Can near-luxury brands save themselves?

The question posed is especially relevant in today’s environment of sinking department store sales. Aspirational brands like Ralph Lauren and key handbag vendors are really struggling, and they are taking the approach of “less is more” when it comes to distribution. Here’s my recent comment from RetailWire:

Brands like Coach and Kors couldn’t grow fast enough, partly by overdistribution to department stores and partly by overexpansion of their own stores. Investors were happy while the category was hot, but the brands have been compromised at the same time that the demand for designer handbags is cooling off.

A strategy of deliberate scarcity makes sense in the short run (despite the volume hit), in order to rein in discounting and drive better sell-throughs. But the underlying issue remains: How to reignite consumers’ interest in near-luxury hanbags when they aren’t all that interested in visiting department stores at all.

Finally, I’m not sure that near-luxury brands like Coach and Michael Kors are ready and able to abandon the traditional department store as a key volume driver. Some of their recent problems fall on their own shoulders — the overexpansion of their own stores (hundreds in the case of Kors), the willingness to distribute their goods to off-pricers and their own outlet stores, and the failure to cherry-pick the best anchor locations. It’s not an exact parallel, but Apple has always been selective about being in “the right mall,” not every mall — and it’s a lesson that aspirational brands should learn as they continue to do business with department stores.

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