Recently, some media reports that the US light luxury brand, Michael Kors decreases a lot in sales. The first deficit quarter in the 2017 fiscal year comes along, which becomes the turn of Michael Kors.
Some people comments that Michael Kors itself brings this, while some people keep unoptimistic about its future. No matter what others say, Michael Kors makes its first steps of renaissance: closing stores. Obviously, it is hard for people to believe that the company will go back to normal by using this kind of plan. The decline in sales this time brings Michael Kors in a situation of disadvantage, and it may also influence its development in the future.
Michael Kors was so popular in the past, and can it re-shape its image and go back to its peak?
Huge decline in sales, Michael Kors shut down stores immediately
There is a curse that when a brand gets popular, its sales will decrease soon. Michael Kors, just as other light luxury brand, cannot avoid this curse. Michael Kors used to develop fastest among the luxury brands. Now because of the huge decline of its sale volume, Michael Kors might have the structural changes with Kate Spade amd Coach of same level, which can bring MK in a situation of disadvantage.
According to the financial report of the forth quarter of 2017 published by Michael Kors, the sales revenue is 1.06 billion dollars, with a 11.2% decrease and deficit of 26.8 million dollars. The sales revenue from retail is 0.575 billion dollars, with an increase of 0.5% only, and the sales of same stores decrease to 14.1%. And the decline of wholesales is 22.8%. The sales from licensed business decrease by 6.2%, 3340 USD.
It is a trend that Michael Kors’ global sales are decreasing, except for one area, the Asian market, which is the only market keeping increasing. According to some analysis, China has been Michael Kors’ most potential market. After Michael Kors took back all the licensed business in June 2016, the sales revenues almost doubled, increasing by 6.3%, 0.128 billion dollars.
However, the increase in Asian market is not enough to make up for the decrease in other areas. For the US market, the sales decrease by 18%, 0.71 billion dollars, and there is a 15.3%, 0.215 billion dollars decrease in the European market. So Michael Kors indicates that 100 to 125 stores that don’t run well will be shut down in the following 2 years.
Michael Kors state they have to close the stores, which can save 0.1 to 0.125 billion dollars in cost. The board director and CEO of Michael Kors, John D. Idol says the year 2018 is the most important fiscal year of the group. The attractiveness of Michael Kors decreases, compared to the previous years. For now, it is urgent for Michael Kors to improve its brand image and product quality.
The crazy expansion of Michael Kors in global store is like taking a poison?
Since the list of Michael Kors, the prediction of decline hasn’t been stopped in the industry, especially when the former investors took back their funds last year. Now the decrease of Michael Kors’ sales is just like LeTV in the technology industry. There are two reasons for this:
It should be worried that if the products are seen everywhere in the streets for the luxury, even for the light luxury products. For the luxury, it is important of rareness. However, Michael Kors takes the way opposite. Michael Kors has been expanded its stores crazily since 2013. According to the financial report up to April of 2017, there are more than 800 Michael Kors stores in the world, including 201 in Europe, 228 in Asian, and 398 in US.
Except the crazy expansion of the stores, Michael Kors also makes a mistake in the industry—increase the sales by discount. Too much discount can damage the image and position of the brand. There is a consumer behavior that if customers are used to discount, they won’t buy the full price goods. When there are goods always in discount, customers definitely are not willing to buy at full price, which is just like Coach.
In this way, Michael Kors leaves people the impression that it is a product in discount everywhere in the streets and stores. Even so, Michael Kors achieved the goal of making profits in short run. After the list in 2011, Michael Kors has funds of 0.944 billion dollars, and the stock price exceed 25% on that day. Michael Kors can make money by discount because its founders are the ex-designer of Celine in LVMH, judger of roject Runway, and famous designer of Michael Kors brand. However, as time goes, when customers get used to this, they are not buying for this.
This poison development method also brings Michael Kors some hidden dangers. The unlimited production and huge discount lead to low quality products and many returned goods. And Nordstrom, the famous US department store, stop selling it. Although luxury are durable goods are quite different, Michael Kors leaves a bad image to the customers because of the low quality and large amount of returned goods.
Besides, the terrorist attacks in Europe lead to a decrease in the number of people travelling there, which in some way influence the sales MK. Because the terrorist attacks happen every now and then, and there are many photos and videos on the internet, the visitors in the streets decrease sharply. Even some citizens choose to stay at home instead of going out.
Luxury industry is affected greatly by terrorist attacks. Even Hermes, whose sales keeps increasing for years, shows a trend of decreasing in Europe. LV store is robbed just few days before. Michael Kors is also influenced by the errorist attacks in Europe showing a 15.3% decrease, 0.215 billion dollars.
From this, the prediction of decreasing of MK is not come from nothing. It is not only the poisoning developing method that is not agreed by the people in this industry. The terrorist attack is also a factor that influences the development of Michael Kors.
Michael Kors is in a situation of disadvantage, and it is hard to get back to its peak.
Michael Kors used to be the most popular light luxury brand at that time. It developed the fastest, compared with Kate Spade and Coach. Now the sales legendary of MK break. The sales volume of MK decreased, as well as its stock price, showing a decline of 31% when compared to its highest. It is hard for MK to go back to its peak.
Unlike other light luxury brands’ stable development, MK suddenly becomes popular between the year 2014 and 2015, surpassing Kate Spade and Coach of the same level. Michael Kors is favored by customers by its high cost performance and design. And it increases its sales by crazily opening new stores and long-term discount.
It changes as time goes. Kate Spade and Coach have integrated as one, while Michael Kors’ legendary breaks. The structure of light luxury industry has changed. Coach is back, from its closing stores to increasing over 10%. Coach raises the attention of customers again with a better brand image.
As for Coach, it used to increase its sales by crazily discount, but then it went down. It seems that Michael Kors is taking the way of Coach. It is easy to fail but hard to succeed. In the situation of depressed luxury market overall, it is almost impossible for Michael Kors to go back by copying Coach’s method.
It is a bad season for capital, and low in the market of retailing. The self problem of MK is worth thinking. The founders of MK are also called M copy. People can always find some evidence of copy from its accessories or bags. With so many copies, people would doubt if Michael Kors has its own designers.
There is no innovation in this high leveled light luxury brand. What it does is copy, and crazy expansion, which makes the brand everywhere for every people. In this way, it loses its original value and meaning of existence. MK has a sharp decline of sales in its 2017 fiscal year, and the closing stores down method somehow shows that MK is unconfident about its sales in the fiscal year of 2018. Its revenue might have a further decrease.
Overall, the over expansion of stores and crazy discount have already damaged its brand image and the trust of customers. In the future, if MK doesn’t stop this and think carefully, or MK doesn’t look into customers’ demands, or MK doesn’t put efforts to improve its brand image, Michael Kors would never become the legendary again.