It is obvious that the term ‘luxury‘ implies a high level of quality, which we also understand is subjective. However, most of the value that sets one brand apart from another, in terms of luxury, is immaterial. That is, to say the symbolic properties that are related to identity, whether through self-identity or through status and group-membership. Fashion itself is centered around this concept: beyond clothing ourselves for protection, what we wear is on some level an indication of who we are or who we aspire to be.

Immaterial values are dependent on the cultural perceptions of luxury in each market. For example, the display of ostentation fluctuates between show-off and understatement, and what is considered to be modest in Miami is different from what is viewed as modest in, say, Vienna. An icon of the show-off class is Paris Hilton, especially in her pre-jail days. Note her shift to represent herself in a more understated way once she faced sentencing: she wanted to demonstrate to the world (and, more likely, the judge) that she had suddenly become more respectable, responsible, and less wild… and that she was willing to “tone it down”. However, when you’re opening a nightclub called “Vanity“ (and Paris is doing just that), it is pretty clear that ostentation and a show-off attitude are part of your identity (or brand, as it were). Contrast that with the late yet infamous Carolyn Bessette Kennedy, who is still known for her classic, understated elegance. She will likely remain a timeless icon of good taste and class, as her parred down and chic look seem less dated, more refined. Consider the difference is what her look and Paris’s look communicate in terms of identity:

The same point can be made for brand identity. Whether in furniture or fashion, architecture or art, each brand or designer has a core identity that fits somewhere between the show-off and understated categories. For example, Versace has built a brand image based on the va-va-voom Botticelli Babe, South Beach, the supermodel society, and bleach, bleach, bleach. Contrast that with Armani’s roots in minimalism, androgyny, clean lines and a subtly striking silhouette, or with Ralph Lauren’s foundation in American Classic and aristocratic elegance.

Of course, even within one brand there are varying degrees of ostentation, and this is typically presented by way of line diffusion.  In order to appeal to different market segments within the broader “luxury market,” a brand will often produce a top-level line (haute couture or designer, for example) and then one or more diffusion lines that target a lower price point.

As you move further down a brand’s diffusion into these lower price points, logos become increasingly important as quality and innovative design diminish. Armani can produce a basic white t-shirt that looks just like a Hanes, but if they stamp a massive logo across it, a consumer can still feel that they are buying into a piece of the Giorgio Armani lifestyle. That’s the idea, anyway.

However, not all brands take this approach. A particular characteristic of French luxury brands is that they are often built around an elegant and notable iconic figure such as Coco Chanel or Dior’s New Look lady, rather than a lifestyle, and these brands often avoid diffusion lines. For this reason, a brand like Chanel is able to offer both understated and show-off looks within the same line, though typically in separate stores, with less variation away from the core look, and always on the same price level.

Distance

The factor of distance often stands out as the definitive characteristic of the luxury product in the minds of many consumers. Rarity illuminates the notion of desire; it validates the idea that something is unique, special and somehow worthy of the term luxury. This is why companies like DeBeers take great measures to limit the number of diamonds on the market. More generally, this is also why limited editions are created: limited supply (plus great design, excellent quality and/or spectacular marketing) can create a frenzied sort of demand and support a premium price.

When considering the point of rarity or distance, you’ll find that luxury brands go to extreme measures to exaggerate this point (as they well should). Aside from the obvious limited editions, distance is displayed (or hinted at) on every level.

In store merchandising, distance is conveyed by hanging only one or two units/sizes (SKUs) per product, instead of crowding the racks with every item in inventory. You must ask a sales representative for help, and he or she serves as a symbolic barrier between you and the product (any subtle intimidation there serves as an added psychological filter… you’re welcome!).

In store displays, rarity comes across in carefully thought-out strategies. The Prada SoHo store displays merchandise like a museum with products arranged in still life settings or behind glass cases. Those Pierre Hermé cake shops in Paris are not designed like jewelry stores just to symbolize the quality of the products; it also communicates a sense of “Hands-off! Rare and precious items here! You can look, but you can’t touch.”

The Balancing Equation

A company is said to be competing in the luxury market when they have a balance of three components: the material, the immaterial, and distance.

