New model boosts Ralph Lauren in China

8 February 2013

BEIJING: Ralph Lauren, the fashion group, is seeking to enhance its brand awareness, retail network and ecommerce capabilities in China as part of a longer term shift in the firm's local strategy.

The company previously licensed brands like Polo and Ralph Lauren to Dickson, a retail distributor, for two decades, but terminated this agreement in 2010 in order to build its own operating unit.

"China is still in its infancy," Roger Farah, Ralph Lauren's chief executive, told analysts. "I think we're beginning to lay the foundation for what, over time, will be a very successful market."

Marketing is set to play a crucial role in achieving such an objective, given that Ralph Lauren has only been trading with its current corporate structure and priorities for a short period.

"As we continue to get better brand awareness in a country where our brands are not well known, we have to raise brand awareness about who we are and what we do," said Farah.

Farah also suggested the organisation will attempt to roll out its "pyramid of brands", which spans the Collection, Blue Label, Purple Label and Denim & Supply ranges through to Polo and children's stores.

"Given that China will be dominated by direct-to-consumer, whether brick-and-mortar or ecommerce, we will attempt over time to replicate the pyramid of products from the most elevated, most fashionable, most expensive straight through the hierarchy with a similar profile of real estate," he said.

Within this, Ralph Lauren hopes to open 11 stores in its current fiscal year, and around 20 during the next financial year. These outlets are often smaller than in Japan and Korea, its main Asian markets.

"The new stores in Hong Kong or China are still small in relation to the overall scale of the Korean and the Japanese markets," said Farah. "So the teams over there have worked very hard to refine assortments. We've learned every season more and more about that customer and what they want."

Ralph Lauren also plans to establish three flagships in China, with Beijing and Shanghai two target cities. But only one is likely to be unveiled in the 2014 fiscal year as the company tries to identify the right sites.

"To find these unique locations takes time," Farah said. "When you find the flagships, it's probably a year of dead rent and construction before you open the doors to take your first customers."

Such efforts may deliver wider benefits, as Chinese buyers yield 30% of category sales in Europe and 15% in the US. "Our initiatives in China ... will have an extraordinary halo over the rest of the company in multiple locations," said Farah.

Data sourced from Seeking Alpha; additional content by Warc staff