luxury players, that’s where the growth is coming from.
[00:05:51]
Q: Were there any other important pre-coronavirus trends? How have they changed since the pandemic?
SV: Before COVID, there was emphasis on digital, for sure. That was the wave of the future, it’s something
we’d watch, but obviously, the pandemic has completely accelerated that, where you had no choice. That’s
where business was happening. That’s where you had to meet the consumer, because they were not going out
physically into stores. For sure, that’s one big change. I would say, even pre-pandemic, there was a lot of
emphasis on experiences. The best experiences you can have are instore, in my opinion, and so there was a lot
of emphasis on doing special collaborations instore or events. Naturally, that changed, and people had to pivot
in ensuring that they can adapt to move seamlessly between the instore and online experiences, so they’ve
moved some of those experiences to online during the pandemic, post-pandemic. Took some time to figure it
out, but they, I think, have done it and are doing it successfully. That was definitely one trend, and I think that
probably will change back, to a certain extent.
I think the store is still very relevant, and obviously, with some positive news out there, with the vaccine roll-
out, etc, people will be going back into stores, and you absolutely need that touchpoint, but there’s no question
that this pandemic has accelerated the omnichannel movement. It was already there, but this really
accelerated that, and I think that consumers that may have been going mostly into stores have changed their
behaviours, to becoming much more omni now and shopping across channels. That’s definitely a place people
are focusing on, to make sure that the three or four channels, whether it’s wholesale online, factory stores,
outlet stores or the full-price stores, that the experience is super seamless. It was not like that pre-pandemic,
and that’s just accelerated it. All of these things were there pre-pandemic. Again, the pandemic just
accelerated them, so social media, social commerce. I think China was ahead of the game, the Chinese
consumers were ahead of the game vs the US in terms of using social media to drive purchases, but that has all
accelerated, as well. It was there before, we were watching and learning and knowing that this was a place
where we should play, but again, it’s now extremely relevant, and that’s where you have to meet the consumer,
because that is where they are today, especially the newer market, the newer generations.
[00:09:19]
Q: Could you outline Tapestry’s business lines and strengths? How does the company break down
geographically? Is it stronger in some markets? Why do you think it has that market influence?
SV: I’ll break it down in two ways, just in terms of categories and then regional. Obviously, Tapestry,
specifically focusing on Coach, is extremely global. Let me start with categories. We know handbags are really
what drives our business. That is what they’re known for, as well as small accessories, so small leather goods,
wallets, etc. Those are really the main drivers of their business, but again, as I mentioned before, this is a
trend. Most of the luxury players now are diversifying and expanding their portfolio to become more lifestyle,
and so they’re trying to grow their ready-to-wear businesses, their jewellery businesses, even their men’s
businesses. They’re definitely smaller to the pie. The focus will always, in my opinion, be on handbags and
small accessories. That’s their bread and butter, but these other pockets of apparel, jewellery, are becoming
increasingly important, and it does differ by brand. I would say that Kate Spade obviously has a larger hand in
more of the playful accessories like jewellery and the home categories than Coach. Then, obviously, Stuart
Weitzman is all about footwear, but they are trying to also look more into, “How we do expand into lifestyle?”
getting into smaller accessories and handbags, etc.
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From a regional, geographic perspective, for Tapestry as a whole, North America is a huge driver of the
business, but China is right there, and particularly for the Coach brand. Those are the two areas they play
really well in. There’s a lot of brand awareness, where there is still continued opportunity in both markets, I
think. As they think about especially the digital transformation and expanding their consumer base to the
younger generation, there’s definitely more opportunity, but those are really the drivers of the businesses from
a geographic perspective. I would say that there are definitely still untapped growth opportunities within Asia
and Europe for Coach. Also, if you think about Kate Spade and Stuart Weitzman, there’s definitely a presence
in China, but based on the success that Coach has had in China, there’s definitely much more room for those
two brands to grab market share within Asia and China.
[00:12:38]
Q: Where do you think the next demographic opportunity is for Tapestry?
