Brand Extension Plan for Kate Spade New York -Spade Café by Yichi Huang

Spade CafĂŠ NEW YORK Brand Extension Plan for Kate spade New York Yichi Huang Savannah College of Art and Design M.A Luxury and Fashion Management Final Project

Table of Contents 1. Abstract 2. Introduction 3. Company Overview 3.1 Kate Spade New York Company Introduction 3.2 Financials 3.3 Kate Spade’s Current Situation in the U.S. Market 3.4 Company Future Outlook 4. Situational Analysis (Secondary Research) 4.1 Current Global Café Market Overview 4.2 Current Café Market in U.S. market 4.3 Current Café Market in New York 4.4 Café Market Future Outlook 4.5 Competitors’ Analysis 4.6 Café Consumers Research 4.7 SWOT Analysis 5. Primary Research 5.1 Research Goals 5.2 Research Design 5.3 Research Analysis 6. Research Analysis and findings 7. Target Consumers Identification 7.1 Demographic Segmentation 7.2 Behavior Segmentation

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7.3 Lifestyle & Attitude 7.4 Target Customer Profile 8. Marketing Plan 8.1 Spade CafĂŠ Introduction 8.2 Business Model (Partnership) 8.3 Strategy Goal & Objective 8.4 Place Strategy 8.5 Product Strategy 8.6 Price Strategy 8.7 Promotion Strategy 8.7.1 In-Store Promotion 8.7.2 Reward Promotion 8.7.3 Website and Mobile Application 8.7.4 Social Media 8.7.5 Public Relations 8.7.6 Direct mail 8.7.7 Outdoor Advertising 8.7.8 Activity Map 9. Financial Plan 10. Conclusion 11. Appendix 12. Reference

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1. Abstract Many brands are beginning to extend into different industries to attract consumers and to expand their brand image and consumer preferences. For example, many brands have opened their own restaurants, cafés, bars, hotels and spas as brand extensions. In my final project, a Kate Spade Café will be opened in an existing Kate Spade store in SOHO in New York. Kate Spade is known as one of most popular fashion brands among Millennials and Generation Z. Also, cafés are popular among Millennials and Generation Z. The goal of this project is to continue to attract not only Kate Spade's current customers but also bring on more potential customers, as well as enhance the Spade brand image. Spade café strives to link customers closer to the brand and build customer relationships, and thus pull them into the retail store to spend more time with the brand. Using in-depth primary and secondary research to support market trends and customers’ demands, this project offers a way to increase the sales of this Kate Spade’s products and gain a bigger market share in the food and beverage industry. In the future, Spade Café will be expanding domestically and internationally at a rate of about 3 stores per year, starting with this first café in New York City. Creating a unique in-store environment and enhancing the shopping experience will be important goals of Spade Café.

2. Introduction The fashion industry is becoming more and more competitive. Consumers purchase not only fashion products but also are trying brands in other areas of their lives. For example, a consumer who buys Louis Vuitton might also look into buying other products from the brand, such as a pet carrier travel bag. Many brands are trying to use different sales tools to attract consumers to improve their brands’ image and consumer preferences. Opening a restaurant business and extending it into the food and beverage industry is a popular trend for many fashion brands to attract more consumers and enhance the relationship between its customers and the brand. Furthermore, research shows that consumers are more interested in making an investment to increase their lifestyle experiences. In order to meet these demands, more and more brands are setting up multi-choice experiences in their flagship stores, offering entertainment and leisure together as a way to connect with their consumers, while offering lifestyle experiences along with their other products. Some of these multi-choice lifestyle experiences are in the form of coffee shops, bars, restaurants, bookstores, art galleries and so on. Examples of these brands are like Café Dior (Seoul), Ralph Lauren and Ralph's Coffee (U.S.), Emporio Armani and Armani Restaurant (U.S.), 1921 Gucci Café (Italy, Tokyo, China), Vivienne Westwood Café (China), Burberry and Thomas’s Burberry (London), Bulgari and IL Café (Tokyo), Chanel and Chanel Beige (Tokyo), Coco Coffee (China), and so on. Giorgio Armani says he believes that cafés and restaurants are a destination after a day’s shopping; a space where one can enjoy a smart and relaxed atmosphere. He has always wanted to create a complete Armani lifestyle that reflects his ideas and can be applied to different areas, not just fashion. Restaurants and cafés seem to be a logical expansion (“Why Fashion Retailers are Staging Food Experiences”). These brands all aim to communicate the brand information with customers and meet the consumers’ preference using cafés and restaurants as brand extension. 3

Kate Spade is known as a popular fashion brand among young consumers. When considering other opportunities for Kate Spade to create a new brand image within the café industry, as well as an easy way to get more in-store experiences, a café experience is very important to encourage customers to stay and learn more about the brand. Opening a café shop such as Spade Café will also help Kate Spade gain more brand awareness in the market. This project will develop a new strategy for Kate Spade by opening a new café called Spade Café in New York. New York is the biggest city in the U.S. market, and many travelers visit this city. Food and beverages are very important for New York. Therefore, opening a café shop in New York is a good opportunity for Kate Spade to expand. To provide new experiences and services to people living in a fast-changing world, the project gives the brand extension of a fashion brand, Kate Spade New York, as the launch plan of Spade Café. This project aims to determine how to use promotion methods to improve the brand culture.

3. Company Overview 3.1 Kate Spade New York Company Introduction Kate Spade & Company (NYSE: KATE) operates principally under two global, multichannel lifestyle brands: Kate Spade New York and Jack Spade New York. The Company has four category pillars: women’s, men’s, children’s and home. Known for crisp color, graphic prints and playful sophistication, Kate Spade New York aims to inspire a more interesting life. Kate Spade New York collection includes the Madison Avenue, Broome Street and on purpose labels. Jack Spade New York offers a timeless and versatile assortment of bags, sportswear and tailored clothing founded on the aesthetic of simple, purposeful design. The Company also owns Adelington Design Group, a private brand jewelry design and development group. (Kate Spade official website). Kate Spade New York is an American fashion design house founded in January 1993 by Kate Spade and Andy Spade. Kate Spade launched her company, Kate Spade New York, with a collection of nylon bags. In 1996, Kate Spade brand opened its first boutique; a 400-square-foot shop located in Manhattan's trendy SOHO district, and moved its headquarters into a 10,000-square-foot space on West 25th Street. Kate Spade was sold in 1999 to the Neiman Marcus Group. In 2004, Kate Spade Home was launched, featuring bedding, bath items, china, wallpaper, and other home products. At the same time, Kate Spade launched its official website and provides E-mail service to send news, new products, and events to encourage sales from their consumers on online visitors. In 2006, apparel giant Liz Claiborne Inc. bought Kate Spade for about $124 million from Neiman Marcus Group. Kate Spade has also expanded their retail stores to include Kate Spade New York Outlets. In 2007, the company was sold to Fifth & Pacific, formerly known as Liz Claiborne Inc. Deborah Lloyd, formerly of Banana Republic and Burberry, joined Kate Spade New York in 2007 and leads the creative aspects of the brand as president and chief creative officer. Liz Claiborne Inc., which sold its namesake label in 2011 to J.C. Penney, has since been renamed Kate Spade & Co. The brand has expanded beyond bags to clothing, shoes, jewelry accessories, kids’ clothing, home goods and gifts and more. Kate Spade is now a public company. The company projects that by 2016 Kate Spade New York will reach 475 to 550 company-owned and partnered owned stores worldwide with 250 to 300 in North America. In 2017, Kate Spade New York has over 140 retail shops and outlet stores across the U.S., and more than 175 shops internationally. Their products are sold in more than 450 stores worldwide, in every time zone and on every continent. The company has grown to include its own retail outlets, as well as selling their products through such high-end stores as Bloomingdale's, Saks Fifth Avenue, and Neiman Marcus. Right now, they are studying the right approach in China, so that they will have a consistent global experience for the consumer that also addresses the nuances of the market (“How Social Media Helped Kate Spade Become a Global Brand”).

Mission Statement: Kate Spade New York is a global lifestyle brand offering aspirational luxury with a clever wit and playful charm that is distinctly our own (Kate Spade official website).

Vision Statement: Kate Spade New York draws women into a world that is culturally curious, intellectually alive, and glowing with irresistible allure. Kate Spade N e w Yo r k i n s p i re s wo m e n to live colorfully, delivering on our promise to help her lead a more interesting life. Kate Spade New York is the brand that helps women expresses their own personal style with incandescent charm and a dash of rebellion (Kate Spade official website). 6

Kate Spade New York current brand target market Kate Spadeâ&#x20AC;&#x2122;s primary target consumer are women 18 to 30 who are trend conscious, independent, young urban professionals, adventurous, single, and financially stable. They gravitate toward color and prints and prefer the unusual to make a statement with fashion. The secondary target consumers are women 30 to 60 that are nostalgic for the classics, married with children, and professional. This group lives in suburbia; they are aware of current trends but are not followers. In addition, Kate Spade has specific targets from segmentation, and these break down to 4 groups. The first group is hearts women, current and post college students age 19 to 29; they are the aspiring luxury consumer where the heart believes in the brand clubs. The second group is young ladies aged from 29 to 39, only clubbers that are beginning careers and identifying their own styles and loyalty to brands begin defining Spades. The third group is age 39 to 49 and encompasses the biggest consumer segmentation; they are young and vibrant and enjoy experimenting with bold patterns and bright colors. This consumer wears Kate Spade jewelry, accessories and limited editions. The last group is diamonds aged around 49; this affluent consumer exudes Kate Spade from head to toe and is the most loyal consumer. She dresses her children, friends, home, and pets with the brand. Kate Spade is very modern compared to vintage and classic designers. Women that appreciate the modern feel can encounter that through Spadeâ&#x20AC;&#x2122;s products and the atmosphere of her stores. Despite the fact that Spadeâ&#x20AC;&#x2122;s general targets demographic are women; the company is expanding to reach the male group of onlookers. Like all other fashion brands, males are targeted as equally as women. Now that Kate Spade has taken off and become a vast achievement, the male onlookers present a new challenge.

