Polo Ralph Lauren adapts in Asia

27 May 2011

SEOUL: Polo Ralph Lauren, the luxury group, is adopting a diverse approach across the core Asian markets of South Korea, Japan and China.

Having formerly relied on distributors, the company assumed direct control in South Korea in late 2010, the culmination of a "multi-year" programme to bring its Asian activities in-house.

Such a shift has included incorporating 200 South Korean staff and integrating separate systems, and while this requires a meaningful short-term investment, beneficial results are already at work.

"We are encouraged by the early business trends, sales, gross profit margins, operating expenses, all of which have been favourable to plan," Roger Farah, Polo Ralph Lauren's chief operating officer, said on a conference call.

"As we've replenished inventory through the last five months, the customer there has responded, and that market has responded to better products, more elevated products and more fashion."

Polo Ralph Lauren formally took over in Japan during 2007, and has yielded several advantages as a consequence.

As with South Korea, Japan was largely focused on men's casual clothing, sportswear and the firm's Blue Label range before the transfer occurred.

"In Japan, where we've had control of the business longer, we've seen tremendous reaction from the customer as we've begun to elevate product in women's and in kids and in other product categories," said Farah.

More specifically, enhanced designs, brand positioning and communications all exerted a positive influence, although the recent natural disasters hitting the country mean the future is necessarily uncertain.

"As we've sharpened our message, pre the earthquake and tsunami, we were beginning to see nice trends in what overall was a tough market," said Farah.

"The long process of rebuilding is just beginning and will obviously have an impact on our fiscal [20]12 outlook for the region, but we are happy to see the nation on a path to recovery."

Sales in Japan dropped by 30% in the weeks after the crisis, and while "irregular shopping patterns" remain in place, room for optimism is emerging.

"We're already seeing some recovery in the mood and the spirit in Japan. There's definitely an attitude of trying to move on," said Farah.

The Dickson Group previously handled Ralph Lauren lines in Hong Kong and China, but rather than aping the strategies used in South Korea and Japan, Polo Ralph Lauren started from the ground up a year ago.

"We had to build an organisation from scratch. We had no history on the merchandise. We had no infrastructure," said Farah.

A primary issue to be grappled with is that department stores and concessions, the main channels in South Korea, are not of equivalent importance in China.

"Our ability to identify and acquire key locations, both in major cities and more suburban malls, will be a key to that market," said Farah.

But success in China promises a double benefit, given rising numbers of local consumers now travel overseas and buy premium goods, a development observable from South Korea to Europe.

"We believe as we build up the proper presence consistent with our global image in China, we will see ... [a] lift in our business in Europe," said Farah.

"So it's really a holistic approach to the Chinese customer, slightly different than the Japanese and Korean markets.

"The Chinese tourist is today the dominant influence in really the gateway cities."

Data sourced from Seeking Alpha; additional content by Warc staff