SV: I would say, again, based on my opinion, women are 100% driving that business. You know that they’re
also the ones coming in to buy men’s products, as well, whether it’s for a gift or for themselves. They’re just
shoppers. I would say there’s definitely an opportunity. I think it’s smaller, though, because they’ve tried it
over time. I think it’s just a different need for purchasing. To actually target more to men’s is definitely an
opportunity, but I think it’s smaller. Honestly, this is just my opinion, but I think women will continue to drive
that business, and there’s no shortage. You can look at just the general information in terms of how often a
woman will replace her handbag. There’s a lot more newness, four times a year, while men probably, for at
least an accessory or a handbag, wait probably four years before they buy something again or replace their
existing. Looking at it vs demographics, I think women are going to continue to drive the business. I think,
though, from a demographic perspective, or a lifestyle perspective is how I like to look at it, and it’s happening
right now with the digital transformation, it’s going to be the younger generations.
I think the Coach brand, for example, has been around for so long that there’s so much brand awareness
around it, that you’re going where the opportunity and where the growth opportunity is. More of aspiring
fashion novices, for some of the younger consumers that have a different lifestyle in terms of the way they
shop, where it’s completely online and they’re very omni, may not be all the time as brand-loyal, because
there’s a lot of noise in the market, too, with some more of these direct-to-consumers and newer brands
coming along that have an easy value proposition. I think it’s going to continue to be extremely competitive,
but I think they’ve done a really good job with pivoting and gaining more market share with the younger
consumer across the globe. I think women will continue to drive that. It’s just probably the younger generation
is the opportunity.
[00:17:02]
Q: How does Tapestry connect to the young consumer? How is it strategically successful in doing so?
SV: They have data now on these consumers. They’re meeting them where they are, and they’re doing a really
good job of it. It is in understanding what their preferences in terms of their needs, what drives them to buy in
terms of the design aesthetic. You can see it with the Tabby collection. I’m focusing right now on Coach. The
Tabby collection is a collection that has been around Coach for two years. They’re continuing to make it a
legacy collection. A lot of the luxury players like Gucci and LV have had a lot of success in having evergreen
styles, where Coach had never really done that. They were constantly infusing newness. Everything was new,
new, new every quarter, and so they’re working on this different type of strategy, this longevity strategy. I
think it’s sustainable, but they are using that Tabby collection and doing fun, novel iterations of it, because
that is what this younger generation, this younger consumer, wants to see.
They want the newness, they want the newest trends, and you can see that with, I think it’s called the Puffy
Tabby or the Pillow Tabby. It’s a seasonal item. They took it, they ran with it, they put it on all the digital
platforms, they put it into influencers. Influencers are what drives their society right now, especially that
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generation. They put it on TikTok, they put it the hands, they put it on J-Lo. It was all over, and I would say it
was a success. It did really well. There was a lot of buzz around it. There were people driving to buy it. It’s one
of the iterations of Tabby that’s going to be in and out, and that’s the purpose, but as long as it can continue to
innovate on the trends and what that consumer wants, and then put it in the right place, ie social media, in the
influencers’ hands. In China, they do a really good job. I don’t know all the channels that the Chinese use, like
WhatsApp, there are so many other different ones, but putting it in those markets and marketing it that way is,
again, how they shop today, what drives them to purchase. They’re influenced by seeing it on a celebrity or
seeing it on an influencer. That is what drives them to buy, so I think they’ve pivoted, to address that market
and to be relevant for them.
[00:20:31]
Q: What are the difficulties in penetrating China’s market? How did Tapestry overcome those difficulties?
Why do you think it was successful in doing so?