Kate Spade New York’s competitors Kate Spade’s top competitors are Coach Inc., Burberry, and Michael Kors (Kate spade & company, 2014). These brands convey a similar product assortment as Kate Spade, obviously one of the reasons behind the competitiveness. Spade’s competitors produce many of the same types of luxurious handbags and accessories, but specifically what makes Coach Inc. one of their competitors is their colorful products, as well as the brand’s price affordability. Burberry is among Spade’s top competitors due to its luxurious products and their way of incorporating vintage into their classic products. Michael Kors is one of the highest trending brands among the similar target market as Kate Spade, which makes them one of Spade’s top competitors. Michael Kors and Kate Spade are constantly competing for the consumer’s attention. Only Burberry followed in the footsteps of designers like Ralph Lauren by opening up its first restaurant called Thomas’s in London, but Burberry has no stores in the U.S., and other competitors have no extension in the food and beverage industry. If Spade Café opens in New York, this brand will be the first one to try to get more consumers to participant in in-stores experiences, make more contact with them, and create a better brand impression rather than their competitors. Today, Kate Spade has grown into a global lifestyle brand, and aims to inspire colorful living through its products from handbags and clothing to jewelry, shoes, stationery, eyewear, baby, fragrance, tabletop, bedding and gifts. Kate Spade New York inspires women to live colorfully, delivering on their promise to help her lead a more interesting life.

3.2 Financials According to the Kate Spade 2017 Financial Report, net sales for the first quarter were $271 million, a decrease of $3 million or 1.2% compared to the first quarter in 2016. Figure 1 shows that the net sales from 2013 to 2016 increased from $803 million to $1.38 billion. This increase came about as a result of the custom Kate Spade Saturday iPad Management System, which was built on Java. Kate Spade began using technology to create a â&#x20AC;&#x153;socially engineered software experienceâ&#x20AC;? that encourages shoppers to remain in store. By replacing paper signs with digital information, this iPad system provides users a more interactive and convenient shopping experience. This new technology allows for new marketing strategies and promotions, which has helped to increase their net sales. In 2017, first quarter direct-to-consumer comparable sales declined by 2.4%. E-commerce is no mere accessory at luxury product manufacturer Kate Spade. The web now accounts for 20% of sales, and executives say they plan to roll out a series of enhancements to continue growing through the online channel. Comparable sales per square foot for Kate Spade New York stores were $1,516 for the last twelve months, compared to $1,557 for the twelve month period that ended December 31, 2016. Gross profit as a percentage of net sales was 63.2% for the first quarter of 2017, compared to 61.8% for the first quarter of 2016. To consider the sales channel in recent years, retail stores occupied the most total sales, followed by Ecommerce. Ecommerce channels rose 3.4% in 2016 (Fig.2). The United States is the biggest market for Kate Spade. New York-based brand Kate Spade & Company rings up about 80% of its sales in the U.S., and Kate Spade stores had a 1% sales growth in stores in 2016. Its growth margin fell to 59.7 % from 61.6% compared to 2015 and 2016, driven by increased promotions in its outlet business.

(Figure 1, Kate Spade & Co. Net Sales)

(Figure 2, Kate Spade & Co. Revenues & Sales - By Channel)

The companyâ&#x20AC;&#x2122;s gross margin declined as it spent more on promotions to clear merchandise at off-price stores and tested lower price-points for certain products to attract customers. George Carrara as president and chief operating officer of Kate Spade & Company said that Kate Spade delivered over 140 basis points of gross margin expansion in the first quarter driven by operational efficiencies and their continued focus on quality of sale amidst a highly promotional environment. In addition, Kate Spade continued to generate robust cash flow over the past twelve months and ended the first quarter in 2017 with $422 million in cash. According to the prediction of Kate Spade & Company, the revenue of Kate Spade will grow from $1.38 billion in 2017 to $1.93 billion in 2020 and net income is predicted to slightly grow from $153 million to $158 million in 2019, roughly staying around the same level. Margins are not expected to be high but still acceptable at 8.2% during this time as well (Pearce, 2017).

3.3 Kate Spade Current Situation in the U.S. Market As of December 31, 2016, Kate Spade New York had 168 specialty and outlet stores in the U.S. and 12 specialty stores in New York City. Kate Spade has been very successful in Ecommerce and digital marketing. The company is very proud of its store-to-web and web-to-store cross development, making it almost impossible to read the growth of one channel without the other. The company views its E-stores as its ultimate flagship with the broadest assortment representing the world of Kate Spade. Currently, over 20% of sales come from Ecommerce channels, a top tier performance in the fashion industry. In 2004, Kate Spade launched its official website, which provides E-mail service to send news, new products, and events to encourage sales from their consumers and online visitors. Kate Spade also opened social media accounts on Facebook and Instagram to share their information and post photos and videos for consumers. According to the following Digital Data chart (Fig.3), it is easy to see that many consumers are moving from the official website to the brand’s social media accounts. From May to October 2017, some social media platforms increased their brand’s number of followers. For example, Youtube videos received approximately 31,1Million views in October, 2017 compared with 20, 2 million views in May, 2017: their number of visitors increased nearly by 50% and subscribers by 30%. The official Instagram account received more than 84,000 new followers in five months in 2017, and likes increased by 5% on their Facebook account. However, the brand’s website visits decreased nearly by 50% during these five months. Social media is an integral part of how consumers look at Kate Spade’s marketing, communications, and consumer outreach. Kate Spade appeals to young people who live and breathe social media and are immersed in it every minute of every day.

(Figure 3, Digital Data of Kate Spade New York, Source: eMarketer Retail)

Kate Spade New York knows how to use social media to build customer loyalty. They reward their loyal customers with extremely generous offers that keep customers coming back. The loyal customers that follow Kate Spade on Facebook will be one of the first to know when the “surprise flash sales” arrives. Designer bags at 75% off gets plenty of fans excited, while getting fans to tune in for other exciting sales and events. Kate Spade is utilizing Instagram Stories and their Twitter feed to provide users with a daily piece of advice to brighten their day and encourage users to “live colorfully.” The staff in Kate Spade has shared inspiration on the social media and through email for years, so when a member pitched Pinterest to Kyle Andrew, the senior vice president of marketing for Kate Spade, the then-unheard of photo-sharing website seemed like a natural extension of the brand. For Kate Spade New York social media is the new way of marketing. Most of Facebook updates, and pins aren’t even of products you can buy on KateSpade.com. But the non-promotional updates help build customer loyalty and understand the message the brand wants to convey. At present, their followers are active on seven platforms and remain true to their brand voice, which is the Kate Spade New York girl personified. The company team creates unique strategies for each digital platform, understanding that each channel functions in a different way. Their primary goal is to keep their fans and customers engaged. In addition to creating interesting content, they are always listening, their conversations are authentic, and they adjust their strategic approach as their consumer’s behavior changes.

Twitter: They provide their Twitter community with a glimpse into the interesting life of the Kate Spade New York girl in 140 characters or less. It’s the best way for their 559k followers to travel along with the brand’s colorful adventures. Pinterest: Kate Spade was one of the first brands to experiment on Pinterest, launching their campaign long before other fashion brands. Their creative marketing team continues to work together to share a mix of current products, campaign shots, branded blog content, and inspirational images across their fifteen curated, branded boards.

Facebook: With a fan count exceeding 341 million, Kate Spade prides itself in having a large and engaged audience. Kate Spade New York always posts promotional information for some new shop gifts on Facebook, which is a good way to increase sales for consumers. Their content, which is posted multiple times daily, consists of original blog content and exclusive marketing messages. Kate Spade shares campaign news on their Facebook page. For example, Kate Spade is celebrating a quarter century of creating fabulous clothing and accessories. The Kate Spade 25th Anniversary collection was created to pay tribute to 25 incredible years of being in business, and Margaret Qualley stuns in Kate Spadeâ&#x20AC;&#x2122;s 25th Anniversary Campaign (fig 4). The campaign helps consumers spend more time browsing the official website and also increase sales online.

(Figure 4, Kate Spade New Yorkâ&#x20AC;&#x2122;s Facebook Official Account)

Instagram: After launching their Instagram account in Spring 2011, Instagram became the visual component to their Twitter account. With a fan count exceeding 2.2 million, they ask users to follow them for a more detailed peek into the world of Kate Spade New York. Office birthday parties, Sunday brunches and nights at the ballet are just a few of the things one will discover. For example, the official account posts some events and campaigns for the new collection (Fig. 5). Kate Spade will share the latest news, such as opening a Leopard pop-up shop. If Spade Café opens in New York, the official Instagram account will post Spade Café information that will attract Kate Spade consumers.

(Figure 5, Kate Spade New York’s Instagram Official Account)

YouTube: Kate Spadeâ&#x20AC;&#x2122;s channel has come a long way since it launched in 2010 with 3.6 million views. With a thoughtfully designed branded channel, they are able to present all of their in house created videos in a brand appropriate manner. Focusing on the idea of converging content and commerce, they looked to create a video that was both shoppable and charming. The official account shares new campaigns and advertising, as well as some of the latest seasons from fashion week shows for promoting their new collections (Fig.6). Kate Spade New York ranks among the strongest brands in the online marketing space. From Twitter to Instagram and online videos, consumers have been consistently impressed with the quality and strength of voice the fashion and lifestyle label has brought to each new platform.

(Figure 6, Kate Spade New Yorkâ&#x20AC;&#x2122;s Youtube Official Account)

3.4 Company Future Outlook Kate Spade will enhance future communications and interactions with its customers through social media, which is the new way of selling products. Kate Spade plans to build a global multichannel lifestyle brand embraced by consumers and markets in all the fashion capitals around the world; it is a brand that spans multiple categories and reaches the consumer in many different moments of their life. Kate Spade believes that the brick-and-mortar or online channels of distribution are all important points. The company wants to modernize their product offering, while building on the DNA and the heritage of the brand. The Kate Spade girl aspires to lead an interesting life and to engage in the arts, literature, travels and adventures, and these are the topics they often discuss on their personal social media accounts. Kate Spade will focus on social media and Ecommerce marketing, while considering more in-store experiences. The company will provide not only fashion products, but also a fashionable lifestyle. Many fashion brands start businesses within the restaurant and cafĂŠ industries, which is a new way to attract consumers and provide more in-store experiences while increasing sales. Kate Spade will also try to do cross-border collaboration, like starting a business in the food and beverage market, and having more opportunities to attract consumers.

