Ralph Lauren Corp is one of the best-known fashion design and licensing company in the world. The brand was launched in 1967 founded by American designer Ralph Lauren. Prior to starting Ralph Lauren, he worked for Brooks Brothers. In 1968 he started a line of men’s ties. By 1969 he had a boutique store within the Manhattan department store Bloomingdale’s. In 1971, Polo Ralph Lauren launched its first women’s collection and his first store in Beverly Hills, California.
Ten years later, in 1981, the brand went global with its first international store on London’s New Bond Street. The Polo Sport line was introduced in 1993. The brand’s mission is they are always standing for providing quality products, creating worlds and inviting people to take part in their dreams. They are the innovators of lifestyle advertisements that tell a story and the first to create stores that encourage customers to participate in their lifestyle.
And their vision is planning to open more stores and increase market share in the next fiscal years, positioning to begin taking advantage of international market’s appetite for luxury goods. Ralph Lauren designs, markets and distributes luxury products domestically and globally. The company’s brand names include Polo by Ralph Lauren, Ralph Lauren, Purple Label, Ralph Lauren, Black Label, Blue Label, Lauren by Ralph Lauren, Polo Jeans Co. , RRL, RLX, Rugby, RL Children’s wear, Chaps and Club Monaco.
The company offers, along with its licensing partners, broad lifestyle product collections in four categories: apparel, which includes collections of men’s, women’s and children’s clothing; home, which includes coordinated products for the home, such as bedding and bath products, furniture, fabric and wallpaper, paints, broadloom, tabletop and giftware; accessories, which encompass products such as footwear, eyewear, jewelry and leather goods, including handbags and luggage, and fragrance and skin care, of which products are sold under the Glamorous, Romance, Polo, Lauren, Safari and Polo Sport brands.
The Company operates in three integrated business segments: wholesale, retail and licensing. The company sells the products through department stores, specialty stores, golf and professional shops, as well as its own stores and licensed retail stores, concessions-based shop-within-shops, and e-commerce Websites. Distribution is accomplished at a domestic and international level with the three business segments.
Due to the business expansion and fast growing e-business, the company’s wholesale cited strong demand in U. S and international market. As of the first quarter of 2013, Ralph Lauren had 329 retail stores around the world, and operated 240 wholesale of its own stores in the U. S, 100 retail outlets, 478 concession-base shop-within shops and 6 e-commerce websites. In the end of 2012, the total revenue reached to $6. 8 billion. According to Yahoo Finance, from the fourth quarter of 2012 to the first quarter of 2013, the total revenue reached 992. 1. There are two main competitors towards Ralph Lauren.
Tommy Hilfiger(THC), though its subsidiaries, designs, sources and market men’s and women’s sportswear, jeans wear and children’s wear under Tommy Hilfiger trademarks. THC offers the products in the global market and engaged in wholesale, retail and licensing, Tommy Hilfiger reported earnings results from the fourth quarter 2012 and the first quarter of 2013, the revenue increased 9% to $891. 1 million from $815. 8 million in the prior year’s fourth quarter.
So THC is the biggest competitor of Ralph Lauren. And another main competitor is Liz Claiborne Inc. LIZ), its designs and markets branded women’s and men’s apparel, accessories and fragrance products. This Company is operating wholesale, retail also and reaching consumers of various age, gender, size or value preference. Due to stripping out unrealized foreign currency losses and other items, the company’s total revenue has decrease. But it still reached $307. 4 million from the end of 2012 to the first quarter of 2013, which is the competitor for Ralph Lauren and share the market. Ralph Lauren’s strengths lie in its brand equity, infrastructure improvements, its history, and its financial strength.
Ralph Lauren’s brand name and the logo are both recognizable and highly regarded in the fashion world. Polo Ralph Lauren’s classic style has allowed the company to expand its product portfolio into markets. High customer loyalty allows for a larger profit margin than most other companies in its industry. The powerful brand equity responsible for such a strong consumer following reduces the price sensitivity for retail sales, which was a strong factor in maintaining good performance. However, the weaknesses are in its dependence on department store sales and manufacturing.
Sales from department Sales from department stores make up for almost one third of Ralph Lauren’s revenues. Sales in department stores can be uncertain due to market share with competitors and the financial stability of these stores. Moreover, manufacturers has resulted in limitations with manufacturing for situations of high demand. Due to the high standards of the Lauren fashions. Lauren’s designs sometimes create new methods for quality with manufacturing, which hinder future growth. Lauren’s opportunities for growth include brand extension, and international expansion.
International expansion presents a wealth of opportunity for Ralph Lauren. Their approach to each region is specific to its business climate and structure, while the common goal is to broaden their reach through increasing direct brand ownership and control with new specialty retail store openings. The strong, flexible infrastructure allows Lauren to capitalize on opportunities to grow businesses around the world. Lauren has a strong investment of $1. 1 billion comes from its stakeholders and long-term debt ratio just 7% at the end of first quarter of fiscal 2013.