SV: The Chinese consumer is very different from the US consumer, for the most part. We’ve known this for a
long time, ever since we’ve been in China. At least Coach has been in China since 2009. Again, Tapestry or
Coach is meeting them where they are. Shopping just makes them really happy. They are natural omnichannel
shoppers, and they do love a bargain, because they’re such good omnichannel shoppers. If they see a price,
they’ll look on Taobao or Tmall or whatever other outlet channel they have, to see if they can get a better price,
but I think what’s changed is that price is no longer paramount. I think the US consumer is definitely more
price-sensitive, but for them, it’s definitely the brand or the next hot thing, the biggest thing that is a status
symbol, I would say. That is what drives them, and I think that’s changed over time. I think Coach has done a
good job, and Kate Spade is learning from this, as well as Stuart Weitzman, of maximising their prices for this
market. They’ve done a really good job, and this wasn’t always the case. They’ve learned, and again, the
pandemic has accelerated that, to meet them where they shop. They’re now visible on Tmall and Taobao, and
they’re in all the channels that the Chinese consumers shop, so their brand awareness has definitely gone up.
Again, and this is public knowledge, there is a premium on the US products in China, and there’s not a lot of
price-sensitivity, especially if it’s a hot style like Tabby and the Tabby collection. I would say that that is what
has driven their success. It’s marketing right, marketing to the right people, from an assortment perspective,
understanding the Chinese consumer and the differences in terms of what types of styles they like vs the US.
Again, a lot of data on this now, in terms of the consumer data and using that data to inform assortments, and
using that data to inform designs, really putting the right product out. Logos are very important to them.
Hardware is very important to them. There are certain silhouettes that are very important to them, so ensuring
that we’re distorting the investments and distorting the assortments within China and maximising the price,
because I think they’ve found that they’re not very price-sensitive if it’s the right style.
[00:24:37]
Q: You mentioned a social-media approach and targeting influencers in the US. Is that a strategy in China as
well, or is there more nuance to that approach?
SV: I would say it’s very important for China and, again, the younger generation. The younger generation in
the US, the millennials, gen Z, whatever, they are very celebrity-, influencer-connected. That is what drives
them. It’s very similar, I think, to what we’ve seen with the Chinese. Regardless of age, they’re very driven by
that, too, especially the younger generation, of course, so it’s a very similar strategy, I would say. I think Coach,
Kate Spade, Stuart Weitzman, they’re really trying to find those brands. Those are the right brand
ambassadors for the brands in China, because that’s also what influences their purchase, for sure. It’s really
interesting. I think, from a marketing perspective, it’s similar. I would say the Chinese consumer is a little bit
ahead of the game, in terms of adapting and use of technology and their need for more digital and more
experiences, because they’re ahead of the game in terms of their omnichannel buying behaviours, as well, than
the US, I would say. Whatever I said about the social-media approach within the US, I would say it’s even
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more pronounced in China.
[00:27:09]
Q: How do companies such as Tapestry take advantage of the digital landscape? What makes a brand
successful in being digitally focused? How digitally focused does a brand have to be to attract its preferred
clientele in China?
SV: I’m still learning on the digital front myself, because it’s changed so rapidly and I’m of a different
generation, but I think, again, it’s using data. The beauty of it is, if you are very digital, there’s so much data to
collect and to better understand your consumers. It’s constantly being agile, constantly adapting on a daily,
weekly basis, to understand the data that you’re getting from the digital-shopping channels that they’re using,
to understand their purchasing behaviour, what types of sales or products they’re buying, what mediums
they’re using. Then, just staying really, really close to the technology that’s happening over there, and in the
US but over there specifically, and being able to pivot.
I think, from a Tapestry perspective, they’ve really built that out. They’ve built out the digital function. That’s
the one team, not the one team but, in addition to the data analytics team, that’s where all the focus is. That’s
where all the investment is, so they’re bringing in new people with those very relevant and recent digital
experiences and ensuring that they have the global piece of that covered, because it’s a little bit different in the
US vs China, which is what we’ve been talking about, in terms of the types of digital channels that they’re
using. Bringing in experts that are based in China that have that digital experience, bringing in experts that are
in Europe, bringing in experts that are in the US and being a part of the team, so you have that global
representation and you have people with the experience of the digital knowledge. It’s the data, it’s using that
data to understand them better and what types of products they like better, but then also having that talent
and investing in that talent on the digital front across the globe. That’s what has, I think, made them
successful.