4. Situational Analysis (Secondary Research) 4.1. Current Global Café Market Overview According to the Specialty Coffee Association of America, 37 % of coffee sold is of the specialty variety; coffee and tea have a high markup, up to 80% on specialty coffees in the U.S. market. They also estimate the retail value of the U.S. coffee market at $30-32 billion dollars. In order to capitalize on the retail value of coffee, Kate Spade will create Spade Café, a colorful and fashionable café offering an interesting, relaxing experience for discerning customers, both old and new. Spade Café will provide a variety of specialty coffee, which represents a big percent of the U.S. coffee market. In addition to coffee, Spade Café will also offer traditional café fare, including cakes and tea. Spade Café is named as such since the French word café evokes the image of a laid-back, yet elegant restaurant that sells not only coffee but also other delicious food and drinks to appeal to the target consumers. The choice of café industry plays a main role in the American concept of a European bistro or coffee shop. This concept will help encourage customers to remain in store and purchase other Kate Spade products. The café industry has a wide selection of food and drink, sometimes including alcohol, but the focus is primarily on non-alcoholic beverages. Consumers are increasingly looking for operators to sell social experiences as much as they do beverages or baked goods. Bars are looking for ways to drive snacking traffic and fill tables between traditional mealtimes. Coffee plays an important role in the café industry and is popular in the Western hot drink market, accounting for 59.7% in 2016 (Fig.7). Coffee trends in the U.S. play a main role in the analysis of the café market. Coffee is the world’s most popular beverage in cafés, and more than 400 billion cups are consumed every year (“Specialty Coffee Association of America”). Noncoffee products like tea, sparkling water, chocolates and smoothies account for almost one-fifth of the café market. As coffee plays a big role in a café’s sales, it is important to analyze the coffee industry for Spade Café.

The Hot Drink market realized total revenue of US$123 billion in 2016, representing a growth of 4.4% compared to 2015. Statista forecasted the compound annual growth rate (CAGR) of the revenue from 2016 to 2021 to be 4.2%. The segment coffee accounted for 60% of the worldwide Hot Drink revenue and 65% of volume sales in 2016. In that year, coffee sales increased by 4.5% in comparison to 2015, and reached US$73 billion (Fig 8).

(Figure7, Source: Statista Consumer Market Outlook 2017)

(Figure 8, Source: Statista Consumer Market Outlook 2017)

Today, cafés are popular meeting places for business and other social activities. People may not go to their favorite restaurant on a daily basis, but they may visit a café and drink a cup of coffee every day. People want to get a cup of coffee which is replacing alcohol as the social beverage of choice, with people meeting for coffee instead of cocktails. People can now meet for café at any time of the day, rather than just “cocktail hours.” Some cafés even serve quick lunches and healthy snacks for the afternoon. Some people open cafés because they like hanging out in coffee shops and want to serve their friends and think it would be awesome, and a restaurant will make more money per square foot than a coffee shop. Such cafés can be used for socializing, relaxing or for professional purposes, such as conducting business or holding informal meetings. About 450 years ago, the first café opened in Constantinople and soon became very popular in the rest of Europe. Later in the second half of the 20th century, Americans too accepted the café as a place for social or cultural gatherings. Successful cafés have heavy foot traffic and highvolume sales. The majority will serve up to 500 customers per day. In fact, profit margins for beverages are extremely high at least 80% because the product contains more than 95 % water. While each customer spends $3-$5 on average, 500 customers will bring in around $2000 plus of sales a day. Coffee beverages were estimated to be nearly 70% of all retail sales in a café. The beverage products were also linked intimate to the experience of the café. The café experience included the atmosphere: decoration, music, and smells, customer service, and the beverages and food.

4.2 Current Café Market in the U.S. Market In 2016, the café and bar market value increased to 6%, reaching sales of $55.2 billion in the U.S., while transaction volume rose by 4%, increasing the number of outlets by 2% to 77,320. The number of outlets of chain cafés and bars increased by 29,200, and the number of independent cafés and bars increased to 41,490 between 2011 and 2016; this number is higher than specialist coffee shops which increased only by 25,260 units. It represents that cafés and bars increased more quickly than specialist coffee shops because operators continually are using technology to help drive sales. According to Euromonitor reports, the transactions of cafés and bars grew about 20% from 2011 to 2016 (Fig 10). Consumers have kept demanding quality coffee and they like to try better quality products. In the U.S., competition has become a regional and even city-level game, with large numbers of independent, third-wave cafés and boutique chains popping up to compete with larger brands. Over the long-term, this kind of movement toward a highly diversified, highly fragmented, and most of all highly competitive global café market is only expected to continue. Operators all over the world have all taken note of the rapidly growing demand in cafés, and everyone is looking to get in on the opportunity (“Coffee Shops around the World: Three Key Insights for 2016”).

(Figure 10, Sales in Cafés/Bars by Category: % Transaction Growth 2011-2016)

Over the past several years, café stores have become more and more popular among customers who enjoy their coffee in a fashionable café store. The number of Americans drinking coffee on a daily basis increased to 62% in 2017, up from 57% in 2016 (NCA, 2017). Americans consume 400 million cups of coffee per day, making the U.S. the leading consumer of coffee in the world. Specialty coffee sales increased 20% per year and account for nearly 8% of the $18 billion dollar U.S. coffee market. Thirty million American adults drink specialty coffee beverages daily. This includes mochas, lattes, espresso, coffee mochas, cappuccinos and frozen/iced coffee beverages (National Coffee Association). The average amount of money spent on coffee in a café store is around $21 per week. The coffee consumption growth rate in the United States was 7.9% during 2015-2016, and the retail coffee market was valued at $12.8 billion in 2015 (Fig.11). The greatest demand for coffee consumption is from American consumers. This is the reason why Kate Spade has chosen to offer many coffee products and open a café in New York.

(Figure 11, Source: Euromonitor International data)

4.3 Current Café Market in New York According to Jeffrey Young, the festival’s founder and an industry veteran who has been analyzing trends for 18 years, that café is showing unprecedented growth in New York City. “The amount of new openings has absolutely been crazy,” he said, citing a 20% increase in café shops in the city in one year. He says its part and parcel with the city’s love of coffee and for the “caffeinated lifestyle and a taste for the best things in life.” New York is probably the most caffeinated city on the planet, Young said, with 25 million cups of coffee sold every day. And that number is growing rapidly. The chart in fig.12 shows that Starbucks and Dunkin’ Donuts have the most outlets in New York City. The Restaurant Inspection Results list counted 454 Dunkin’ Donuts and 272 Starbucks locations within the city. Forty-two percent of the City’s cafés are one of these two major chains, with the remaining majority made up of smaller chains or single-location establishments. New Yorkers prefer smaller and popular local cafés or chains, which accounted for more than 50% (Fig. 12). As a result, having one location in New York City, it will cater to their desire for exclusive experience. Spade Café will attract many New Yorkers. Also, because Kate Spade is a well-known and well established brand, consumers who go to Starbucks and Dunkin’ Donuts may consider frequenting Spade Café.

(Figure 12, New York City Department of Health and Mental Hygiene)

StatsBee had compiled a list of 1,700 cafés, coffee shops, and tea shops in the five boroughs of New York City. Manhattan neighborhoods have the highest density of cafés per ZIP code. The East Village ZIP code of 10003 has the highest number of shops with 49, closely followed by Midtown/ Hell’s Kitchen (10019) with 47. Midtown East (10017) and SOHO (10012) each have 41, and Tribeca/Chinatown (10013) has 40. The non-Manhattan neighborhoods with the highest concentration of caffeine are Williamsburg (11211) with 31 shops, Glendale (11385) with 32 shops, and Park Slope (11215) with 32 shops. See below chart about coffee and tea in NYC (Fig 13). Kate Spade Café will be located in the SOHO district. SOHO is in Downtown Manhattan, with a population of 51,240. Total household expenditures in SOHO are above the national average which is $96,558 in 2014 (“Onboard Informatics”). SOHO is an urban shopping mall that is prime shopping and dining territory. There are many art galleries and some excellent art spaces that also attract travelers. Walking along the streets, it is easy to find great New York restaurants, bars and things to do in this downtown neighborhood. This is a great location to open a café in the Kate Spade retail store in SOHO.

(Figure 13, Restaurant Inspection Results)

4.4 Café Market Future Outlook The café industry has been growing over the past few years, and it is bound to grow even further in the future. As café culture is closely tied with social and dining traditions, conditions vary widely by consumers’ preferences. Cafés and bars recorded a solid current value growth of 6% in 2016. Due to busier lifestyles, American consumers are increasingly seeking convenience and on-the-go purchasing options via foodservice. The forecast sales in cafés and bars show a high performance, and the transaction growth will increase from 1.9% in 2016 to 7.6% in 2021 (Fig.14). The biggest part of the café market is the revenue in the coffee segment, amounting to US$12.94 billion in 2017; the market is expected to grow annually by 3.1 % (CAGR 2018-2021). Coffee volume sales in the United States are increased by 1.5% between 2016 and 2017 (Fig. 15). Statista predicts that coffee volume sales will increase 1.9% in next 3 years. In terms of expenditures, per capita spending on tea, coffee and cocoa has increased from $29 in 2006 to $33.5 in 2015, and is further expected to increase to $37.6 by 2020 as consumers increasingly switch to more premium quality tea and coffee.

(Figure 14, Forecast sales in Cafés/Bars: % Transaction Growth 2016-2021)

(Figure 15, Statista Consumer Market Outlook)

Growing Millennial population is fuelling market growth of coffee. The people aged between 19 and 34 years account for the highest coffee consumption. About 44% of the United States coffee demand comes from the Millennials. In eight years, through 2016, the daily consumption among 18 to 24-year-olds increased to 48% from 34% , while it increased to 60% from 51% among the population aged 25 to 39 years, as reported by the National Coffee Association in New York. The advancing café culture is becoming a “fashion symbol” and is driving coffee consumption. In this fast-paced world where consumers look to fast, quick and easily accessible coffee drinks, the tea and coffee market size reached $71.43 billion in 2014 and is expected to reach $116.13 billion by 2024 according to a new report by Grand View Research, Inc. For these reasons, the coffee market has a great potential to grow in future. Consumers are also turning away from soda drinks and turning to healthier choices which include coffee drinks. With the interest in café shops, many consumers are eager to experience their time in the café shop with rituals such as having afternoon tea in the café shop.

According to a new report by Grand View Research, Inc. Ready-to-drink tea and coffee are a part of the growing trend in the soft drinks industry. These drinks are not only perceived as instant energy drinks but also form a part of lifestyles in major countries around the world. The enhanced nutritional benefits and compatibility with different flavors is driving the demand for these products. The major factor promoting the ready to drink tea and coffee market especially in a cafĂŠ shop is the rising health awareness and disposable incomes of the population. The growing consumption of on-the-go health drinks has largely impacted the demand for these products. The growing cafĂŠ culture and the changing habits related to tastes and flavors have fueled the market demand for these products. For these reasons, the cafĂŠ market has a great potential to grow in future.