When one or two of these components are low, the other(s) must be high to compensate. For example, in lower level diffusion lines, where the quality (a material value) is similar to mass market products, the logo (or the immaterial) must be more prominent. If the material value of a Gucci key-chain is quite low, the immaterial value must compensate.

For a very rare and/or high-quality product, the immaterial value need not be so high. In 2006, a bidder at Christie’s auction house broke the world record for the highest amount ever paid for a case of wine ($345,000 for a 6-bottle case of magnums). Unlike Gucci or Armani, Ferrari or Porsche, the brand of the wine was unknown to most non-connoisseurs. The wine was Château Mouton-Rothschild 1945. The background story is beautiful (man returns to his family vineyard in Bordeaux after WW2 and the Allied liberation to find the place in disrepair and his wife murdered in a concentration camp, rebuilds and produces one of the most glorified wines of all time), the label is special and unique (marked with a V for victory after WW2, commissioned by a French artist and signed by the producer), and the quality of the wine is regarded by connoisseurs worldwide as remarkable.

Material: Is it a high quality wine? Many wine connoisseurs would argue that this Mouton is among the finest wines ever produced, however some would consider it merely good. Is it expensive? I certainly think so, but others might disagree.

Distance: Is it rare? Certainly: there were only so many bottles produced in 1945, so this is definitely a limited edition.

Immaterial: Does it convey status or identity? In some circles, yes; it is very famous. However, unlike many luxury brands that boast near universal fame, this Mouton is known only within more closed, expert circles. But, hey, if that’s the group you want to be associated with, Château Mouton-Rothschild 1945 is certainly a hot entry ticket.

In the case of Château Mouton-Rothschild 1945, the material and immaterial properties are relatively subjective, however the rarity of the product is indisputable. Is it luxury? At $28,750 per bottle, and with a story like that, I would certainly consider it a luxury to experience this wine… however, I have been wine tasting in Bordeaux and would consider just about all of it to be luxury. To each their own.

(By the way, there is a great history of the Château Mouton-Rothschild estate and wines here.)

In the end, there really is no luxury product, just a balance between these three points.

So, if the industry defines luxury partially through Material Values (price & quality), what does that mean?

As we all know, the fact that something has a high price does not indicate that it has a high level of quality, and vice versa. However, a premium can be tacked onto the price of a product or service for a customer experience that is considered above and beyond, whether that experience is through customer service, or through being introduced into an admired community or tribe. After all, luxury is an indicator of status. Therefore, unlike most mass-market goods, the price for luxury goods and services is not based on tangible values alone.

Quality

Quality is subjective, depending on who you ask.

For example, I have relatively little knowledge about luxury watches, and so my perception of quality will be based on the brands I know, as opposed to the perception of a connoisseur who will understand quality from the details of craftsmanship. Ask me about the performance details of a car, and you will receive a meek “beats me” shrug. Now, ask me about shoes, and we’re in business! I KNOW shoes: materials, heel dimensions, construction practices, secrets of comfort, stitching, design and brands. But I digress…

There are many dimensions of quality, and any given product may have points that conflict in degrees of excellence. Here are a few to consider:

• Organoleptic Qualities (feel, smell, taste)
• Performance
• Resistance & Longevity
• Visual Qualities
• Quality of Manufacturing & Finish

How might these points of quality conflict? There are many examples, and I’m sure we all have our stories.

For example, resistance and longevity might conflict with feel, because tougher materials are often rougher to the touch.

Hermes scarves have great visual and organoleptic qualities, but the quality of the finish and the resistance and longevity are questionable. Each scarf is beautifully printed with many incredible colors, but the dyes are not fixed. Unless you want your Hermes scarf to turn into a blotchy mess, you absolutely cannot get it wet. That means you can forget about wearing it on that fabulous yachting tour, much less on a day with a chance of rain.

A haute couture Chanel wedding gown will have tiny inconsistencies in the stitch, simply because the fabrics are too fine to be manipulated by a sewing machine and must be constructed by hand. One person might look at this as a mark of the artistry, while another person will prefer the “perfect” finishing of a mass-produced gown, together with fabrics that are not so fragile.