[00:30:15]
Q: What was the largest challenge you faced when trying to expand Tapestry in China?
SV: Again, I think the pandemic has changed something a bit, and I’m coming at it because I did pricing for
them for a long time and planning and assortment. Again, I think it’s changed a little bit, and they’re learning.
This is from probably surprising new information, but good information, that they’re not that price-sensitive.
At least Coach and Kate Spade has watched Coach very carefully on price. How did we enter China from a
pricing perspective? It is, again, public knowledge that China has high premiums vs the US home base price. I
think, for Coach, it had always been a challenge, from a global brand perspective, of they charge those high
premiums for the same product in China vs the US, and they’ve perpetuated a third-party reseller business, so
to speak. Those are people that are coming from Asia. Now they can’t really travel here but, in the past, they
would come and go to the outlet stores or the full-price retail stores, and buy a whole bunch of stuff and then
sell it back to China for some profit. I think that obviously has some dilution in terms of margins for the
company, and also just brand consistency, as well.
I think Coach dealt with this ending. Maybe somebody is dealing with this problem still today, but I think it’s
changing a little bit, of this tale of two cities for the brand. You have the Coach China consumer who is willing
to pay a higher price for the Coach brand, and in terms of who that consumer is, where else they shop, they’re
more on the luxury end. Then, you have the US consumer who’s very different from that, who is more price-
sensitive, and they’re comparing to a different set of players. They’re the ones that are potentially shopping at
Michael Kors. Again, I think that’s changing a little bit because of the new customers that Coach and Kate
Spade are bringing in in the US, with the younger, the more digital-savvy consumer that, I believe, they’re
finding are not as price-sensitive in the US. Again, that issue of the tale of two cities is, “Are we luxury? Are we
accessible luxury? What are we?” across the globe. Again, it had had a different level, China vs the US, but I
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think that’s changing a little bit with the digital pivot.
We’ll see, but in my time there, that was always the challenge, of, “What are we standing for? How can we have
the same bags?” Tabby has such a global appeal. It’s a top seller in China, it’s a top seller in the US, but we
have very different prices for it, and the US consumer was much more price-sensitive. They were pricing it for
wholesale in the US, but in China, that consumer was willing to pay a lot more for it, and then you have this
problem where there’s just such a big price disparity, and so you’ll fuelling a third-party reseller business. It
was always a concern, but I think that concern, and I said it before, has dwindled down again with the
pandemic and the digital pivot. We’ll see, as we come out of it and we maybe go back to normalcy in the next
year or two, if that problem continues to arise. I don’t think it will, because I think they’re very much aware of
it, and I think, again, they’re using data to help drive more assortment decisions, and diversifying the
assortment that way for the Chinese consumer vs the US, because they have a lot more data in the back that
helped inform those decisions.
[00:35:15]
Q: Who do you think is driving price discrepancy or sensitivity for the US consumer? Is Tapestry doing an
adequate job at controlling pricing? What could it do better?
SV: That’s always a same thing. Even within the US, the pricing disparity that I explained of China vs the US,
that even had been a challenge in the US. I think there was this assumption pre-pandemic that you have an
outlet channel, you have a full-price channel, and then you have the e-commerce channel and the wholesale
channel. They were very separate, and this is not the case anymore. The consumer is shopping across all
channels now. It’s very omni. There was a thought that there wasn’t a lot of crossover between the outlet
consumer and the full-price consumer, because the outlet locations are too far from the full-price locations,
but again, with the digital innovations and that presence, that has changed.