4.5 Competitors’ Analysis The café industry has many competitors in the market. Knowing competitors can help to better understand the market and brand positioning. Spade Café’s major competitors include Ralph's Coffee and Toby’s Estate Coffee. These brands will share the same consumer base with Kate Spade. However, Kate Spade will be located in the SOHO area, which is near its competitors, but it will provide different brand experiences for customers. It will operate with a menu of specialty coffees, espresso drinks, teas, bottled beverages and packaged pastries and sandwiches. Major Competitors Location

Ralph Lauren, Ralph's Coffee The renowned fashion designer has thrilled the Londoners by opening Ralph’s Coffee & Bar, Ralph Lauren’s first dining destination in London, and is inspired both by The Polo Bar and Ralph’s Coffee in New York. The menu offers coffee, cocktails, light meals, shared plates and snacks such as fried olives and mixed nuts. The bar plans to serve up cocktails including an Old Fashioned and a Ridgway Margarita, as well as custom-roast coffee made from organically grown beans by La Colombe. Ralph's Coffee offers more than coffee, as it offers an experience that blends fashion and friends with exceptional coffee that includes Ralph Lauren's private coffee blends from USDA organic coffees. The interior features a brass-topped bar, saddleleather banquettes, and equestrian-themed art hung against dark wood paneling and green billiard cloth. An intimate oasis in the heart of Mayfair, the café is spacious to accommodate twenty four diners, with a dozen more seats at the bar. The environment exudes a sense of comfort and warmth with antique bistro-style chairs, whitewashed tables and the vintage oak library table that proves it's not just another coffee shop. Price range: $($3-10) Distributions: 2 in U.S. (New York, Chicago)/ 1 in Paris, 1 in London Location: 711 5th Ave, New York, NY 10022

Urban Outfitters: UO Cafe Urban Outfitters opened of UO Cafe, located in iconic Herald Square. It offers locals, tourists, and shoppers a unique food & coffee experience. UO Cafe serves a selection of fresh & healthy options. For the lunch and dinner crowd, UO cafeĚ focuses on vibrant and chef inspired composed salads that change daily, along with creative sandwiches and pressed paninis. All of URBNâ&#x20AC;&#x2122;s current food and beverage brands will be folded into and managed by the Vetri Family. The restaurant veterans will also be tasked with helping Urban develop food and beverage concepts. UO Cafe has partnered with Australian-based coffee company Will & Co. Visitors can satisfy their afternoon sweet tooth with a fresh baked cookie and espresso drink. Price range: $($1.5-9) Distributions: 3 in U.S. (UO Cafe in New York, 2 Terrain stores in Glen Mills and Westport) Location: 1333 Broadway, New York, NY 10018

Club Monaco: Tobyâ&#x20AC;&#x2122;s Estate Coffee Club Monaco has partnered with Toby's Estate Coffee and Strand Books to open up something of a stylish, intellectual, gastronomical trifecta on 5th Avenue. The Club Monaco flagship juxtaposes fashion and urban life by housing two new shops-inshops: Toby's Estate Coffee, a hip Williamsburg mainstay, and The Strand, the iconic Manhattan bookstore. These retail extensions have added an authentic New York experience filtered into a unique shopping environment that became a second home to stylish urbanites, who shop current trends over a cup of coffee and pour over books in categories such as art, travel, photography, food and fashion. Price range: $$($2.25-35) Distributions: 1 in U.S. (New York)/ 1 in London, 1 in Toronto Location: 160 5th Ave, New York, NY 10010

Tom’s Cafe Tom's Café is available at TOMS Community Outposts and select Whole Foods stores. The new venue at 264 Elizabeth St. boasts a coffee shop serving fair trade coffee, an eyewear shop; TOMS shoe collection, a free book swap and a soon-to-open outdoor patio perfect for lounging in your new kicks. The new cafe boasts a menu serving pour-over, espresso drinks and house specials like a vanilla coriander latte. The shop was designed in line with the philosophy of the company, on the principles of reusing material and highlighting the space’s history. The old floor coverings, the walls and doors have been maintained; the old coatings and bricks have been left exposed; the old furniture has been repaired and used in a completely different way, while an old sheepfold has been used for the metal sheets in place. A very impressive patio, which allows daylight into the store, makes this place special and very matching to a Tom’s store. Tom’s café is a little casual gem for local workers seeking out a quick and healthy lunch. The seating area features a wide counter, barstools, outlets and free wifi, so customers can hang out at the coffee shop and put off shoe shopping. TOMS is working on partnering with local eye doctors to fill prescriptions for frames sold in their SOHO store. Price range: $$($1-6) Distributions: 4 in U.S. (New York, Venice CA, Chicago, Austin TX ) Location: 264 Elizabeth St, New York, NY 10012

Red Fleece Café - Brooks Brothers Brooks Brothers is the oldest men's clothier in the United States and founded in 1818 as a family business. Brooks Brothers has opened its first ever in-store Café at its Flatiron store in New York. The cafe is named after the preppy Red Fleece aesthetic first launched by Brooks Brothers in 2014 and known for its slimmer fits and younger customer. They proudly serve Stumptown Coffee Roasters beverages along with an assortment of pastries, specialty teas, beer, wine, and soft drinks. And if you don't really drink coffee, you can still sip on something hot thanks to a range of Kusmi Tea available. It’s an oasis of retail therapy and aromatherapy for the busy city lifestyle. The single-origin stumptown coffee drinks made by baristas appropriately decked out in Repp ties and oxford shirts. In fact, the cafe also proudly sells some brew kits, accessories and coffee beans from Stumptown as well as tea assortments and gift sets from Kusmi Tea. Price range: $($3-$10) Distributions: 1 in U.S. (1 in New York) Location: 901 Broadway, New York, NY 10003

Blue Box Café - Tiffany & Co. The Blue Box Café is located at Tiffany & Co.'s flagship store on Fifth Avenue in New York City. The restaurant is decked out with decor in the chain's signature robin's egg blue, accented with silver and white. The newly designed space is part of a recent renovation to the fourth floor of the famed jewelry store. The space looks like a Tiffany’s jewelry box come to life. The menu includes a range of dishes, from breakfast items like truffle eggs and sweet pastries to lunch items like the Fifth Avenue Maine lobster salad and a poached salmon with Osetra caviar. Breakfast is prix fixe set at $29 per person and lunch is $39. Both meals include a starter and main course. Price range: $$($29-$60) Distributions: 1 in U.S. (1 in New York) Location: 727 Fifth Avenue 4th Floors, New York

Competitors Perceptual Map& Analysis

From the competitors’ chart, it is clear that the price range of Blue Box Café is the highest price, followed by Toby’s Estate Coffee. In order to attract as many consumers as possible, Spade Café will provide a wider range, from $3 to $40, which is higher than Toby’s Estate Coffee but lower than Blue Box Café. In addition, Spade Café will provide a VIP reward service, Spade Service, for consumers, which competitors have not provided. Spade Service will attract many younger consumers to stay in-store. At the same time, these two brands also provide innovative food like housemade granola, as well as fashion and relaxing atmosphere. Toby’s Estate Coffee will be the direct competitor because it is successful in social media marketing. Toby’s Estate Coffee has many followers on their official Instagram and Facebook accounts. Blue Box Café is successful on Facebook promotion. Blue Box Café does not have an official account on Instagram but many consumers do the hash tag #blueboxcafe for sharing with other people. These are two successful companies and also the direct competitors for Spade Café. 35

The secondary and primary research helped determine that the customers care more about the food and atmosphere of a store. Innovative food includes different tastes, special food materials, and new packaging of products. The perceptual map shows that Blue Box Café and Toby’s Estate Coffee rank at the top with excellent food and environment. However, when compared with other fashion brand cafés, UO Café did not satisfy consumers, as shown in the bottom of the map. Spade Café is posited on the top of the map to indicate that they provide innovative food and environment.

4.6 Café Consumers Research The growing importance of Millennials in the U.S. supports more out-of-home food and beverage consumption. Coffee is the main beverage product that most consumers have in a café. In the U.S., 44 % of the entire coffee demand comes from drinkers aged 18-34, according to National Coffee Association (NCA). Additional data from the NCA suggests that from 2008 to 2016, consumption by 18 to 24 year olds jumped by 14% to 48%, and for those aged 25-39, coffee consumption increased by 9%, up to 60%. Daily beverage consumption among 18 to 24 years olds rose to 48%from 34%, while it climbed to 60 % from 51%among those aged 25 to 39, according to the National Coffee Association in New York. At the same, adults 60 and older saw a drop to 64 % from 76 %, and there was also a decline for the 40-to-59 age group (National Coffee Association). Coffee consumers are younger, more affluent, and educated and are 22 % more likely to be aged 18-24. They are also 65% more likely to have an annual household income of more than $100K. Coffee consumers are 28 % more likely than the average American adult to be single and 70% more likely to have a post graduate degree. The average age of specialty coffee drinkers is 43. Women indicated that drinking coffee is a good way to relax, while Men indicated that coffee helps them get the job done. Occasional latte devotees are in the higher average income of $76,000, and similarly, cappuccino and espresso drinkers reflect an average income of $60,000. Millennials are going to be the center of consumption with enough disposable income as their spending powers are increasingly growing. In terms of their demands of the café, Millennials are concerned with the café environment, so they prefer to spend more money and time in the comfortable and fashionable environment of a café. Coffee is one of the most popular beverages in a café in America. Most people wake up every morning with a routine: hit the alarm clock, take a shower, get dressed and grab some coffee. Some like to take their time in the café shop to relax and jot down notes of the flavors they taste in the dark roasted Ethiopian-Colombian hybrid nitro brew. They are getting a caffeine addiction fix. The café shop environment combines the benefit of anonymity with the dull buzz of exciting activity. Unlike working at home, with the ever-present black hole of solitude and procrastination, a café shop provides the opportunity of human interaction on customers’ terms. The internet is bringing coffee enthusiasts and lovers closer to their perfect cup of coffee. Millennials are lucky in that they are tech savvy, have the internet widely available to them as well as social networks so that they can find the best information on café shops and coffee specialists close to them. The younger generation of Millennials is becoming the main driver and consumer in the café market, and they are very outgoing and social, often posting pictures of their coffee on social media.

