Fashion Brand Sees Potential To Broaden Foothold In Lucrative, Yet Challenging Fashion Market#
Wing-Gar Cheng writes for Bloomberg today that American retailer Ralph Lauren hopes to open 15 new stores in China annually in coming years. While the signature Ralph Lauren style has been adapted -- or "copied", depending who you ask -- by brands with a long-time presence in China, like South Korea's E-Land (not to mention counterfeiters throughout the country), the number of free-standing Ralph Lauren locations has remained limited. With the global demand for higher-end items remaining relatively anemic in the North American, Japanese, and European markets -- despite improvements -- China, with the high potential of its second- and third-tier cities, remains a sought-after target by mid- to higher-range fashion brands like Ralph Lauren.
As Cheng writes, rapid expansion in China is not simply driven by idealism. There is a great deal of untapped potential throughout the underserved mainland, well illustrated by a quote by George Hrdina, president of Ralph Lauren’s Asian business, who said, “We do more Ralph Lauren business on the island of Manhattan, New York, than we do in Hong Kong and China.” Clearly, adding 15 stores per year is less unrealistic than it may initially sound.
Cheng goes on to point out that Ralph Lauren is moving away from department-store sales to compete with luxury heavy-hitters like LVMH and Gucci. In retooling its strategy to appeal to luxury-hungry consumers, China's fast-growing luxury market is a good place to start. However -- naturally -- this ever-changing market will not be without its challenges:
Demand for luxury goods in China, the world’s most populous nation, remains unabated, according to a survey published last month by consultants Ruder Finn Asia. New York-based Ralph Lauren, with 12 stores and 35 retailing counters in Hong Kong and China, is changing its strategy to move away from department-store sales to compete with brands such as LVMH Moet Hennessy Louis Vuitton SA and Gucci owner PPR SA.
“The Chinese market for luxury products is still growing very well,” Shaun Rein, the Shanghai-based managing director of China Market Research Group, said in a phone interview today. “The consumers in China are still spending money, although some are hit by the financial crisis.”
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“I don’t think they did a very good job at marketing, positioning and store development for the China market, and they also probably were hit fairly hard by piracy,” Rein said. “The problem for Polo, people don’t know what’s real and what isn’t.”
The clothier is taking back the Asian distribution rights for its Polo and Ralph Lauren brands from Dickson Concepts (International) Ltd. on Jan. 1. The move is part of the company’s efforts to retool its image in Asia, moving away from selling products in department stores to focus on setting up its own retail outlets.
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Luxury brands, facing aging populations in Europe and North America are turning to Asia, Joe Wong, managing director for PPR SA’s Gucci Group in Hong Kong, China and Macau, told an industry meeting on Aug. 28.
“Asia, particularly China, is possibly the solution,” Wong said. “China has a very big base of consumers and lots of up- and-coming young executives and middle class.”
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“The sense [among execs] is that there is a demand for the elevated brand that they’ve not seen in this market place,” Hrdina said. “Here, we definitely feel that we’re going to continue to invest aggressively.”
As always, Cheng provides clear-headed analysis of the Chinese luxury market, which is to say that it presents huge opportunities among its many challenges. However, with careful planning, aggressive branding and as-good-as-possible trademark protection to create strong brand equity throughout China, companies like Ralph Lauren can thrive. Only time will tell if their new, retooled brand strategy will pay off, but the fact that Ralph Lauren's Asia execs recognize the difficulties they face and have planned ahead for them, we're guardedly bullish about their prospects.