I think something that I’ve noticed, in terms of looking at the assortments and going to stores, is what they
used to do. Again, everybody is aware of this. It’s public knowledge that they grew a very, very enormous outlet
business, and they trained the customer to be price-sensitive and buy on promotions. They were offering
similar styles. I think you can call them retail-derived styles, so styles that sold well in the full-price channel,
they would remake them in outlet, different materials. Over the last few years, I think it gives a confusing
message to the consumer. “Coach, Kate Spade, which one are you? Pick a lane. It looks very similar.” I think
they’re realising, because the world has become much more omni, that they do have to pick a lane. They’re
starting to pick a lane, and so, for example, they’re being very thoughtful about the types of styles they put out
in full-price, and not really approaching that retail-derived strategy anymore. They’re, again, like I said,
picking a lane in terms of what styles and collections they put in full-price, and ensuring they’re putting
different types in the outlet channel to not confuse that message, or not confuse the brand consistency.
I think through that, by doing that, they’ve helped to protect the AUR, or not even protect the AUR but
actually increase it. They’ve been very disciplined about it, and I think, again, what has helped them do that, I
think it will be sustainable, because what’s changed from now vs a few years ago is they have a lot more data.
They’re looking at the data to be able to help around the consumers and their price-sensitivity, to be able to
help inform how to diversify the promotional cadence. I think there was a time where, if a store, for a season,
you do 70% off, it was a blanket promotion, everything 70% off in stores, without really looking at data to
maximise the price. Not everything has to be 70%. There are different levels of price-sensitivity in terms of the
location that you’re at, the types of customers that are coming in, and even vs the types of categories. For
example, men’s categories could have less price-sensitivity than women’s wallets or something like that, so
they’re diversifying in that way, by looking at the data to help maximise the AUR. I would say that’s very
relevant for the US, but I think that is a global approach, as well.
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[00:40:28]
Q: What are your thoughts on the wholesaler and retailer approach to promotional activity? Do you think
Tapestry should have more control over its distribution footprint and pricing?
SV: I think that’s such a good question, and such a really important point. In my honest opinion, I don’t really
have a solve or an answer for that, because I think that’s very tricky. Wholesale has always been so tricky. I
worked in wholesale for a few years, and while it was international wholesale, you had to have very good
influencing skills, because at the end of the day, when you filled in the inventory to them or the products to
them, you didn’t always have control in terms of what happened to it and how promotional they can get. You
can give them guidelines, but at the end of the day, you don’t own the inventory anymore. They do.
I think that’s very tricky, and I think that’s a really good point, because I think there is a huge opportunity for
them to have more influence and have more control, because I think that’s the only way they’re going to be
able to protect the AURs. I don’t know how you do that other than ensuring that your direct-to-consumer
business, you’ve put so much more focus and effort into that to be able to offset some of the wholesale
challenges that may arise. I think, as the Coach brand becomes stronger, or the Kate Spade brand or the Stuart
Weitzman brand in particular become stronger, they probably will have more influence to be able to control
that promotional activity a little bit better. I think the real answer is that you have to just make sure you’re
completely focusing on the direct-to-consumer business, because that’s what you can control, at the end of the
day.
[00:42:54]
Q: When do you think Tapestry decided to take a data-driven approach? What were the reasons for doing so?
SV: Obviously, that’s all the talk right now, and even before the pandemic, consumer-first, data-first. This
goes back to the time that Victor Luis, who used to be, they’ve gone through a lot of leadership changes, but
the old CEO, and I would say probably around the time of 2017 is when they really started investing into this.
Victor is really, really savvy, and he’s really, really into what is happening in the industry. He, I think, was one
of the first that was seeing this. Maybe not necessarily so much in luxury retail, but he started seeing some of
the more fast-fashion, much more accessible fashion companies using this approach, like Zara, like H&M,
earlier on.
I think he was a visionary, seeing that and seeing how he can apply that to Coach or Tapestry, realising that
was a need, and so that was the time where a lot of investment went into building up that data analytics team.
Here we are 3-4 years later, and they’ve definitely put some systems into place, some processes into place,
improved some, being more digital. Having more of a digital presence has only helped that, because it’s a little
more challenging when your business is mostly store-focused to get that data from your consumers, but
they’re definitely putting more processes into place to be able to capture all of that, and look at the customer as
a whole and not just by channel. I would say that movement really started happening four years ago, and I
think it was driven by seeing some of these more fast-fashion companies, how they were using data and how
they had more of a customer-first approach. Then, obviously, the whole industry followed, and that’s what
everybody is talking about over the last few years.