4.7 SWOT Analysis

S 1. Kate Spade’s large customer base and potential customer group Spade Café will be open in a retail store, so consumers who buy Kate Spade New York products will also consider spending their time in Spade Café after shopping in the store. Some consumers who just want to have a rest and try a new brand of coffee in Spade Café may buy other Kate Spade’s products. While others may not buy any Kate Spade products and do not like drinking coffee, they like to follow new trends and will consider the fashion café store. 2. Strong brand identity and image Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially Millennials. 3. Distinct stylish products that bring recognition to the brand Kate Spade brand is youthful, playful, lighthearted, and modern. Clean shapes, classic elegance and a touch of wit are the fundamental principles behind her distinct designs. 4. Ecommerce business, growing sales worldwide Kate Spade’s Ecommerce business is very successful, and Kate Spade’s sales are growing through online channels. Spade Café should consider selling online products. 5. A range of product categories, handbags, clothing, jewelry, shoes, stationery, eyewear, baby, fragrance, tabletop, bedding and gifts. Kate Spade not only sells leather goods, but also other products, even home collections, which can be used in the Spade Café store. This brand increases the parent company's product sales, especially for Kate Spade home and tableware products, which deliver a fashionable lifestyle for the target consumer. 6. Loyal customers Kate Spade has many loyal customers now, and Spade Café will also help to build customer loyalty, while understanding the message the brand wants to convey. 39

W 1. No drink and food industry experience Spade Café is the first café store that the brand will be opening, and they have no food and beverage industry experience compared to other competitors. Therefore, the brand needs a partner to help with its operation. 2. Lack of brand awareness compared to competitors Lack of awareness is an issue for any new brand extension. Since consumers have no impression of Spade Café, it may change the brand’s image for Kate Spade and increase brand awareness. 3. Short brand history Kate Spade New York was founded in January 1993 by Kate Spade and Andy Spade. This brand has just 25 years history of being in business, which is a very short brand history compared with their competitors.

O 1. Strengthen the brand identity through café shops to communicate with consumers Many fashion brands open cafés or restaurants to attract consumers. Kate Spade also may consider operating a café to connect with their consumers more. 2. Younger generations like drinking coffee as a kind of lifestyle Coffee is very popular among the younger generations. They like to spend their time in a café store, which is now becoming a new lifestyle. Spade café will also attract these younger generations. 3. Meeting friends and eating together outside is popular now Target consumers like meeting friends and eating outside, especially in a café. They like to rest with their friends in a café store while relaxing in a comfortable atmosphere. 4. New York is a modern city and welcomes new café brands New York is the best city because many New Yorkers like to try new café brands, and they will also try Spade Café. 5. Lots of travelers visit New York Spade Café will not only be visited by New Yorkers but also many travelers who will try this new brand. 6. Customers need somewhere to rest after shopping for a while New York is a great shopping place, especially for travelers. Consumers need a space for resting after shopping; Spade Café will be a great choice for them. Consumers can have a seat in Spade Café and also look around in-store and buy this brand’s other products such as Kate Spade’s tableware.

T 1. Many brand competitors, like Ralph Lauren, have opened café shops Some fashion brands are operating cafés and restaurants. Consumers have a good impression of other café brands. Spade Café will be a new brand for consumers, so they may have scruples towards this new brand’s food quality or this taste. 2. Many professional and traditional café shops There are many other café brands that consumers are familiar with. 3. Consumer preferences may be changing Consumers’ preferences change all the time, including their tastes, eating habits, products, and packaging inclinations. Consumers like to follow new trends so they may change their minds anytime. Spade Café needs to consider providing new products, not always just the same products, like strawberry cake. Including some new products will attract consumers. 4. Potential threats to the cafés include the possible growth of fast food and fast casual operators which offer premium beverages and food, which could attract some customers who regularly frequent cafés/bars. Many other restaurants and fast food eateries provide nice beverages and great food. Consumers will consider these brands if their locations are convenient and better for them.

5. Primary Research 5.1 Research Goals The secondary research provided much information about the industry’s current situation and future outlook as well as Spade Café’s competitors in the U.S. market. The next step is primary research using a survey. The survey will help to better understand the target consumer behavior, consumer insights about Kate Spade as a brand, as well as consumer preferences and willingness to purchase, e.g. the reasons why they go to a café, what elements they will consider when they go to a café, and what platforms they use to learn the new fashion information. 5.2 Research Design The project began with secondary research of the U.S. café market and consumer behaviors. The next step is to design a questionnaire, including one choice questions and multiple-choice questions for a total of 14 questions. The questionnaire format uses Survey Monkey. This is the best way to get the information needed to fill the gap between what the consumer wants and the brand's offerings because the online format is more convenient for participants. The questionnaire received 154 responses from the U.S. target customers, especially consumers who live in New York. The target market is directed towards travelers in New York and some local fashion persons who like following new trends and like drinking coffee. I try to find these customers in other coffee stores and some in cafés or bars, especially in my competitors’ café brand stores in New York. These people are mainly Millennials and Generation Z, both female and male. They could be students or anyone living in big cities or close to the SOHO area in New York, as well as people with middle to high income. They all love following fashion trends and like to try new food and restaurants. They prefer eating outside and using social media to share new information. 5.3 Research Analysis According to the survey results, up to 85.7% of participants bought a Kate Spade Product before. Many participants have a deeper impression for this brand. Moreover, 77.3% of participants think that leather goods best represent Kate Spade. Although Kate Spade has beautiful apparel and accessories, as well as cute home collections, participators do not have a deep appreciation for other products. Futhermore, 88.9% of participants often use social media to acquire information about Kate Spade, followed by 48.7% of participants who use magazine advertising and 29.2% from the Kate Spade New York official website. They prefer social networking and are influenced by brand image. This is a positive for Spade’s Café business as social media is the most important part of the strategy to promote Spade’s Café and help consumers to better understand the Kate Spade brand. This brand’s use of social media is successful. Some participants know Kate Spade from their in-store promotions and also from official emails. This is also important for Spade Café because in-store promotions will directly impact the store’s sales. Through this process, brands improve their equity and obtain financial reward as a result. In addition, there are many opportunities for Spade Café to include promotion on social media. Most participants responded that Instagram 43

(79.9%) and Youtube (74%) are the most commonly used social media platforms, and 40.9% of participants often use Facebook. Therefore, Spade Café will focus on Instagram, Youtube, and Facebook promotions because more consumers will see this brand’s posts through these platforms. Furthermore, 92.2% of participants follow other fashion brands or company’s official social media accounts. Spade Café needs to prepare to post some special brand content and campaigns that are different from other competitors to attract consumers. Also, 87.7% of participants will post photos on social media if they tried some new food and restaurants, which will help Spade Café to create more opportunities, because many consumers are willing to trust their friends and want to have new experiences in new stores. The atmosphere (89.6%) and food quality (76.6%) are the most important elements to attract consumers to go to a café before they consider the café’s location. Therefore, environment and food quality are the standards which Spade Café should achieve and deliver to consumers. The price is not the first factor they consider; they would spend under $25 per person at a café to mainly meet with friends, which accounted for 64.9%, and some go to a café for a date. Spade Café will consider many consumers’ preferences and make a price acceptable to consumers. Some consumers go to a café because they enjoy food and need coffee. Additionally, 44.2% of participants would go to a fashion café if they hung out with their friends, followed by 33.1% who would go to a popular local café, and just few participants who would go to a traditional coffee specialist shop, which accounts for 17.5%. Therefore, many fashion and local popular cafés will have many opportunities to attract consumers because consumers think a comfortable and relaxing atmosphere will be important for them. The last survey question received 94.2% of people willing to try Spade Café, so it represents positive opportunities for Kate Spade to run a café business. However, 14.3% of participants who never bought a Kate Spade product said they would consider trying Spade’s Café. 44

6. Research Analysis and Findings Fashion consumers prefer unique and special experiences in retail stores. With the increase of interest in the café industry, many fashion brands begun to open cafés and restaurants. Consumers are eager to relax in the fashion stores and have afternoon tea in their cafés or restaurants. The following findings are divided into the trends of the café market, the characteristics of Millennials consumers, and the current status of the café industry in the U.S., the characteristics of Café consumers, Kate Spade Brand findings, and current issues. The trends of the café market 1. The café market shows strong growth in the U.S. food and beverage industries in terms of number (4.7%), with projected revenues of 3.9% from 2016 to 2021. The Coffee industry especially resulted in a remarkable increase of 20.5% during this period (National Coffee Association). For these reasons, the café market has a potential to grow in the future. Because of the big coffee and other beverage consumption in the world, there is an opportunity for Kate Spade to offer beverages in the café. 2. Consumer demands are changing now, which affects the luxury and fashion industry towards their in-store experiences. The trend for fashion brands is opening a café to provide more in-stores experiences and offer unique and special services, which consumers prefer. 3. With the increase of interest in the café industry, consumers are eager to have a comfortable environment to relax in their daily lives. The interior design of Spade Café will be an important element to attract consumers. 4. For the growing trend of the café industry, coffee and tea will become the mainstream. Sales of coffee and teas increased throughout 2016, and these products are expected to take off in popularity in the next few years. Spade Café will consider providing more special coffees and tea, especially during afternoon tea time. 5. Manufacturers are creating some interesting and delicious blends, including Ethiopian coffee mixed with organic Moroccan mint tea and green tea mixed with French roast coffee. These interesting offerings will give something different to other café’s products. If Spade Café offers these innovative products, it will cause consumers to be interested in the café’s products. 6. Consumers, including Millennials in New York, share their experience of products and services as well as refer to other people’s reviews through platforms such as social media and the press. For these reasons, opening Spade Café can attract more consumers, which will lead to additional financial profits. 45

The characteristics of Millennials consumers 1. Millennials and Generation Z have started to dominate the market according to secondary research. There are now more Millennials than there are Baby Boomers in the U.S. That means café shops and coffee producers may have to start refining marketing strategies to focus on younger consumers. 2. Millennials and Generation Z are concerned with their lifestyle more than the older generations. They are still the largest consumers in the café industry. 3. Millennials and Generation Z will be the center of consumption with enough disposable income as their spending powers are increasingly growing. 4. Millennials and Generation Z would like to try these new products. 5. For their demands, they are concerned with atmosphere and food quality, so they would like to go to a fashion café with their friends. It is of the utmost importance to provide high quality food and beverages at Spade's Café to keep the younger generation engaged, happy and productive. 6. Millennials and Generation Z like to use social media to acquire new information, and they use social media platforms such as Instagram, Facebook, and Youtube to share their experiences with their friends. Millennials and Generation Z in New York prefer to use Instagram rather than other western Millennials. Spade Café will focus on promoting on these social media platforms and communicating with consumers through social media. 7. Millennials and Generation Z are interested in social activities with others, and many Spade events will attract them. 8. Millennials and Generation Z are also looking for healthy and innovative food, as well as following a fashion lifestyle, which provides an opportunity for Kate Spade to open a café that caters to their healthy and fashionable lifestyle.