Verifying Quality through Experience

In non-luxury industries, it is often easy to challenge product quality. However, even in within the industry, it is not enough to prove one’s product legitimacy in terms of quality. Quality should be made an experience that one feels, first through the product and then through the product’s environment, and the consumer’s experience of both.

Pantofola d’Oro began making made-to-measure athletic shoes in 1886. The quality of their shoes has remained so high that many athletes continued to wear them, even after they are contracted to represent other brands. To avoid giving up the quality footwear, they commonly apply the sponsoring brand logo (Adidas, Puma, etc) over their d’Oro shoes. However, d’Oro is not a luxury brand. The shopping experience is poor.

A brand can sell a high-quality product, but in order to move into the luxury industry, they must verify the quality on an experiential level. This begins with the shopping experience.

The Shopping Experience

Think of a couple of luxury shopping experiences, off the top of your head. For me, the first one that comes to mind is the Prada Flagship in NYC, designed by Rem Koolhaas. I went there as a teenager when they first opened, long before I even considered moving to Milan. Although I was barely a college student at the time and unable to make a purchase, the service staff was attentive and the store design blew my mind. That’s the kind of experience that sticks with a consumer, converting the experience into potential long-term sales and loyalty when they grow into the target market of the brand.

Another luxury shopping experience I had the pleasure to encounter was in the Pierre Hermé cake shop in St Germain area of Paris. It is designed like a jewelry store, with the cakes laid out in splendor. Actually, it’s not just the store design that is modeled after the luxury jewelry sector; it’s also the marketing… and the pricing for custom desserts. Want to know why “French Women Don’t Get Fat”? It’s because the sweets are too gorgeous to eat.

This is the legendary type of shopping experience that people make a special trip for, tell stories about, and share with their loved ones, even if it’s just for a macaroon!

How to Convey Luxury in the Shopping Experience

Most of the following points seem like no-brainers after you read them, but we can all think of a bunch of examples for each point where the ball has been dropped, and luxury brand value negatively impacted. Here they are:

• Urban & Cultural Areas: Luxury flagships are located in First-Tier Cities (Paris, Milan, New York, London, Tokyo, etc). These world capitols provide a wealthy base customer within the local population, but more importantly, they offer a huge number of tourists. This was especially important when you had to travel to obtain national luxury items (Want couture? Go to France. Want Chianti? Go to Italy.). However, today it is important to house a brand flagship in these capitols in order to provide a sense of the spirit of the brand, whether it is a piece of the American, French, or Italian lifestyle the brand represents. Furthermore, these cities offer a sense of refined culture through history, events (opera, theatre, special conferences) and exhibitions (cultural, professional), and the brands benefit through association.
• Co-Presence: Who is the place shared with? You’ll notice that luxury stores rarely stand alone. If not sharing a roof or directly adjoining one another, luxury stores are at least on the same street or within the same district. Think about Worth Avenue in Palm Beach, Rodeo Drive in Beverley Hills, 5th Avenue in New York, or Montenapoleone here in Milan. Even as the humblest immigrant communities or the richest McMansion neighborhoods, luxury powerhouses gain strength through community and mutual association. Just like buying a flat overlooking Central Park in the Upper East Side is a statement, opening a store on any of these streets tells the world, “I have arrived. I belong with thesepeople/brands.” Many established brands have a presence in multiple districts to target a variety of consumer markets. Consider the Louis Vuitton stores in Paris:
  • Champs Elysee: the largest store, full of tourists
  • Montaigne: smaller, more chic
  • Saint Germain: smallest, highest sense of luxury, quite local and exclusive
• Store architecture & scenography: Although the recent trend for Starchitects to create branded temples is a testament to this point, store architecture goes beyond the fame of the designer and touches on points of the interior. Note that luxury stores do not display every item in inventory. Racks are not crowded  with various sizes. You’ll find very few sizes on display because the staff is there to assist you. The luxury customer should not dig through piles of garments to find an item. Further, the store architecture should represent the brand, especially in emerging markets where new consumers are just beginning to speedily acquire a brand education. What are the core symbols of the brand? Who is the target customer? You should be able to identify that from the store. (Ralph Lauren is the champion of branded store design, by the way.)
• Store entrance & accessibility: Did you ever notice how heavy the doors to most luxury stores are? These are not your typical motion-sensor sliding doors. Rather, these doors make you slow down before entering. Often a meaty man or two is flanking the door to assist/intimidate you. Yeah, that’s right, I said “intimidate.” Why? It’s the bouncer-affect. Are you on the list? The theory is that if they can scare you off, you probably don’t belong there. Plus, the last thing a shoplifter of premium merchandise wants to see is a prize fighter guarding the door. This also has to do with co-presence, but not the co-presence of other brands like we went over above. Rather, this point attempts to ensure that the co-presence of the patrons meets a certain standard. However, it’s hard to spot some luxury consumers or future luxury consumers, and so the probability of offending someone is high and the repercussions can be disastrous for a luxury brand. Obviously it’s best to be discrete in this form of psychological filtration.
• Welcoming Service: In addition to the bouncer-types at the door, a luxury shopping experience should provide friendly service that extends above and beyond the call of duty. This is unfortunately where most luxury stores fall short, and we’ve all heard stories of or actually had rude, snobby or lazy sales assistants, which drive away sales and tarnish the brand image. The fact of the matter is that it is at times difficult to find sales staff that represent the brand values with class, intelligence and politeness. However, I believe this is due less to a lack of available people and due more to a problem of luxury brands not fully understanding and conveying their core values to employees, and lacking quality customer service training programs. This is perhaps the single greatest weakness of luxury brands (and you could relate it to their lagging online presence, because that translates to customer service as well), and yet it seems to be quite low on the priority list of many brands. Curious… they could learn a lot from Zappos!

