Will an Elevated Ralph Lauren Resonate in China?

Ralph Lauren’s comeback was nothing short of classy. On March 22, the American lifestyle leader transformed the Museum of Modern Art into a cozy replica of its founder’s living room for its first live runway since the pandemic, featuring pieces from both its Fall 2022 women’s collection and men’s Purple Label. With form-fitting evening gowns, structured blazers, and RL-emblazoned sweaters, the 61-look show read like a love letter to New York City. Founded in 1967, Ralph Lauren epitomizes American fashion — striking a balance between aspirational and approachable. Although the company houses various labels, none is more recognizable than Polo Ralph Lauren: think polo shirts, embroidered ponies, and East Coast prep. However, over the years, its high-end image has slipped as these popped collars became ubiquitous on the discount racks of Macy’s and TJ Maxx and the number of sub brands grew without proper distinction. Brand elevation is just one of its many challenges. With fiscal 2021 revenue plunging to 4.4 billion amid COVID-19 shutdowns, Ralph Lauren’s current figures are a far cry from the 7 billion-plus made in the mid-2010s. On top of this, the fashion giant is still playing catch up in China where it entered much later than other brands. Now, will doubling down on its luxury positioning help Ralph Lauren accelerate momentum in China and around the world? Or has the polo shirt maker already peaked? Turning the page Faced with a crisis, CEO Patrice Louvet unveiled the “Next Great Chapter” in 2018 to revitalize the company. The plan was to win over a new generation of consumers, drive regional expansion, energize core products, lead with digital, and operate with discipline to “return Ralph Lauren to sustainable long-term growth.” Put into practice, this largely meant that Ralph Lauren would distance itself from the off-price market. That’s why, back in 2017, the fashion house started pulling back products from underperforming department stores at a rate as high as 25 percent while shrinking its inventory to avoid excess stock. At the same time, the New York company consolidated its brand portfolio by transitioning the mid-range Chaps brand to a licensing model, further reducing exposure to the US wholesale channel. “Wherever we show up we want to make sure the brand is portrayed in a way that is consistent with the image,” said Louvet during a fireside chat in January. In that spirit, Ralph Lauren also doubled down on its own stores — both in quality and quantity. Among the 80 locations opened last year, new concept stores in Beijing and Shanghai capture this emphasis on elevated experiences. In addition to a smart retail environment powered by Tencent, the Ralph’s Coffee and WeChat Mini Program features like “My Fashion Consultant” and “RL Reading Club” work to enhance customer engagement. China challenges But will these tactics bode well in China? First, it is important to note the context: Ralph Lauren entered the Chinese market in 2011, well behind other luxury brands like Louis Vuitton (1992) and Gucci (1997). As such, the market penetration is low — although Louvet views this as “good news, because that means there’s a significant upside.” To close this gap, the American icon has quickly grown its footprint, especially in Shenzhen, Chengdu, Shanghai, and Beijing, via brick-and-mortar stores and online channels like Tmall, JD, and WeChat. In fact, mainland sales jumped 22 percent in 2021 and its brands ranked No. 2 on both Tmall’s Luxury Pavilion and JD’s luxury platform during Singles’ Day activations, according to CFO Jane Nielsen. Ralph Lauren also teamed up with actor Xiao Zhan to launch its first major fragrance, selling 40,000 units of Ralph's Club fragrance in a 6-hour period in December 2021. That said, strong sales do not necessarily equate to luxury status. As Hazel Diliziya, a cultural and marketing researcher at Cherry Blossoms Intercultural Branding, told Jing Daily, “Ralph Lauren may not be seen as a luxury brand, but as a premium brand, for a significant number of Chinese consumers’ impression of the brand is limited to its relatively inexpensive polo shirts, and only a few know its high-end branches.” Additionally, the group “is behind the times for Chinese people since sports like polo or golf are not exclusive to the upper class anymore.” There are other issues that come with Ralph Lauren’s delayed start. “While their official market entry may have only taken place relatively recently, their iconic polo shirts have been a mainstay of China’s once ubiquitous fake fashion markets for the last 20 years,” said Adam Knight, cofounder of cross-cultural agency TONG. “Reshaping perceptions of the brand is an uphill struggle, requiring significant investment and a savvy consumer-centric strategy.” Potential opportunities According to Louvet, “Heritage sometimes isn’t enough.” And while that’s true, Ralph Lauren’s American DNA and vintage aesthetic are partly how it can differentiate itself in China. One opportunity for the company, Diliziya noted, is to lean into the vintage trend, which has become popular among young Chinese consumers. Another is to leverage the rise of gender-neutral fashion: “Recognized as simple, comfortable and all-purpose fashion items, many of Ralph Lauren’s gender-neutral style shirts and suits have become Chinese female consumers’ new favorite,” she added. More broadly, Knight believes that one area Ralph Lauren should focus on is brand collaboration. “Ralph Lauren has one of the highest levels of logo recognition globally,” he explained. Partnering with a domestic designer would leverage “existing audiences and consumer trends as a short-cut to growth.” Already, Polo by Ralph Lauren has teamed up with Edison Chen, creative director of CLOT, to bring Silk Royale prints and frog button closures to its well-known silhouettes. Ultimately, whether or not it manages to attain its desired “luxury” recognition, Ralph Lauren is on the rise. The New York corporation’s adjusted gross profit margin expanded 60 basis points in its recent third quarter to 66 percent, driven by improved pricing and a better product mix. Now, it expects constant currency revenue growth of up to 41 percent for fiscal 2022 to 6.2 billion. It’s not the 7 billion of its heyday — and certainly nowhere near the 71 billion LVMH made in fiscal 2021 — but it’s a step in the right direction. And Ralph Lauren has no intention of slowing down. “The brand elevation never stops,” Louvet told Business of Fashion. “In 20 years, we’ll still be talking about brand elevation.”

Will an Elevated Ralph Lauren Resonate in China?

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Published May 03, 2022

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Will an Elevated Ralph Lauren Resonate in China?