The current status of the fashion café industry in New York 1. According to the secondary and primary research, the café industry in the U.S. shows a growing potential trend in the next few years. In the development of the café culture, shopping environments still make New York the first choice for Millennials and Generation Z. 2. Many travelers in New York have visited fashion cafés, especially many consumers following the fashion industry will go to New York. 3. The environment and food quality attracts consumers to visit fashion cafés rather than just go to a traditional café. The characteristics of the café’s consumers 1. Café consumers are younger, more affluent, and educated: they are 22 % more likely to be aged 18-24. 2. Some people would go to a café once a week to meet with friends, and go on a date and so on. They make it a habit to take an afternoon tea with their friends. 3. According to primary research, most consumers would spend under $25 per person at a café. Spade Café will consider an accepted price under $25 for consumers.

4. In terms of their demands of the café, Millennials are concerned with the café’s environment, so they prefer to spend more money and time in a comfortable and fashionable environment. Atmosphere and food quality will influence consumers’ purchasing behaviors, which will finally influence the brand’s sales. This is what the Spade café needs to consider as a key point to satisfy this group of consumers.

Kate Spade brand findings 1. Online sales are Kate Spadeâ&#x20AC;&#x2122;s fastest growing channel of distribution. Sales growth has increased by 74% year-after-year. Ecommerce is growing even faster and it's almost triple-digit growth. 2. Kate Spadeâ&#x20AC;&#x2122;s key focus areas are looking to establish itself as a global lifestyle brand. It plans to grow its revenue by expanding its product categories and by entering new geographies. This would allow the company to grow its operating margin and build scale. The company is also expanding its e-commerce channel, which represents a significant 20% of the companyâ&#x20AC;&#x2122;s total sales. 3. Social media is an integral part of how this brand looks at their marketing, communications and consumer outreach. They put significant effort toward innovative ways to engage with their customers and communicate Kate Spade New York lifestyle across a range of social media channels. Every piece of content they post across their social media footprint is thoughtful and calculated, and ties back to a larger content strategy.

company issues Much of Kate Spade’s sales growth was driven by the company’s robust E-commerce business. Global E-commerce business has done particularly well, registering strong double-digit growth in both flagship and flash sites. The main change for the company is a shift into the lifestyle space, breaking into sales of home goods and apparel on top of accessories. After excluding its E-commerce business, Kate Spade’s in-store sales grew slightly, just under 8%. The company is actively expanding in the children’s wear and home products segments in order to elevate its image as a lifestyle brand and increase cross-selling opportunities. The company introduced 14 new product categories in 2015. These categories were a success among the company’s existing customers as well as an attraction for new customers. About 30% to 50% of the customers who made purchases in these categories were first-time purchasers of Kate Spade products. These groups of consumers like to consider buying the new collection of products, and are attracted by this new category within the Kate Spade brand. Therefore, new products will attract new consumers, creating an interest in the brand through opening Spade Café. Kate Spade will still focus on social media marketing in the next 10 years. The strategy to invest in innovative digital technology for potential and existing consumers will be the most important.

7. Target Consumer Identification 7.1 Demographic Segmentation Age: young adults (18-40) Gender: focus on female consumers but also want to attract fashionable males, and middle-class consumers Occupations: high school and university students, fashion bloggers, editors, writers, creative directors… Income (year): $40,000-$95,000 According to CNBC market research reported, the middle-class annual income range in New York is $36,637 to $184,447 in 2017. The company, Kate Spade New York is mainly targeting the consumers whose average income up to $70,000. From the primary research, consumers who pull in the annual income range from $36,000 to $84,000 are interested in Spade Café. Spade Café will focus on the middle-class consumers whose annual income range from $40,000 to $95,000. The target consumer for Spade Café is going to the people who appreciate high quality coffee products and a fashionable lifestyle. Ideally, many travelers and coffee fans in New York would be targeted and encouraged to visit the Spade Café. Customers are mainly Millennials and Generation Z, both female and male. Target consumers could be anyone, especially someone is working in creative fields, such as art, fashion, and social media industries. This group is educated, well traveled, and fashion-forward. The market will also have the existing customers who are engaged with Kate Spade's fashion lifestyle, while aspirational consumers who want to have more experiences and become closer with Kate Spade through the café.

7.2 Behavior Segmentation This group of target consumers is familiar with using mobile phones to get new information. American consumers have been accustomed to using the Yelp App on their mobile phone to look for delicious cafés. Meanwhile, many customers like to post daily photos on the Internet and talk about life experiences, using social media such as Facebook and Instagram. Young generations consume and connect with all technological devices. Furthermore, they have strong shopping habits and like spending more on good quality products. They are more likely to consume coffee out-of-home than older consumers, being more technologically connected and eager to browse online, learning about products online and via mobile devices. 7.3 Lifestyle and Attitude

Younger consumers prefer to hang out and dine with their friends rather than cook at home. They like spending money on entertainment, looking for adventures, experiencing new cultures, and are constantly looking for new products. They are followers of trend and like popular styles. The target customer lives online, and is addicted to social media, wanting access to information very quickly and easily. Consumers, especially Millennials, are increasingly using their smart phones to stream movies and TV shows. As far as the consumption of coffee is concerned, increasingly health-conscious consumers are looking for higher-quality coffees, while demand for organic coffee is also on the rise. Younger consumers are increasingly engaging with brands on social media with over 80% of Generation Z consumers and Millennials following or ‘liking’ a company’s social media feed or post; over 75% interacted with a company via a social media post. American consumers are now increasingly gravitating towards fashion and beauty influencers on Instagram and blogs when it comes to making purchasing decisions, instead of traditional celebrities such as actors, musicians and athletes.

7.4 Target Consumer Profile

Jessica Age: 20 Status: Single Nationality: New York Occupation: Advertising Student at NYU Income: while she is not actually employed fulltime, she has a part-time job earning about $35,000/year Interests: Enjoys social and outdoor activities, concerts, making friends and going bar- hopping, shopping for fashion and luxury products. Lifestyle: She likes to go to school and local events and enjoys shopping with her friends. She is more technologically connected and learns about products online and via mobile devices. She keeps up with the latest trends in the world of fashion. She follows all her favorite brands on Instagram.

Emily Age: 28 Status: Married, no kids Nationality: Toronto, Canada Education: Master's degree from University of Toronto Occupation: Lifestyle Editor/ Journalist Income: $95,000/year Interests: Traveling, reading, music, socializing, loves exotic places and foods, and work out programs such as yoga and pilates Lifestyle: She spends all of her extra money on traveling and shopping. She loves to express herself through crazy fashion. She is most likely to purchase novelty items from Kate Spade.

David Age: 35 Status: Single Nationality: New York Education: Master's degree from Parsons School of Design Occupation: Fashion Designer Income: $90,000/year Interests: Social media, watching movies, reading, fitness, art and theatre Lifestyle: He always tries to maintain a professional appearance with a style mix of high-end designers and commercial brands. He is fashion conscious and loves fashionable products with good quality and brand history. He is sensitive to fashion, and pursues fashion trends

8. Marketing Plan 8.1 Spade Café Introduction Based on primary and secondary research, cafés are very popular in the food and beverage industry, and many fashion brands have begun to tap into the café business within their store to improve the brand’s awareness. The marketing strategy is to open a Spade Café to attract many consumers as possible. Spade Café is Kate Spade New York’s first café in the global market, providing innovative food and beverage. The Spade Café will be opened in an existing Kate Spade store in SOHO in New York. In order to provide better service and experience, Kate Spade will cooperate with the Sysco Corporation to achieve high standards for providing the best consumers experience. Sysco Corporation will provide the whole service for managing the Spade Café. The service includes choosing the best coffee products, designing the menu, and distributing coffee products to the café, as well as managing the employees, and shop operations.

Vision Statement Creating a interesting , relaxing experience for discerning customers

Mission Statement To encourage fashion followers to experience the new colorful lifestyle in Spade CafĂŠ

8.2 Business Model (Partnership with Sysco Systems and Services Company) Sysco Corporation is an American multinational corporation involved in marketing and distributing food products to restaurants, healthcare and educational facilities, hotels inns, and other foodservice and hospitality businesses. The company is headquartered in the Energy Corridor district of Houston, Texas. Management consulting is also an integral part of their services. They have the services and expertise to fit Spade CafĂŠâ&#x20AC;&#x2122;s needs. Sysco is able to connect our business with the services we need in order to run a cafĂŠ successfully. Solutions designed for our coffee shop, such as menu profitability and design, order tracking, along with the cake suite of products. Since many of their associates have backgrounds in restaurants and other foodservice settings, they understand the challenges of managing a kitchen, retaining staff, and providing customers a smooth dining experience. Though Sysco has grown to become the largest foodservice distribution network in the world, their local Sysco specialty companies and operating houses work are closely with local farmers, ranchers and producers to provide customers with the freshest products available. They continue to build on the local business initiatives to ensure the highest quality products and services are delivered efficiently.

8.3 Strategy Goal & Objective Fashion stores now are trying to get consumers to step into the stores by providing different store experiences. These unique experiences may encourage consumers to purchase items that they previously hadn’t considered purchasing. One of these new store experiences is Spade Café, an in-store café at Kate Spade stores. Spade Café aims to convey innovative food and an excellent atmosphere for consumers to remain in the store a longer time. Spade Café will be the support for Kate Spade New York retail stores to extend consumers’ shopping experiences and the time they stay in stores. According to the secondary and primary research, which indicates target consumers’ preferences for using social media to acquire information, Spade Café will use technology in-store to help consumers enjoy their experience at Kate Spade. By joining the café industry, Kate Spade can in turn better understand customers’ shopping preferences and habits. The consumers’ local purchases will also help Kate Spade’s sales profit grow. Statista.com shows the per capita personal income in New York was $59,563 in 2016. This increasing disposable income and consumption expenditures provide a good economic environment and a positive situation for a Kate Spade coffee business. These consumers not only have the ability to pay but also a willingness to pay, providing a good business environment to Kate Spade. Spade Café will also help consumers better understand Kate Spade New York. The objective is not only to bring a diversified brand experience that attracts current Kate Spade consumers and increase excitement for Kate Spade, but also to attract potential consumers and cultivate the brand preference. This will ultimately help to achieve the goal of increasing the profitability of Kate Spade while also increasing other product sales. New York is a modern city in the U.S., and consumers are more open-minded and prefer to try new food and beverage stores. It is a trend now for a fashion brand to open a café or restaurant. Therefore, there is a good opportunity for Kate Spade to open a Spade Café.

