Ralph Lauren embarks on new strategy for China

During Ralph Lauren’s second-quarter earnings report, CEO and president Patrice Louvet discussed how the brand’s newly developed strategy in China would poise the company to gain market share in the Asia-Pacific region, boosting overall sales. That strategy includes the recent launches on the Chinese e-commerce marketplaces Tmall and JD.com and social platform WeChat, a slew of both flagship and small-format store openings and an increased effort to market directly to Chinese customers through partnerships with powerful KOLs (influencers) in the region.

This is the brand’s third attempt to establish a winning relationship with Chinese customers, as the area is ripe for growth. Ralph Lauren’s revenue in Asia in the second quarter was $217 million, an increase of 4 percent over the same period last year, and while it’s the smallest region (revenues in North America and Europe were $877 million and $463 million, respectively), it’s the only one posting increases in sales across all channels. In North America, revenue decreased 18 percent overall, while European revenue was flat.

Today, Ralph Lauren’s Chinese strategy is to strike a balance. While its brand messaging and partnerships with Chinese celebrities position it as a high-end luxury brand, with such apparel and accessories available on the local marketplaces and in Ralph Lauren flagships, the bottom line is padded out by the more affordable Polo Ralph Lauren business, which can effectively drive sales. Though the strategy is mainly concentrated on the digital platforms that are now partners with Ralph Lauren, a fleet of small-format Polo stores have been opened in China to support sales growth.

Overall, Ralph Lauren’s Chinese strategy is directly in line with how local marketplaces Tmall and JD.com position themselves as valuable partners to Western brands. To lure brands onto their sites, both platforms have established specialized luxury platforms to make them feel more at home. (Tmall has an invite-only Luxury Pavilion, while JD.com recently built a high-end customer service experience and inked a partnership deal with luxury marketplace Farfetch.) Brand consultants also help high-end brands find the right KOLs to partner with and help brands figure out how to target the right customer in China, thanks to their vast amounts of customer data. When selling on marketplaces rather than through wholesale partners, brands like Ralph Lauren have more control over their pricing and positioning.

That’s especially important for a company coming back from the brink of brand damage and dilution. Ralph Lauren has decreased its presence in American department stores, thanks to rampant discounting, and plans to critically rethink its partnership with all retailers until the company is rightsized.

adapted from Glossy 

Ralph Lauren pre-Fall 2017