LUXURY BRANDS FLEE DEPARTMENT STORES
Seek More Control and Higher Margins in Own Stores
By Mya Frazier, ADAGE

The blue suede Coach bag is stuffed on a clearance table with the markdown price of $88.90, a steal compared to the original price of $178. Nearby is a section of glass shelving stocked full of Coach purses, including a $328 pink suede satchel.
Only 11% of Coach's sales now come from department stores. The company is in the process of building its own national chain of 350 stand-alone stores.

Leave Nordstrom’s, however, and just three stores over Coach bags priced over $400 are displayed like museum pieces. It’s a world where a friendly and immaculately dressed sales staff always greets you, the music is always just right and absolutely nothing ever goes on sale.

$1.6 billion in sales
The contrast explains, in part, why in a little less than five years, Coach has cut its dependence on the department store channel -- down today to 11% of its $1.6 billion in sales from 15% in 2000 -- to build its own veritable retail empire, outlining ambitious plans to reach more than 350 stores over the next few years.

The strategy is much the same at other fashion megabrands like Polo Ralph Lauren, Guess and Liz Claiborne. Frustrated by an inability to control pricing and brand display and tired of competing with retailers’ proliferating private-label lineup, such brands are aiming to reduce their co-dependency on department stores.

“Great brands see they have to protect themselves and can no longer depend on department stores,” said Howard Davidowitz, chairman of Davidowitz and Associates.

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