[00:46:09]
Q: How do the Kate Spade and Stuart brands fit in with Tapestry’s overall strategy? What are the challenges in
maintaining and scaling these brands?
SV: It’s such a good question, and it’s a question that gets asked over and over again. It really is a challenge. I
would say those two, Kate Spade and Stuart Weitzman, coming into the Tapestry or into the Coach family,
which then became Tapestry, was all with good intent. It was exciting to see another life for Coach. Taking the
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playbook from some of the European luxury houses like LVMH, and making that American house of luxury
accessories, was sort of the idea, and it was reasonable. With Stuart Weitzman, I think that was the time when
Coach saw a huge opportunity in footwear, and could learn from Stuart Weitzman’s playbook obviously being
so well-recognised, especially in the US, in footwear. Stuart Weitzman, it was about synergies, learning from
each other and what you can leverage from each other to make each brand stronger, and ultimately get to the
goal of being a true lifestyle brand, for the Tapestry family as well as each of the brands.
For Stuart Weitzman, the synergy and the learning from Coach is international expansion. They had a good
foothold in the US but definitely did not have a lot of brand awareness in Asia, and there was definitely an
opportunity. Especially with Stuart Weitzman’s positioning being a little bit more luxury and that aesthetic
appealing to that market, there was definitely an opportunity for a lot to learn from Coach. I would say same
for Kate Spade. That acquisition was an interesting one, because Kate Spade has always been considered a
competitor of Coach, and there are certain styles that are similar in terms of silhouettes or price points. What I
think we’ve realised is that the consumer is different, and so that’s where the opportunity was, too. I think
Kate Spade also had synergies to learn from Coach in terms of international expansion, because they don’t
have as much brand awareness, especially in China and Asia, and so that’s definitely an opportunity for Kate
Spade, for sure.
From the Coach perspective, I think just getting more information or more expansion into learning about a
different type of consumer that maybe Kate Spade had, which is Kate Spade’s aesthetic is different from
Coach. Coach is very New York. Coach is very cool, and they’ve evolved into that. That has definitely taken
some time, but under Stuart Vevers leadership, they’ve evolved into that. They’re going back to their roots,
which is fantastic, because that’s where they should be. With the change in the creative director that
happened, I don’t know now, two years ago, I think they’ve alienated some of their core customers, and they’ve
realised, through data, etc, that they need to go back to that quirky, fun, not-take-yourself-so-seriously classic
element. I think that’s how Kate Spade fits into the whole Tapestry portfolio, and then the Stuart Weitzman is
the intent.
The challenges, I think they get there, but as we’ve seen, Kate Spade and especially Stuart Weitzman have
struggled a lot. I think a lot of what has driven that is just these brands that are trying to build their brand
awareness elsewhere, and then, at the same time, having so much inconsistency and not a stable environment
in terms of leadership turnover has not helped them. I think, with this new leadership team in place, the
stability that is hopefully there, and I think it is, it’ll take some time, but I think these brands will have a
turnaround. If they take a page out of Coach’s book, but also stay true to who their customers are and what
their brand stands for, I think there’s opportunity ahead of them, but it’s going to be a challenge. They’ve got
to work on it, but they’ve got to have the stability there first, which I think they do have now.
NH: Could you elaborate on why there is so much instability? Do you think this applies to the industry as a
whole?
