Many want to untwist their business to raise both enterprise’s reputation and the revenues. However, to be successful, you need to behave accordingly. Recently, Michael Kors began to make gains in this case. The company has long been committed to get into the list of luxury brands, so it makes every effort to achieve the goal.

This brand has refused to service retailers like Macy’s and Neiman Marcus, and decided that from February 2017 it will exclude itself from their broad-based coupons and sales. As its second quarter fiscal 2017 earnings results announcement shown, Michael Kors steadily moves up and do not intend to retreat. We will introduce you to the strategic plan of the company, which it is going to stick in the future.

 

Sorry, No Discounts

As we have said, in order to be regarded as a luxury brand, Michael Kors got to behave like one. On the example of the masters of the fashion industry, such as Chanel, who did not offer people discounts, Michael Kors also began to move away from this habit. «We’re really focused on reducing the amount of promotional activity that we are going to be involved with as a brand,» – said John Idol, company’s chairman and CEO, – «We think that’s the right thing to do for the health of the business». By the way, like-level brands Coach and Kate Spade have taken advantage of such a ruse.

If you still do not believe in that tactic, let us assure you that it is quite logical. «Discounting a product and expecting to maintain a premium image are contradictions,» – said Richard Church, a retail analyst at the data analytics firm Discern, – «when your product is increasingly in the off-price channel and is being discounted in department stores, your brand image suffers».

Michael Kors. Luxury Brand

 

This method is primarily helps to keep not as much money as the reputation of the brand and its face. Idol believes that Michael Kors’ sales are a drop in sales due to promotional activity. «This past quarter, we saw mid-single-digit increases in our overall accessories business in units», – he said.

«When a brand [attempts to] drive more sales volume with more promotion, the customer begins to wait for the discounts. Ultimately, the brand will likely never regain a full price margin and the equity in the brand suffers,» – said Church. So that, ask for the exit, discounts.

 

Less Is Better

Paula Rosenblum, co-founder and managing partner of RSR Research, once remarked: «When you get too much availability of any ‘luxury,’ it becomes a commodity. The Michael Kors brand is almost crazily over-exposed». Reducing receipt of the goods on the market may cause an increase in its value, and therefore the demand.

Idol revealed that, despite the fact that the move was blamed for second-quarter wholesale revenues falling 22 perfect in the Americas, the company will continue to cut the number of units it sells in the North American marketplace, particularly in department stores. «We are in the process of rebalancing our business to increase the average transaction value in our retail stores, as well as in our wholesale channel. <…> There’ll be less product, there’ll be more demand, and that demand will be more at full price versus sale».

Michael Kors. Luxury Brand

Once again, the logic of such a move supported by the fact that several other brands follow the same path. Coach made the decision to completely move out of department stores in the name of boosting perceived value, and Ralph Lauren pointed to “pulling back inventory” in its earnings statement released this week. The bad news for the department stores, but reliable solution for companies.

 

Who Said That It Was Easy

Michael Kors clearly understands that change can not happen this very moment. We assume such moves can cause resentment on the part of buyers. But on the way to the goal of being a luxury brand, you need to go through it. «We expect this trend will continue through the remainder of this year», – said Idol about the downslide of wholesale revenue. After earnings announcement, Michael Kors shares fell more than 4 percent in after-hours trading. But the company remains steadfast and feels support from other brands. As Church said, «heavy promotional activity and over-distribution across channels like wholesale and off-price are the kiss of death if you want to be perceived as ‘premier’ or ‘luxury’». Let’s see to what they will come.

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