Other sectors can also achieve a sense of luxury for mass-market goods by applying the above principles. We have seen this increasingly in the last ten years, as luxury companies target downward into the mass market, and commodity companies target upwards into the luxury market.

For example, Sephora applies all points of the luxury shopping experience to its stores, but it is a democratic store lacking exclusivity which carries some luxury brands in the product mix (even if it is owned by luxury powerhouse LVMH). The Sephora stores are centrally located in world capitols and cultural centers, often surrounded by luxury brand retailers; they have a grand entrance that is discretely guarded, and the staff is friendly and helpful without being pushy.

Furthermore, the displays are clean and organized like a luxurious market, and the branded interior design is based on the awe-inspiring cathedral (the Duomo) in Siena, Italy. While most customers will not recognize the trademark black and white horizontal stripes of the store as being related to the Duomo, the effect is quite nice in providing a sense of Renaissance splendor, don’t you think?

So, if Sephora offers all of this, aren’t they a luxury retailer? Not quite. While you can find products from Chanel, Dior, Frederick Fekkai (I love), Sephora still offers mass market goods that you could find in your local pharmacy, making the experience inclusive of the mass market.

Premium Price + Quality Products + Grand Shopping Experience = Luxury Brand? …Not Yet

We’re not there yet. In order to achieve true luxury status, immaterial values of brand identity and group-status, as well as exclusivity must be proven. More on that in the next segment of this series…

However, I came across some notes I took last year, based on a lecture from the French Fashion Institute, and I think I’ll add them to the discussion going on out there about the present and future of “luxury.” Since there is a lot to get into, I decided the best way to go is to break this apart into a series.

The Luxury Product vs. The Luxury Brand

The diamond is a luxury product, and DeBeers wants to become a luxury brand specializing in diamonds.

YSL is a well-known “luxury” brand, yet a large chunk of their revenues are earned by sales of masstige products (ie, lipsticks, nail polish, etc).

Truffles are luxury products, but if they were branded you probably wouldn’t want them anymore. Don’t worry; you wouldn’t be alone in that. The same thing happened to smoked salmon about 30 years ago when it became branded. Market perception changed, and it is no longer considered a luxury product.

So, how do we define a luxury product?

The Luxury Product

There are many factors that go into the production and marketing of luxury goods and services. However, in order to be successful in this industry, both the customer and other industry players must be able to identify some key characteristics inherent in “luxury.”

