Coach‘s proposed purchase of the Kate Spade brand for $2.4 billion is big news in a fashion industry that, like others, sees a lot of benefits in consolidation. Coach isn’t buying the Kate Spade brand to dilute the brand by blending it in — the independence of the well-known Kate Spade name is critical to its success. But behind the scenes Coach hopes to streamline supply chain and other operational functions to save tens of millions of dollars, making the combined companies more efficient.
Efficiency is good for shareholders, but it has some unhappy effects too. Efficiency usually means people lose jobs — because the same work can be handled by a single person at the combined company. But it’s more than just jobs in this case: the hoped-for efficiency of the new operation probably means better inventory control and fewer — brace yourselves, bargain-hunting fashionistas — bargains. Kate Spade constantly runs special flash sales — or surprise sales — to move surplus merch. The company even has a special domain for these sales on the Internet called surprise.katespade.com for their specials. Coach chief financial officer Kevin Wills says Coach’s takeover will include plans to eliminate the need for these sales and create more demand than there is supply.