The company’ financial and strategic fundamentals looks like very strong. It shows that Ralph Lauren is highly reliable. Wholesale and retail are the two main business segments of Ralph Lauren, accounting for about 97% of its revenues. About 45% of the retailer’s revenue comes from the wholesale segment, and the retail segment constitutes about 52%. In fact, the wholesale business’ contribution to overall revenues has been declining since 2008. It stood at 58% of total revenues in 2008 and 45% in 2012. On the other hand, the retail segment improved from 39% to 52% during the same period.
So this trend will continue in the future with wholesale’s contribution coming down to as low as 30%. t Moreover, the department stores’ market share has been declining in the U. S. retail market and the market per share has decline from $179. 90 to $168. 41 between the end of 2012 and the first quarter of 2013, which representing the percentage 6. 39% decrease. Due to the increase in the share of private label brands, such as the competitors expand their business by introducing the new lines for their products, Ralph Lauren’s specialty stores and other department store revenues will be impacted.
Other factors such as the discontinuation of American Living brand and consolidation of China network will also weigh on the wholesale segment’s growth. The international revenue has decline from 10% to 8%, which dragging its overall revenues down by 2%, especially in countries in Europe. From 2012, Lauren witnessed a sharp decline in its revenues from Europe due to its over reliance on the region’s southern countries, which have been significantly impacted by the debt crisis.
Lauren is facing problems in Europe mainly due to the increasing cost of wholesale hipments and tax cost. Lauren set a high retail price on its products but people don’t want to spend too much to buy it. Therefore, it result in the large surplus of the product. On the other hand, Lauren found out the high shipment and tax cost are mainly due to the unfavorable economic environment and its high concentration in the worst hit Europe. The retailer operates more than 600 stores in the region. As a result, it earns more than 60% of its revenues from this region and has high exposure to countries such as Spain, Italy and Greece, where economy remains weak.
In addition to this, the retailer runs the risk of self-cannibalization due to its high concentration in these markets. Since the European business accounts for an important part of Laure’s revenues, the decreased from 10% to 8%, dragging its overall revenues down by 2%. The counterfeit issue which affects the Lauren’s brand image, especially happened in Asian market, such as China. The evidence shows that Ralph Lauren being more focus on Asian market. For instance, in China, there are more than 16 retail stores and 23 factory stores opened in recent years.
Therefore, the new problem counterfeit issue has shown up during Lauren’s expanding. It was reflected in people said that they have bought the counterfeit shirt in China. Even in the U. S, more and more counterfeit clothes which have the same label with the authentic ones entered into market. The reason that cause this problem in China mainly due to the position of Ralph Lauren, Ralph Lauren have three color label (purple, black and blue) series represent the different level of craft, but the retailer in the Asian market mix them together to sell. On the other hand, the “high class” series mainly remain in the U. S, and just a small amount exports to China.
Therefore, the blue series which represent the “low class” are sold more. So people regard Ralph Lauren as cheap and common and believe it can just fit for the young people. They don’t regard Lauren as one of the luxury goods brands. This opinion affect the position of the brand. The counterfeit products occur because the blue series it is easier to replicate. The retailer doesn’t classify the different Ralph Lauren labels probably because he lacking of strict requirements for the site selection of the retailers.
With the large growing population of China, more and more U. S company aim China as their second large market and wants to earn more market share. Ralph Lauren’s retailer had to missed the opportunity in the big cities and choose the customers in smaller cities as the object aimlessly. And the economy situation is different between the big cities and medium-small cities; it is easier to sell their products in big cities in order to build the good brand image. Moreover, brand image usually is cognized in big cities and then spread to other medium and small cities.
Therefore, the need of the Ralph Lauren is affected by the development of the cities and as the result affects its performance. Overall, the brand image is affected by the counterfeit issue. For increasing the market share, there are a number of potential solutions. Introduce new design for the existing product line, such as design more color on product especially for the apparel in different season. People’s need is always changing, different color on the product will give people more options. Besides, U. S retailers should get more focus on online sale.
Online is important trade group, it can attract more people to buy if they publish its own online-holiday-sale. In addition, online sales were expected to continue to outpace the growth in in-store sales. To take an advantage of online sale, The potential solution for the counterfeit issue all over the world, especially for the China market is building a good brand image. The problem here for Ralph Lauren is, “people don’t know what’s real and what isn’t. ” To build a good brand image, Lauren should stick to its commitment to the market and take more or direct control of its China operations, product, and quality.
For example, close non-profitable stores and moving away from selling products in department stores to focus on setting up its own retail outlets. Due to the lacking of restrict requirement for the site selection and lacking of understanding of the brand for the retailers, Ralph Lauren now is probably a little behind the other luxury retailers in entering this market, so the they should consider the company’s new stores in China must be in Beijing, Shanghai, Hong Kong, Guangzhou and surrounding regions.
The other potential solution for the counterfeit issue is Lauren maybe can introduce the new unique product line for the international market. Such as the limit edition for the different product only for each foreign market or make more different label tags on the product so that it is not easy to replicate. However, this requires Ralph Lauren had better do a lot research on different culture in order to make the best product to meet people’s need.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 1 December 2016
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