Perceiving Luxury, from the Customer Perspective:

• exclusivity
• superfluous
• symbolic
• subjective
• scarce/rare
• high-priced
• quality/craftsmanship

There are a huge number of terms that come to mind when the consumer thinks about luxury. In fact, according to my thesis research, the most commonly associated terms are now negative ones related to waste and extravagance.

However, according to the FFI, there are three criteria to consider in the definition of a luxury product.

Criteria for Luxury Products- Validation from the Industry Perspective:

• Material Value: price, quality
• Immaterial Value: symbolic, superfluous
• Distance: rarity, scarcity

Next up in this series: What is Luxury? Defining Quality

Unfortunately, I couldn’t get away in time to hear Matteo Marzotto speak about his plans for reviving the Vionnet brand, but I was able to make it there towards the end of the day, when one of my favorite topics was being highlighted: Web & Mobile Luxury. However, upon arriving at the venue, I was disappointed to find that the presentation was entitled: “Is Luxury Compatible with the Internet?”

Seriously?! …After writing about this for more than a year, and studying and working in the field for longer, I sometimes can’t believe that we are still hearing this question asked among those considered to be the industry elite.

But I digress.

The presentation was delivered by Jacques-Antoine Granjon, French CEO of vente-privee.com, a members-only online retailer of some 850 brands, typically selling end-of season products through 3-day flash sales. It’s kind of like the European version of Gilt Groupe, with what appears to be a much smaller selection of merchandise and fewer high-profile brands.

The presentation was brief, but in his defense, with only 8 minutes to deliver a message to convince business leaders that luxury and the internet do belong together, he made an entertaining synopsis.

Without further ado….

My Brief Notes on the… Brief Presentation

Following are the notes I took from the presentation. I tried to keep it as verbatim as possible, so read this with a French accent. To begin to illustrate his point, Granjon started with an analogy to online luxury…

Question: What is the most exclusive toy in the world of luxury today?

Answer: The Luxury Jet

• It saves time & offers control (controlling the when & where in life = freedom
• It provides the best service (with highly skilled staff, pilots, maintenance & 1-to-1 travel care
• It offers the utmost in innovation & know-how (provided through superior R&D, highest quality materials, technology & design
• It is exclusive (traveling alone, in privacy = power
• It provides the dream (exploration, imagination)

These five points represent the luxury codes, which the internet can provide for brands. BUT, these codes are not enough for luxury online. There are several more points:

1. The internet is not just a new format of boutique. It requires a new distribution strategy
2. It accelerates growth and visibility of brands everywhere around the world, but only if controlled
3. There can be no mistakes, because the internet is permanent, and it takes time to build a presence
4. The internet is a world that requires new skills and entrepreneurial determination. In addition to the luxury codes mentioned above, in order to be successful on the internet, luxury brands need the following:

• Tech skills: must evolve as quickly as they emerge
• Digital factory: create graphics, coding, etc
• B2C distribution centers
• Award-winning customer relationship services
• Knowledge of online marketing

I see your point, but…

For those of you out there who are, like me, thinking, “That’s IT?” after reading this… yes, that’s it.

They still don’t get it. While it may seem obvious if not insufficient to those of us who eat, sleep and breathe this stuff, I have personally met CEOs and marketing managers of major luxury brands within the last year who are reluctant to start developing a branded web-presence because they fear losing control of the brand image. On the other hand, I have also met online wizards who are eager to take advantage of this lack of luxury presence online, but fail to realize that they need savvy logistics and distribution systems as well as a killer CRM program before even contemplating the notion of luxury e-commerce.

But, back to that presentation. There are two primary associations to luxury that are critical, and are blatantly missing here. When a branded online environment is created, they should definitely be addressed.

The first, and perhaps the most important of all luxury codes is connectivity (this can mean a lot of things, among them the connection a customer feels to what a brand represents, like American Aristocracy with Ralph Lauren, or to a brand’s history of jaw-dropping elegance and sex, which is what a customer is buying in a modern Vionnet dress). Some people will call this “history,” but I think it’s also important to indicate that the luxury customer is  buying into a community, connecting that history with their own.