There are four key success factors to make this café special. First, the relevant atmosphere in the Spade Café store needs to be developed in the interior, especially in terms of music and design aspects. It will create an amazing interior display of brand products like coffee cups. People can spend most of their time in the Spade Café shop and apart from their workplace and home. A good interior design will reflect the original store concept with a comfortable environment. The interior space will attract many young consumers and affect their buying behaviors, and the café shop will help Kate Spade to enhance their brand awareness and help customers learn more about Kate Spade. Second, the frontline employees are the prime connection between the specialty café and the customer. Employees not only help make beverages, but they also help determine the Spade culture. The employees of Spade Café will make consumers feel welcomed as if they are home or it's their neighborhood café shop. The staff is decked out in striped shirts and knit ties in Spade Café's signature pink, along with classic khaki pants and butchers' aprons embroidered with the Spade Café’s logo.

Third, the Spade Café Shop will be located in SOHO in New York. SOHO is an urban shopping district that is a prime shopping and dining territory. There are many art galleries and some excellent art spaces that also attract travelers. Walking along the streets, it is easy to find great New York restaurants, bars and things to do in this downtown neighborhood, making SOHO a great location to open a café shop in the Kate Spade retail store. Last, Sysco Corporation (Systems and Services Company) will arrange Spade Café product offerings and ensure a good quality of products. Sysco Corporation has a great amount of experience with other food service brands, so it will be sure to provide excellent services. Although Kate Spade has no experience in the food and beverage market, Sysco Corporation will provide more help for managing the Spade Café. Consumers pursue a certain lifestyle and inner experience, and they think that material life and spiritual pleasure are all important. The atmosphere will make Spade Café special, which is different from other fashion brands’ cafés. Spade Café features hand-drawn inspired pictures of consumers’ favorite foods in vibrant colors; this collection is a relaxed take on dinnerware and accessories. It will combine the brand characteristics of its own products, and it will develop brand style for the café market, from the brand of visual perception and even auditory sensory series that cater more to the young and modern girl's style. Food also will be particularly cute, delicate, and innovative, and the music in-store is brisk; all these creative atmospheres will bring customers into Spade culture, extending to the consumption of diet culture.

8.4 Place Strategy New York

* New York City (Source: http://www.greatamericancountry. com/places/local-life/local-lingo-and-lore-in-new-york-city)

Spade Café will be located in an existing Kate Spade New York flagship store located in the SOHO area in New York. Generally, NYC is ahead of most global trends. Standing at this birthplace for many economic and cultural developments, Kate Spade can make the right strategies to outperform its competitors. New York City is proud of its public transportation and offers a variety of entertainment activities and different types of restaurants, cafés and bars, which attract many travelers to New York. According to the New York Times, the city is expected to welcome a staggering 61.8 million visitors this year. That’s an increase of just over two percent from 2016’s 60.5 million tourists, which was yet another record. All these factors are considerable support for a café business and bridge potential opportunities for the Kate Spade Company. In addition, compared to other cities, the life of the younger generation in New York is super competitive. People pay more attention to self-realization and are looking forward to a higher level of demand. Consumers face more pressure because of the rising costs of living, such as rising house prices. Also, a growing number of visitors flock to New York, bringing an opportunity for Kate Spade to launch a café to win the niche market. The younger generations are more focused on their career development and lifestyle requirements. The café changes consumers’ lifestyle. Working conditions and advancement opportunities create high interest in the Spade Café.

SOHO Area in New York

Kate Spade CafĂŠ Shop will be located in SOHO in New York. SOHO is in Downtown Manhattan, with a population of 51,240. Total household expenditures in SOHO are above the national average. SOHO is an urban shopping mall that is a prime shopping and dining territory. There are many art galleries and some excellent art spaces that also attract travelers and provide consumers an enjoyable experience. Walking along the streets, it is easy to find great New York restaurants, bars and things to do in this downtown neighborhood. This is a great location to open a coffee shop in the Kate Spade retail store in SOHO.

*SOHO Area (Source: http://www.10best.com/destinations/ new-york/new-york/shopping/best-shopping)

8.5 Product Strategy Spade Café plans to open on November 18, 2019, the week before the Christmas shopping season begins. U.S. consumers are crazy about the sales offered after Thanksgiving Day, and want to get more information about sales information in-store, which is a great time to get more consumers in-stores. Some potential consumers may revisit this brand’s store on Black Friday because they will accompany with their friends for shopping. Spade Café’s competitors offer more traditional food: Spade Café will provide special and innovative food that is different from its competitors. Its menu provides afternoon tea, pastries, desserts, and beverages, including fruit, scones, macaroons, cupcakes, chocolate, fruit tarts, snacks, various types of selected tea, coffee, champagne, smoothies, fruit juice, etc. All these quality products are supported by Sysco Systems and Services Company. Kate Spade brand has its own home collections: the tableware and many accessories from this collection can be used in Spade Café. The service focuses not only on consumers’ drinking experience, but also strengthening interaction between consumers and the brands, which helps consumers to understand the product better. Spade Café will provide wifi service in the store, which will be the best way to increase Kate Spade’s official website visits. In addition to a to-go service for consumers, Spade Café will accept a variety of payment methods, including cash, credit card, debit card, and Apply Pay. Spade Café uses an electronic ordering method in which employees can place orders using an iPad and consumers can place an order online or through an app on their phone. A paper menu is also available for consumers in store.

Human Resources Spade Café will open in an existing Kate Spade store. The Kate Spade New York flagship store in the SOHO district is open from 10 AM to 7PM and on Sunday at 11AM. Therefore, Spade Café will open from Monday to Saturday from 10AM to 8PM, and on Sunday at 11AM. In order to maintain the excellence of the service, the last order can be taken at 7PM. Afternoon tea will be offered from 2PM to 5PM every day. Spade Café staff will arrive one hour before the store opening to prepare products and leave around 9PM to arrange the products and consumption. There are two working shifts for employees. The first shift is from Monday to Saturday from 10AM to 3:30PM, and on Sunday from 11AM to 4PM. The second shift is from Monday to Saturday from 3:30PM to 9PM, and on Sunday from 4PM to 9PM. Spade Café’s minimum number of staff will be 7 people who will include one store manager, 2 cashiers, 2 baristas and 2 bakers. Store Managers can deal with some issues and details in operation. Cashiers will help consumers to make a payment and register consumer’s information. The number of employees, which include 1 cashier, 1 barista and 1 baker, who work for the first shift is as same as the number of employees for the second shift.

Menu Design

Floor Plan

Total Area: 540ft (30ft*18ft) Spade CafĂŠ has 30 ft for the length and 18 ft for the wide. It will include many tables and plants and floors for decorating the environments, and there are also many display areas for selling other products, such as its home collection, tableware and other accessories to get more sales for this brand. Spade CafĂŠ wants to show its brand culture to consumers, even if it is just its 25 years of brand history.

Store Design The design of this store will be very clear white with simple furniture and decorated with some plants and flowers. Spade Café wants to provide a nice, modern and comfortable environment with some colorful pink and whimsical patterns. The store will play some cute and fun music such as Sabrina Carpenter’s songs, “The Middle of Starting Over”, and “Can't Blame a Girl for Trying” which young people will enjoy. The space uses warm lighting as well as natural light in order to create a relaxed atmosphere. To support this relaxed atmosphere, the space also includes fresh flowers and plants for decoration. After shopping, customers are often tired, and the café includes comfortable sofas where they can sit and rest or even read. For the dining portion of the café, the tableware and other accessories are also bright and modern in style to reflect the elegance of the brand. The aesthetic is colorful yet elegant, with bright pinks and greens that reflect the youthful feel of the brand as well as the main colors of the logo. All of these details help to create a space where customers can feel at home.

Interior Design

Reading Area

8.6 Price Strategy The price strategy is based on the competitors’ analysis and the primary research. According to the primary research, consumers would usually spend under $25 per person at a café. When compared to other competitors, Spade Café will provide a wider price range to attract more potential consumers. Some consumers do not care about how much money they will pay, but they care more about the comfortable atmosphere, food quality and service in the store. They want to have a memorable experience and they will often revisit the store if the first memory is cool. Spade Café will provide some expensive drinks, priced up to $5, for this group of people to meet their needs. However, some consumers just want to have a rest and try this new café store, and they do not want to pay much on drinks and food. Spade Café will offer an acceptable price under $5 for this group of people. Spade Café offers afternoon tea time from 2PM to 5PM, and consumers can take advantage of the buy-one-get-one promotion during this time. Spade Café will try to attract more consumers as possible, and wants them to have a memorable in-store experience.

Coffee Pricing Position (Average Price) UO café does not offer coffee but provides many soft drinks. Blue Box Café provides many food and drink combos which includes a cup of coffee, consumers do not care how much each costs, which is a good way to sell more relevant products. Spade café provides perfect food and beverages, and the price point will be under that of Blue Box Café but higher than other competitors. Sysco Systems and Services Company will offers fresh ingredients and manage the operation to make sure Spade Café provides good service for consumers. The average cup of coffee will be $8 which is lower than Blue Box Café. However, Spade Café has its own style of products which are different from its competitors.

8.7 Promotion Strategy 8.7.1 In-Store Promotion Kate Spade flagship store will create advertising boards and arrange them on the store window. Also, consumers can watch the delicious food and beverage images and videos on the walls when they come in the store. When more consumers visit Kate Spade brand because of their visit to Spade Café, they will spend additional money on other Kate Spade products. For Spade Café’s opening event that day, Katie Manwaring, a fashion blogger and style blogger, will be visiting Spade Café for the campaign to drink champagne and speak some words of fashion wisdom. She will be sharing her thoughts about the brand of Kate Spade, and guests will have an opportunity to chat with her about consumers’ own questions. Katie Manwaring is the voice behind New York City-based style and travel blog, Katie’s Bliss. Since launching in 2011, KatiesBliss.com has become a destination for educated Millennial women looking for shopping tips, style advice, travel ideas, beauty product reviews and more. Famous for her Katie's Bliss YouTube channel, this web star and fashion expert has accumulated over 40,000 subscribers and also has 145k followers on her Instagram account. Moreover, she has attracted a large fan base for her style blog as a writer online. She likes wearing some new classic Kate Spade New York pieces. For example, she posted a new photo wearing a new Kate Spade watch product on Valentine’s Day and got more than 4000 likes on Instagram. Her style fits with Kate Spade’s aesthetic and she loves Kate Spade, which will help Spade Café get more consumers’ attention and reach different audiences when she posts some photos on her Instagram account while Spade Café is preparing to launch. 75

8.7.2 Reward Promotion Spade Café provides a reward card for VIP loyal members. The reward program aims to entice consumers to experience Spade Café’s services and products and improve brand loyalty. Spade Café offers an initial reward for those who spend more than $100 purchasing any Kate Spade product. Kate Spade Company will email a credit code for consumers to receive a free cup of coffee. To use this free reward, consumers need to activate the code through their email link or at Kate Spade’s official website. Spade Café has its own point system, which means consumers who spend $1 will receive 2 points in their account. Every 100 points equals $1 in the Spade Café store. On that launch day, the first 100 to sign up will get 100 points for their reward program. When they post on social media, they will be enrolled in the VIP reward program and receive 200 points for each post. Through the reward promotion, Spade Café mainly aims to improve brand awareness and increase loyal members in the long term.

