Thursday, April 6, 2017

Ralph Lauren is in Trouble and I'm Nervous for Them

Left: Google suggested search for "Ralph Lauren"

Right: Google suggested search for "Burberry"

RL + outlet, coupons or perfume, versus Burberry + shirt, scarf, belt


I'm not a fashion-guy, but I know enough to know Ralph Lauren built a great business impersonating British brands with heritage that RL didn't have. πŸ‡¬πŸ‡§

In many ways RL is a great example of American approach of "fake it til you make it." It worked. I'm using this as a compliment. In fact, it worked so well an American brand spoofing a British brand that Ralph Lauren signed a 5-year deal in 2006 to be the first tournament clothing outfitter for Wimbledon. πŸ‡ΊπŸ‡Έ

Purple Label. It's high end. It's made in England.

Ralph Lauren Purple Label clothes are amazing in design in quality. RL Home makes some beautiful items, stuff you'll see promoted in magazines.

Yes, there's a point to this

Why am I spending so much time on this? Vindication. Specifically vindication late 1990s style. I grew up in a suburban high school in Massachusetts. It was homogeneous, 95% white (think I'm rounding down). One of "the looks" to have in the halls of my high school was a RL polo and carpenter jeans from The Gap... told you, 1990s.

These were premium priced items. Drive to your local mall and a few bags later you're styling. That polo shirt today, $85. Assuming a high school kid works in 2017, how many hours does it take before he can splurge for a $85 polo? How many can he buy, or expect as a gift for his birthday / holiday season?πŸ‘š

The image of Polo was a fantasy playing a tennis match with Muffy and Buffy at the country club that didn't exist in your town. It was obtainable luxury. With that can come harsh realities. For Polo that reality could come via a suburban young guy dipping a can of Skoal while getting into a Firebird with 12" sub woofers playing WU-Tang's C.R.E.A.M. on blast (great guilty pleasure song btw).

He just might be wearing an authentic polo or he might be wearing a fragrance. If it's the latter, it's probably his first fragrance purchase, and he hasn't learned about applying in moderation.

That's both the problem, and how RL became such a success. All those bright polo shirts allowed for rapid growth. Rapid growth not in the high end cities you see in the bottom line of a print ad, but rapid growth in the suburbs. It also meant the RL brand was less about high end suits and shirts and more about casual-ware.

And that's okay. What can become a challenge is when your audience co opts your brand. Millions of high school and college kids did that with RL. They took the relaxed ook found at American Eagle and went a little bit more fancy with RL, while staying casual.

Several Things Hurt RL, Some Self Inflicted

It would be easy to take pop shots and attack an $85 polo shirt. I won't.
  • C2C E-comm
  • Factory Outlets
  • Young Person Employment Rate
  • Transition from Polos to Suits and Home Decor
  • Upstart Brands
  • Culture of Sales
E-comm channels, both direct and with retailers certainly puts strain on brands such as RL. What also puts strain, were alternatives of purchasing through none of these channels and purchasing through C2C online via websites such as Ebay, Amazon, etc.

Brands such as RL can be sold in mall anchor stores (good), standalone stores (good), and factory outlets (good). All this is helping condition more top line growth and more polo shirts in a person's closet. It's also driving competition against yourself. If you're looking for a new yellow RL polo with it's famous logo, you've got choices to price shop luxury.

Go to a grocery store register at 4:30pm on a Wednesday. Is your cashier or person bagging the groceries look like a high school kid working his first part time job? Probably not, and neither do any of the adjacent registers. For liability reasons you might not want a 16 year old mowing your lawn, or shoveling your driveway like in generations past. I'm at the tail end of the Millennials, I've worked since I was 14. Between some families having the ability to do so, and pressure downward from the Great Recession, young people aren't working like they used to.



To a young person Polo is one of the top luxury brands, and one of the first luxury brands they'll experience. What's the staying power as the customer progresses in various life stages? For RL, this means the potential to extend into home decor, or upscale into the non casual clothing lines. RL has no shortage of customers, or brands for this to occur. Ignore my earlier Gap carpenter jean comment, The Gap manages life stage shifts of it's customers better than almost any other brand. Baseline with Old Navy (amazing kids clothing design and prices), customers 'graduate' or 'overlap' with The Gap, and then move towards Banana Republic. The price, as a dollar amount or percentage, are much tighter than the range of RL's lines. The Gap does an amazing job, whether you're shopping at Old Navy or Banana Republic, you're also able to organically shop at The Gap.

Within this decade social media has helped fuel upstart brands. That $85 polo now has 3 companies that didn't exist 5-10 years ago with an amazing Instagram feed and email marketing program. They might promote on a slightly different fit, some unique materials, and likely a very different buying experience. Some of the cool factor is the newness, and the leap of faith that you're ordering the right size online. These upstarts are focused on content marketing, user experience, and have a level of brand recognition with exclusivity. The fact they aren't in every department store, standalone store, or factor outlet is making them desirable. At the $50 - $85 polo shirt level, what is a disadvantage in higher manufacturing cost is somewhat recouped in a leaner sales distribution channel. They've kept to this scaled back approach (thus far) and surprisingly haven't made the mass market expansion into retail anchor stores.

