To his competitors, that's the point. The essence of Bottega Veneta, whose handbag prices start at $1,500, "is the people in the workshops," Tomas Maier, who designs the line for the Gucci Group, recently said. "They are artists. You can't get that kind of perfection in a place where people are paid $3 a day."

Fashion executives also snipe that while Coach may have mastered the semiotics of luxury—from elegant boutiques and attentive salespeople to the brand's chocolate-brown gift boxes and logo of a horse-drawn carriage, suggesting a venerable heritage—the ubiquity of the line renders it a pale imitation. With no apparel on the runway and therefore no cohesive image into which the accessories fit, the brand's detractors say it merely exploits the handbag lust carefully created by the European lines.

To such critics, luxury cannot exist without exclusivity. Gucci, for example, has 45 U.S. stores, in places like Beverly Hills; Palm Beach, Florida; and New York's Westchester County. Many of its bags cost more than $1,000, and the least expensive goes for $525. Coach has stores in those upscale sites as well, but in November, when it opened its 270th location, it was in Allentown, Pennsylvania, where the average bag sells for less than $300 and entry-level shoppers can find a key chain for $17.

Frankfort is fine with the contrast. "When I dreamed about what Coach might become," he says, "I dreamed it might be the egalitarian Louis Vuitton. Where they were exclusive, we would be accessible. Where they were pricey, we would be affordable. Where they were snooty, we would be friendly. To people on Park Avenue, having a Coach bag may not be an event, but for many people in America, it is something very special that makes them feel they've really accomplished something." Such distinctions among brands are sometimes more a matter of marketing spin than reality. For example, Louis Vuitton racks up the majority of its sales from its least expensive bag (in basic canvas) but tends to soft-pedal that fact, emphasizing instead the label's pricier, more cutting-edge designs. Coach, conversely, has tried to burnish its image by producing a tiny number of expensive items in recent years—such as a $2,300 embroidered hobo bag and an $8,000 purple lizard shopping tote—and showcasing them in only a handful of stores in premium locations.

While Coach may have expanded rapidly during the past decade by targeting the aspirational middle class, that growth will prove difficult to sustain in a slowing economy. The company now sees sales rising at its factory outlets and falling at its full-price stores, while sales slumped over Christmas as shoppers traded down to low-end items. The company's current expansion—it plans to have a total of 500 locations in North America by 2013—could prove dicey if economic woes continue. With existing stores in the nation's top 200 markets, Coach is now headed for outlying regions with shakier economies, like Limerick, Pennsylvania, and Witchita, Kansas. Still, Frankfort has not closed any stores and has not scaled back growth plans.

Which means Coach must begin a more serious courtship of the truly fashion forward—the girls who wear shoes by Christian Louboutin or Jimmy Choo and wrap themselves in a Balenciaga cardigan or a Dior bolero. These are the young celebrities and socialites who can make or break a brand by slinging a tote at a movie premiere, and in the past decade they have transformed the European luxury brands into cash machines. The influence these celebrities wield can be far more significant than the money they spend, which is a sliver of a company's sales. Their imprimatur can attract the shoppers just below them on the fashion ladder: the army of upper-middle-class suburban women who balk at dropping $2,700 for an Alexander McQueen python clutch but might spend $500 or $600 on a soft leather melon-colored hobo bag to impress the girls at tennis and make the cleaning lady swoon.