8.7.3 Website and Mobile Application The official website and Mobile Application are used for spreading the new brand Spade Café establishment. Spade Café will create the menu at Kate Spade New York’s official website and its mobile application. The purpose of using the website and mobile application is for Kate Spade to provide convenience and increase the brand’s visitors. Spade Café website delivers healthy lifestyle news such as a nutritional meals for weight loss, zone diets and vegans. The website is a way to build their brand image, inform customers of store locations, special events, and the availability of merchandise in-store. Consumers will be able to order, pay, and receive rewards and coupons on the app. The coupon will be on its website and application. When Spade Café opens, it will offer a discount on the price of specific items in store at the time of purchase. After downloading the Spade Café app, consumers will get 100 points when they sign up. Spade Café will buy key words such as “Spade Café” for the long term global goal and “Top 10 fashion café” for the short-term opening of Spade Café in New York. Spade Café will distribute them in their newspaper advertisings, from in-store kiosks, and through direct mail programs.

Website Design

Mobile Application Design

8.7.4 Social Media Millennials and Generation Z prefer to use social media. For this reason, communicating with these generations through social media channels is very important. Yelp is the most popular review website in the U.S. with over 135 million monthly visitors and 95 million reviews in 2016. Yelp can set up Yelp Deals or Gift Certificates for the Spade Café store. Yelp will also provide basic information about Spade Café, including location, working hours, contact information, news, food, website, etc. Also, Spade Café creates accounts on Facebook, Instagram, and Youtube, and posts pictures or videos because younger generations are easily attracted by the visual information. Facebook is for communicating with global followers, including U.S. consumers, to post the latest café information. Youtube is also attracting global target viewers to increase and improve brand awareness through videos. Spade Café concentrates on creating story content and teaching consumers about a healthy and fashionable lifestyle. Consumers can share the videos to their Facebook pages and copy the video links to their friends. Instagram focuses on both global and U.S. consumers. The U.S. Melliennals and Generation Z are affected by influential and fashion instagramers, so Spade Café will launch some parties and spread posts using specific hashtags, like #spadecafé. Spade Café plans to do some advertising on Instagram firstly, and consumers can directly go to the brand official website through the Instagram advertisings. These platforms offer an opportunity for consumers with similar interests to learn about Kate Spade’s products and services that support these target consumers’ hobbies and share information with others.

Instagram Page

Facebook Page

Youtube Page

Yelp Page

8.7.5 Public Relations Public Relations includes public release and launching media events. Spade Café releases information about the launching plan of the first café store and new product introductions to different press media and social media influencers. Spade Café publicizes in travel, food, lifestyle, and fashion magazines to attract tourists, as well as local business newspapers like the New York Times. The magazine of Food Traveler and Good Food are the best way to introduce new food around the world. Consumers who read this magazine would consider reading an article to introduce Spade café. Lifestyle is a magazine that shares the relaxing life and knows more about young consumers’ habits. They are the best way to let consumers know the brand of Spade Café.

8.7.6 Direct Mail E-direct Mail Spade Café uses E-direct mail and physical mail. E-direct mail lists are obtained by creating a landing page on the Spade Café official website and mobile application. E-direct mail offers new products when consumers purchase certain products. Spade Café will display interest-based contents to every user.

Physical Mail (A Thank You Letter) E-direct mail offers potential global consumers; however, physical mail will be based on New Yorkers. Physical mail will reconnect with past consumers to promote the Spade Café instore experience. Spade Café will also send a thank you letter with the Spade Café manager’s signature and some recommended new products every season.

8.7.7 Outdoor Advertising These outdoor advertisings like not only catch the attention of target consumers but also build brand awareness as well as frequency. It is a way to promote Spade Café’s events outside, which will reach the continuous influx of visitors and daily business commuters from the surrounding suburbs. It will effectively impact this highly populated market and make lasting impressions on millions of locals, tourists, and commuters.The high exposure places are the billboards near SOHO transportation. Advertising of the events, such as the opening Spade Café, in outdoor entrances and exits to the subway will be engraved in the minds of target market and other potential consumers who pass by every day. The subway in New York is like a mobile advertisement around the city, and commuters may stare at these posted advertisements when they are waiting for the subway. Interior Train Advertising can offer frequent exposure to target commuters, especially during rush hour, and enhance the visual impact of Spade Café Campaigns. The subway entrances are also the most dominant and vibrant street-level displays in New York City and will directly attract attention to the store message, conveying when and where it is open and creating perfect point-of purchase opportunities. The MTA route station near SOHO area includes 4 routes. - Route NQRW, Canal Street Subway Station, Prince St, - Route BDFM, Broadway-Lafayette St - Route ACE, Canal St - Route 4 6, Canal St, Spring St Subway Station

8.7.8 Activity Map Launch Time: November 18, 2019 Pre-Launch (July - October): All promotions, except on outdoor advertising, physical direct mail and Yelp promotion. The pre-launch takes place over 4 months during the preparation for opening the store; it will emphasize using social media and PR to spread the information about Spade Café. Launch (November): All promotions, except direct mail. Most postings as part of the advertising campaigns, including the digital, in store, social media, and print and sale promotion, will take place during this month. The emphasis of the period will be on sales promotion, which is very important in the process of Spade Café’s store promotion strategy. Post-Launch (December- June): All promotions except outdoor advertising. Outdoor advertising is very expensive, so Spade Café will keep using other promotion strategies except outdoor advertising.

9. Financial Plan Promotion Budget Allocation The budget of Spade Café is divided into digital and traditional marketing: the total budget is about $247,000. Spade Café concentrates on digital marketing, which includes Facebook, Instagram, Youtube and Yelp. It invests 27% of the total promotion budget into social media, about $66,000. Yelp offers a wide array of promotional advertising options that average between $300 and $1000/month for the typical local small business (Biz.yelp. com). The cost of Facebook Advertising is $0.58 per click in the U.S. In other words, every $58 you put into Facebook gives you around 100 clicks on the ads (Facebook Business). The cost to advertise on Instagram is a bit higher. Average CPM (cost per thousand views) is $6.70. The average price per sponsored post is about $300, with some accounts earning more depending on the number of followers or expertise (Insragram Business). For Youtube, a 1-2 minute typical online video costs $5,000 to $20,000. These companies or advertisers have solid professional teams using professional tools. A typical video ad runs between $.10 and $.30 per view, depending on the video quality (Youtube Advertising). Spade Café particularly focuses on its mobile App and website Apps, which represent 20% and 15% of the total marketing budget, respectively. These Apps were built by agencies like Savvy Apps and cost about $50,000 each (savvyapps.com). The cost to build a website is a constantly moving target, especially when it comes to WordPress or custom sites. A custom WordPress theme will cost around $3,000 to $6,000 per month for design and development (Website Builder Expert). Spade Café will spend 15% of the total marketing budget on outdoor advertising and 12% on in-store promotion. A macro-blogger who has more than 90K followers will charge about $2000 per Instagram Post and $15,000 for a one-day opening event. According to research, an ad inventory broker-type company called Blueline Media cites the rates for different types of ads on the New York subway system; it shows static subway entrance ads cost $3,000 per week, and one interior display ad costs $75 to $150 per month. Because of the expensive advertising price for subway station ads in New York, which cost $40,000 per week to cover 200 stations, Spade Café will not choose do the station platform advertising. Spade Café will do three subway entrance ads and 20 interior display ads.

Financial Forecast and Statement Operation Times (Mon-Sat 10AM-8PM, Sun 11AM-8PM) Open 69hours/week, 3588 hours/year The Capacity of the store: 32 people Spade Café expects to earn about $1,377,792 in revenue the first year, with a profit margin of 25.1%, which is a positive profit margin to operate this café. Spade Café sales will be higher in summer vacation and Christmas months because there are many travelers who will visit New York City.

The first Year Forecast Sales (Average Day)

Forecast Sales (Per Month)

10. Conclusion The variety of experiences in the current fashion market is in the collaboration with other industries such as the food and beverage industries. This combination enables the fashion brands to provide not only fashion products, but also a fashionable lifestyle. Spade Café will be the first one of these cafés that Kate Spade will be operating in New York City. Because of the variety of the fashion industry, there will be an increase in the number of customers who visit Kate Spade stores, and therefore they will also visit the Spade Café. This project aims to attract Kate Spade's customers and more potential customers, as well as enhance the Spade brand image. Spade Café strives to link customers closer to the brand and build customer relationships, and thus pull them into the store to spend more time with the brand. This project is a way to increase the sales of this brand’s products and gain a bigger market share in the café industry. In the future, Spade Café will be expanding domestically and internationally at a rate of about 3 stores per year, starting with this first café shop in New York City. Creating a unique in-store environment and enhancing the shopping experience will be important goals of Spade Café.

11. Appendix

(Toby's Estate Coffee, Source: https://www.menuwithprice.com/menu/tobys-estate/ new-york/new-york/584680/)

(Ralph's Coffee Menu, Source: https://www.menuwithprice.com/

(UO CafĂŠ Menu, Source: https://www.menuwithprice.com/menu/uo-cafe/)

(Share of gourmet coffee beverages consumption in the U.S. in 2017, Source: https://0-www.statista.com.library.scad.edu/statistics/323421/share-of-usgourmet-coffee-beverages-consumption-by-type/)

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Primary Research (Questionnaire)

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1. What’s your age?

2. What’s your gender?

3. What’s your monthly income?

4. When you think of Kate Spade, which product best represents the brand?

5. Have you ever bought a Kate Spade Product?

6. What methods do you most often use to acquire information about Kate Spade? (Multiple Choice)

7. Which social media do you usually use? (Multiple Choice)

8. Do you follow any other fashion brands or companyâ&#x20AC;&#x2122;s official social media accounts?

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9. Will you post photos on social media if you tried some new food or restaurant?

10. How much would you pay per person at a cafĂŠ?

11. Why do you go to a cafĂŠ?

12. If you are going to hang out with friends, where would you go?

13. What elements attract you to a café?

14. If Kate Spade were to open a café, would you consider trying it?

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