Kate Spade Saturday: A Cautionary Tale of Customer Segmentation

When affordable-luxury brand Kate Spade New York announced the closure of Jack Spade and Kate Spade Saturday retail stores last Thursday, the news came as a surprise to fashion aficionados. Kate Spade Saturday, the lower-priced “weekend” lifestyle brand of the flagship, garnered a lot of attention after its debut less than three years ago. The spin-off opened 19 stores across the US and was hailed as one of the more innovative retailers in the space. Jack Spade, an early pioneer in trend-setting men’s fashion, gained ubiquity over the last 22 years with its messenger bags and accessories.

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Luxury brands have traditionally taken customer segmentation of gender, income, and age demographics very seriously. While most luxury brands cater exclusively to the highest income brackets, a recent trend was to split their offerings into several price points to appeal to more customers. Thus, lines like Kate Spade Saturday were born. However, the recent demise of Piperlime, C. Wonder, Jones New York, and other “junior” lines of respected fashion brands shows that it’s not profitable to stick to old models any longer. When the latest trends can be quickly replicated by fast-fashion giants, companies can’t afford to keep expanding into lower prices and diluting their brand.

While customer segmentation is an important step to reaching customers, considering only the most obvious categories is no longer effective in today’s competitive landscape. What’s more, segmenting without truly understanding your customer base is an even bigger misstep – which is what contributed to Kate Spade Saturday’s downfall. The younger line didn’t resonate with existing customers, which meant the company had to build a base of younger consumers from scratch.

Retailers should take note of Kate Spade Saturday’s demise. Branching out to serve a younger demographic probably seemed like a good idea based on the successes of brands like Marc Jacobs and Donna Karan. Certainly, the clamor among fashion editors and bloggers over Kate Spade Saturday created the appearance of ready customers. However, expanding too quickly based on blind or intuitive segmentation was a gamble – and it didn’t pay off.

It’s more valuable to understand your existing customer base and figure out the strategy from there. Perhaps if Kate Spade Saturday had always remained a part of Kate Spade New York’s core brand and not a standalone business, the response would have been better. Consistently high value and long term customers means the brand is strong. It doesn’t necessarily mean it’s time to expand into a lower price point. In fact, appealing to certain segments of already loyal customers only further proves that the brand truly understands its target demographic.

That being said, the move to consolidate the brand and strengthen ecommerce is promising for Kate Spade New York, and other luxury brands should take note. While it has taken a long time for high end designers to move into ecommerce, affordable-luxury powerhouses are making headway with online and retail offerings. Still considered a formidable leader in the fashion industry, Kate Spade New York’s recent problems will be soon remedied, and the brand should come out stronger than ever.