SV: I think, today, this space is so competitive. You cannot fall asleep at the wheel, and that happened to
Coach at some point. We brought Stuart Vevers along, and the Coach brand needed that revamp, and then you
see, five years later, that it’s working. It has worked. Yes, leadership changes happen. I think it’s been much
more for the Tapestry family. I think there was just a lot of lack of confidence in the Tapestry strategy. With
the acquisition of Kate Spade and Stuart Weitzman, again, everything with good intent, and I think the
reasons made sense at the time, but over the course of the years, not seeing Coach really holding the fort down
while Kate Spade and Stuart Weitzman struggled, I think some leadership changes needed to be made. There
are some unfortunate unforeseen things that have happened, as well, but I think it was really that Tapestry
strategy. At one point, people didn’t have a lot of confidence in it, because Kate Spade and Stuart Weitzman
were not performing up to expectations. There were reasons around that, in terms of different schools of
thought in terms of the positioning of these brands. Because I’m such an analytics person, again, I think that is
seeming to turn around, because their approach is data first, customer first now. It wasn’t that way. It was
more design first.
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[00:54:23]
Q: Could you elaborate on what it means to be a lifestyle brand? Do you think that definition is consistent
across the industry, or does everyone have their own take on what it means to be lifestyle?
SV: It’s so interesting. I think it’s evolved over time, too. I would say, a few years ago, a lifestyle brand is not
something that Coach really thought was very important. We want them to come into our store and not only
buy a handbag but be a customer of ready-to-wear. We wanted to offer everything that’s part of their fashion
life to them, and that’s what I mean by that. That’s what LVMH has, what Gucci has. I think, with the data,
what they’ve seen is that there are different customers that may be gravitating towards ready-to-wear vs
handbags. There is a small portion that shops across categories. I think it’s an important one, because I think
it brings life to the brand and longevity. Think about all the players, Michael Kors, Tory Burch, the high-end
players like Burberry. They all offer, from a fashion perspective, all of those categories, and so that’s the trend.
It’s been that way for a long time.
I think something that has to be watched is the assumption that I may be a customer of Coach and a handbag
customer, but I may not buy ready-to-wear, I may not buy jewellery. I may just be very category-specific, but
it’s important to offer that to them, and it’s a way to increase your customer base and introduce new
customers. I think, also, there could be new customers that have shopped at Coach for the first time and have
entered through ready-to-wear. Had we not expanded that category, we may have never opened the doors to
gain new customers or that market share, so it’s very important, but I think it’s evolved over time. Today,
lifestyle, it’s also about mixing brands, mixing categories but mixing brands, high and low end. That’s the
evolution and that’s the trend now, and I think that’s here to stay.
[00:57:24]
Q: How would you say the digital shift has impacted marketing spend and ROI? What are the challenges of
successfully marketing your product when the consumer is no longer in front of you?
SV: I think the whole digital pivot from a marketing spend perspective has been positive. Of course, there will
be challenges and risks to that, but I think what I’ve heard, what I’ve seen, is that it’s very positive because it’s
low cost. In terms of where they were investing before, with just all the instore efforts or the instore
investments, much more higher-cost than the digital cost structure to market. I think that has driven the
higher profitability, as well, that you’ve heard on the earnings calls, and so I think it’s definitely been a positive
approach. Of course, there is always that risk that there are certain digital channels that may not work as well,
and you may not get that ROI that you are looking for, but I think the brand, they’re very deep in the analytics.
We used to call it, with Lew, it’s the intersection of the magic and the analytics, and so, again, I think they’re
really well-positioned.
If something is not working, they’re well-positioned to act on it fast and change it up, and they’ve proven that,
I think, during this pandemic. We’ll see. I don’t have much more to add on that other than that, but I think it’s
been profitable. It’s positive. Yes, there are risks to it, but I think they’re very good with their structure in place
and the agileness that they have to pivot if they need to, if something is not working. They also shouldn’t be
afraid to take risks. It’s just calculated risks, and I think Coach in particular has been very good about test-
and-learn, as well. They’re never going to put all their eggs in one basket. They take risks, but they’re very
cautious and conservative with that. I think that’s a good quality.
[01:00:58]
NH: Let me close by saying thank you, Sonali, for your input. Clients, if you would like to speak to Sonali in a
private call or meeting, please let your relationship manager know. Thank you again for joining Third Bridge
Forum's Interview today, this now concludes our meeting. Goodbye.
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SV: Thank you. You, too.
Transcription ends at 01:01:15 of the recorded material
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