While this class of Russians was known for its fascination with luxury brands, there is evidence that Russia's newer wealthy class are shifting their tastes to more independent looks (Groskop, 2008).
The target market therefore is going to be part of the older demographic, for whom luxury brands are directly equated with status and style. In Russia, these will tend to be females in millionaire families, aged 35 and up. These buyers will tend to live in either Moscow or St. Petersburg, where almost all of Russia's wealth is held. They are worldly, and are often familiar with luxury brands from their travels. These Russians are well-traveled and consider themselves among Europe's elite. They are usually educated, but most of the women do not work. Shopping is a pastime, and they will invariably have purchased luxury brands before, if not Coach specifically.
Financial Summary
The typical financial picture of a Coach store is that around 62-64% of revenue comes from handbags, 28-29% comes from accessories with other products making up the remainder. Price points are typically high, and stores do a relatively low volume as a result. There are only 44 freestanding Coach stores internationally, and a total of 159 international locations of all types (Coach 2009 Form 10-K). This includes the major markets of Japan and Greater China. Coach typically enjoys healthy markup on their products which allows the company to thrive even on low volumes.
The marketing outlay is typically around or below 2% of net sales. This is expected to be the case for Russia as well, although there may be an additional $1 million in promotion surrounding the launch of the first store. There are also costs associated with direct marketing, something that Coach typically uses to help sell its products. Catalogs are shipped, and emails are sent to customers on mailing lists. To adopt these tactics in Russia would add a further $1 million to market expenses, in part because of the need for Russian...
Petersburg. The other Russian cities either lack the wealth to support a Coach store or they lack the prestige. Moscow is the economic hub of the country and by far its richest city, while St. Petersburg is the cultural capital and has its own luxury goods scene. The costs therefore should not exceed the 2% of sales threshold for marketing, even with the added costs of converting the marketing campaigns to Russian.
Overall, Coach can expect to generate $75 million in revenue in the second year of business, and $25 million in the first, based on one store initially and three years by year two. These figures are derived from estimating a slight outperformance compared with Coach's average of $22 million in revenue per store (2009 Coach Form 10-K). Russia's large market and relatively low number of stores should allow for this outperformance over the company's norms.
Works Cited:
Coach 2009 Form 10-K. Retrieved December 5, 2010 from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzY0MzU4fENoaWxkSUQ9MzU4NjcyfFR5cGU9MQ==&t=1
Groskop, V. (2008). How Russia's new super rich are buying cool. The Guardian. Retrieved December 5, 2010 from http://www.guardian.co.uk/lifeandstyle/2008/jan/13/fashion.features4
No author. (2006). Luxury goods firms are profiting from Russia's wealth. International Herald Tribune / New York Times. Retrieved December 5, 2010 from http://www.nytimes.com/2006/12/15/business/worldbusiness/15iht-luxury.3917590.html
Time. (2007). Russia: More than just millionaires. Time Magazine. Retrieved December 5, 2010 from http://www.time.com/time/magazine/article/0,9171,1664380,00.html
Volkov, V. & Denenberg, J. (2005). Wealth and poverty in modern Russia. WSWS.org. Retrieved December 5, 2010 from http://www.wsws.org/articles/2005/mar2005/russ-m11.shtml
