Business model of Kate Spade & Company

Customer Segments

Kate Spade sells its clothes to a large consumer base around the world. Its customers can be organised into two principal segments:

• Consumers, principally comprising younger female consumers who purchase clothes for themselves and older consumers who purchase the company’s clothes and accessories as gifts for younger relatives; and
• Retailers, comprising various fashion retailers, boutique stores, and specialist clothing distributors who purchase the company’s products for further sale to end retailer of consumers.

While Kate Spade suggests that its products are targeted at consumers of all ages, market studies suggest that its products are favoured primarily by younger consumers who wish to look mature.

Kate Spade remains headquartered in the US, the company’s largest market.

It, however, maintains a significant marketing and sales presence around the world via stores and sellers across the Americas, Asia Pacific, Europe, Africa, and the Middle East.

Value Propositions

Kate Spade provides value to its customers in the following ways:

• History and Reputation – Kate Spade has an established reputation as a designer and retailer of high quality fashion items, with a track record of designing items that are popular and at the leading edge of the fashion industry;
• Colourful and Innovative Design – Kate Spade notably seeks to differentiate itself in the market by offering colourful, bright designs that aim to encourage consumers to embrace its upbeat and happy approach to fashion;
• Extensive Sales Reach – Kate Spade operates an extensive network of more than 300 retail outlets across its native US and markets spanning markets in the Americas, Asia Pacific, Europe, Arica, and the Middle East;
• Luxury and Prestige – Kate Spade has positioned itself as a designer and retailer of luxury goods, its products bringing with them a sense of prestige and cachet that is enjoyed by much of its customer base; and
• Quality – Kate Spade offers products that are well-made and durable, encouraging consumers to return to the company’s stores.

Channels

Kate Spade sells its products directly to consumers via a network of freestanding flagship, specialty retail, outlet stores, and concession shop-in-shops that are located in regional shopping centres, metropolitan areas throughout the world, and established outlet centres.

Kate Spade’s flagship locations, which are designed to offer the fullest expression of the Kate Spade brand, are located in high-visibility locations and offer a wide range of products.

The company’s outlet stores serve as a means of selling manufactured-for-outlet products and discontinued inventory outside its core retail channels and target more value-oriented customers.

In addition to its own stores, Kate Spade also sells products via a number of high-profile departments stores in the UK and abroad, including stores such as Macy’s, Nordstrom, John Lewis, Harvey Nichols, Neiman Marcus, and Bloomingdale’s.

Kate Spade additionally operates an online store at www.katespade.com, through which customers can browse products, make purchases, and arrange shipping at their own leisure and on a self-service basis.

The company’s online store is also designed to drive traffic to its physical retail outlets around the world.

Customer Relationships

Kate Spade seeks to secure repeat business from its customers by offering high-quality customer service and well-made products.

This includes in-store assistance provided by the company’s sales personnel, as well as services offered by the company’s dedicated customers support teams, who can be contacted over the phone and online to provide assistance to customers both before and after they make purchases.

Kate Spade operates an online portal for its customers, through with they can  track orders, browse deals and sale items, and manage their profiles.

The company also publishes a range of information concerning shipping, student discounts programs, store locations, brands, and product returns that can be accessed on a self-service basis.

Kate Spade maintains an active social media presence via profiles with Facebook, Twitter, Instagram, Pinterest, YouTube, and Tumblr, through which it seeks to engage with consumers, in particular across its target consumer demographics.

The company is additionally able to use these channels to handle complaints and disseminate marketing information.

Key Activities

Kate Spade, together with its subsidiaries, is engaged in the design and marketing of apparel and accessories around the world. The company organises its operations into three core segments: Kate Spade North America, Kate Spade International, and Adelington Design Group.

The company offers a wide range of products, including briefcases, hand bags, small leather goods, fashion accessories, jewelelry, and apparel for men, women, and children.

It also offers licensed products, including footwear, fragrances, swimwear, watches, children's wear, tech accessories, optics, tabletop products, legwear, fashion accessories, furniture, bedding, housewares, table linens, loungewear, pillows, lighting products, activewear, and stationery.

Kate Spade markets and sells its products under a number of brand names, including Axces, Kate Spade Saturday, Jack Spade, Marvella, Monet, and Trifari.

Key Partners

Kate Spade works in close conjunction with a network of partner companies around the world, both domestically and internationally.

These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of materials and tools used in the company’s core design and production operations, as well as provider of third-party services the support the company’s corporate activities more broadly;
• Sales and Distribution Partners, comprising retailers such as department stores, fashion boutiques, and outlet stores, as well as specialist distributors that help to extend the company’s sales reach;
• Branding and Marketing Partners, comprising a range of commercial enterprises, brands, and retailers that help to support the company’s branding and marketing efforts at home and abroad;
• Community Partners, comprising various non-profit and charitable organisations with which the company collaborates on community and social responsibility projects; and
• Strategic Partners, comprising various other companies in the fashion industry and elsewhere, with which the company collaborates on specific development, branding, or design projects.

Kate Spade Notably has retail tie-ups with a number of high-profile retailers, including department stores Macy’s, Nordstrom, John Lewis, Harvey Nichols, Neiman Marcus, and Bloomingdale’s.

Key Resources

Kate Spade’s success is dependent on its ability to provide innovative, unique, and creative designs to customers, and produce clothing and accessories that are high quality and durable.

As such, the company’s key resources are its designs and design teams, its materials and equipment, its manufacturing facilities, its network of retail outlets and retail partners, its personnel, and its brands.

Kate Spade notably controls an extensive network of owned and leased retail outlets across the US and internationally that are key to its ability to reach a global audience.

The company also has several intellectual properties registered with the US Patent and Trademark Office, including applications for a ‘fragrance bottle with cap’, a ‘handbag design, a ‘clutch’.

Cost Structure

Kate Spade incurs costs in relation to the development and design of its original products, the procurement of materials and equipment for its production operations, the operation of its manufacturing facilities, the operation of its retail network, the management of its partnerships, the implementation of marketing and branding campaigns, and the payment of salaries and benefits to its personnel.

In 2016, prior to its acquisition by Tapestry Inc, Kate Spade recorded annual selling, general, and administrative expenses totalling USD 687.7 million, and other expenses of USD 11.1 million.

Revenue Streams

Kate Spade generates revenue through the design and sale of clothing and accessories across an international network of stores and outlets.

The company derives the bulk of its revenue through sales fees collected from consumers at point of sale, as well sales fees collected under wholesale sales contracts agreed with retailers and distributors.

The company also generates a portion of its revenue under licensing deals.

In 2016, Kate Spade recorded annual net sales of USD 1.2 billion, up slightly on the USD 1.1 billion recorded by the company the previous year.

According to Tapestry Inc’s most recent annual report, Kate Spade recorded annual sales of USD 1.3 billion in 2018, representing around 22% of net sales.