The last factor I'll focus on is the culture of sales, specifically items being on sale. Part of this is the rise of Ecomm, C2C sites like Ebay and Amazon, commoditized offerings in standalone stores, anchor stores and factory outlets. Sticking to the yellow RL polo example, if you're in the market for one you'd almost have to try to pay full retail. All these channels are make it hard to "wow" a person. Unless you need it for tonight, or it's not your credit card being used, you may feel guilty to pay the $85 retail when you can walk 500 feet to price check a few stores down, while searching the price online as you walk. The latter is hurting anchor stores, and standalones if they are not constantly discounting and the fear of becoming "Amazon's showroom" is very real.

I'm guilty of doing this. I've have several barcode scanner apps on my phone.

My $80 RL Raincoat

During the 2016 holiday season I was blown away at some of the sales that Macy's was having. My high school observations, combined with Black Friday 2016 shopping was my inspiration for this post. One of the items I bought was a new Ralph Lauren raincoat. It's 3/4 length, and while I don't remember the retail price ($395 ?), with the sale + using my Macy's card brought the price $80 range.

I love this coat. Living in Atlanta it's rare to need a heavy winter coat, so this is a good substitute on colder days. It's cut well, and on the inner pocket there's that "Lauren" tag... Note, it's not a "Polo" tag, it's a "Lauren" tag. However, this would mean something more if the tag was purple in color. My tag was green. It was made overseas, not in England, but instead in Asia. This is RL Green Label. Upside, it looks great and fits great. Drawback includes needing to provide occasional maintenance with scissors to trim a random khaki treading. Why? RL Green Label is going to involve more machine manufacturing process, where Purple Label is more handmade. Annoying, maybe even a little disappointing for a person that didn't know all the RL clothing line tiers.

The reason why I love coat is it is balanced. I had an RL peacoat in college. It still fits, it's sleek, and I wear it about a two dozen times (though it needed it's lining replaced several years ago). Also purchased at Macy's circa 2001, believe it was just under $200. How long will this new raincoat last? No clue. I'd be happy with 2-3 years, I can see 5+. It serves a purpose, it's nice, but not so nice that I'm afraid to wear it. I'm careful, but if the bottom gets caught along my car door, I'm not going to panic.

For years I've always wanted a Burberry raincoat. I like the look, and I know it will last. I also fear, I'd be obnoxiously anxious to be around wearing it, and would protect it from wear and tear. I know this because I have two Burberry polos and an iconic print tie that are so old if they were children they range in age of being able to do basic math multiplication problems, ranging all the way to studying to get a learners permit.

I don't have that fear with my Green Label raincoat. While cutting back a thread here or there is annoying, few things can touch it for the money.


From Polos to Raincoats and Beyond

Back to the problem, how does RL take the MILLONS of young people with one or more polos, or whom are regular fragrance users, and then convert them into raincoat, bath towel, and bedding customers? How can RL fight off the upstart polo manufacturers, and avoid a pricing race to the bottom through sales channel conflict?

These are big questions to work out. Very few buying an $85 polo will ever buy a $2,500 sports coat. If you're in a large retail space, organizing the journey from polos to $2,500 sports coats is not an easy task. It's compounded further when a buyer needs to see that $85 polo on sale under $50 to stay competitive with other sales channels. Those discount percentages, and the culture it creates also makes it tough to stay firm at $2,500 for that sports coat.

I don't think Ralph Lauren is going anywhere. The stories about the significance of closing it's Fifth Avenue Store are sensational, especially with so many retailers in trouble. For many RL represents obtainable luxury, and often one of their first luxury brands. RL in 2017 has an advantage in this field. The cache and pedigree it prematurely projected decades ago when launching, it's obtained, and it's authentic. The question becomes, do you want to sell more polo shirts at a lower average price, or sell less and protect the price?

Can RL shift consumers from associating it's brand with outlets, coupons and perfume? Do they want to?
Can RL shift consumers from associating it's brand with outlets, coupons and perfume? Do they want to? Who knows. Before we sound the alarm on this luxury brand, let's look to another luxury brand, Ferrari. If you're in the market for a $2,500 sports coat, you might also be arriving in a Ferrari, or similar car. Just like there's only so many RL customers for those premium sports coats, there's a cap on super car buyers. RL solved this with $85 polos, and Ferrari makes a fortune doing the same with sneakers, t-shirts, and other accessories.

Obtainable luxury. It's a powerful lure for luxury brands to cash in by harnessing the mass market. Done right, it'll enhance the brand and can be a large portion of the brand's revenue. Even if they are wearing the equivalent of Polo, or Green Label, these customers feel included and part of Purple Label experience that the high net worth luxury buyer enjoys.

So c'mon RL, let's get people searching for shirts, sports coats, and home decor, and less on outlets and coupons.

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