Most luxury brands have a profound history, and if they don’t start with one, it’s often fabricated, as was the case with the Tod’s brand under Diego Della Valle’s brilliant marketing strategy (he had shoes from the new Tod’s brand superimposed on famous images of Audrey Hepburn and other classic icons). Just as the luxury jet connects us either to a location from our past, or to an exciting future, so does the luxury brand. There is a story behind it- something both intimately familiar and excitingly new. The internet is the perfect vehicle to convey that history, to tell the story about how a particular brand developed and why that brand is loved, and to build a connected community of “lovers” around it, like a family that shares the same values.

Finally, an unfortunate association to luxury that is certainly present with the private jet, and a term which occurred in my graduate research on the topic more than any of the other luxury codes, is waste or excess. Happily, the internet can help to eliminate waste in so many ways, from streamlining the supply chain on the back-end to providing the transparency that allows consumers to understand and choose what tradeoffs they are willing to make between such hot points as carbon footprints, “Made in…” issues, labor conditions, and production materials, versus price and quality.

Moving on to the other points of the presentation, I disagree with a couple of things:

• His point: The internet accelerates growth and visibility of brands everywhere around the world, but only if controlled.
  • My point: The internet accelerates growth and visibility of brands everywhere around the world, regardless of whether or not the brand controls the message. It’s always better to establish your own online presence than to entrust it solely to outsiders and amateurs, who could accelerate brand growth and visibility in an entirely undesirable way.
• His point: There can be no mistakes, because the internet is permanent, and it takes time to build a presence.
  • My point: No one is infallible. Tell a brand manager that she has to be perfect in every way on the internet, and she will never build a presence there. The beauty of the internet is that you can address mistakes right away: you apologize, publicly correct the situation, and in the process it’s likely that you actually increase your fan-base because people trust you.

So, for those of you out there who are fashion/web geeks like me, take heart: we’ve got a lot of fun work to do!

And, by the way, I noticed that the Vionnet site is not developed. If anyone knows Matteo Marzotto, let him know that I’d love to help!

Ralph Lauren became the single most profound industry-transformer of the past century by maneuvering his product offering, brand extension and marketing to evolve from a neckwear designer into a brand ambassador for an entire lifestyle, thus creating the “Lifestyle Industry”. Throughout the past forty years, although the company has experienced financial ups and downs, acclaim and criticism alike, it has remained one of the most successful fashion businesses in the world.

The following is my effort to capture the story of the Polo Ralph Lauren company, moving from the history of the man behind the brand to the structure of the business.

Ralph Lauren: The Man

Ralph Lifschitz was born into a working-class family in the Bronx, New York City in 1939. Coming from a long line of Orthodox Jews, Ralph’s late mother is rumored to have wanted her youngest son to become a rabbi. However, young Ralph’s father was a house painter, and Ralph himself had ambitions of becoming a millionaire- according to his high school yearbook.

Young Ralph was apparently driven to become the ideal “self-made man” from an early age. Throughout his youth, he worked summers in the Catskills, where he observed the wealthy American lifestyle that would capture his imagination. Later, Ralph worked in New York department stores and spent his savings on expensive clothes, becoming the best dressed of his classmates by the age of 12.

By 16, he and his brother Jerry had both changed their names from Lifschitz to Lauren. The idea of dressing for the position (or lifestyle) you hope to attain has served as a mantra for Ralph Lauren’s subsequent success, as he has enabled millions to do just that.

People ask, ‘How can a Jewish kid from the Bronx do preppy clothes?’ Does it have to do with class or money? It has to do with dreams.  -Ralph Lauren

After serving in the US Army for two years (1962-64), Lauren was discharged and quickly married Ricky Lauren. They have three children together.

While selling ties at Brooks Brothers, Lauren attended night school in business at City College in NYC. While working in the “preppy” world of Brooks Brothers and observing other like-minded companies, Lauren realized there was a largely unserved market for people like himself, who wanted to dress within a certain “blue-blood” lifestyle, without appearing stuffy or breaking the bank. He began to tap into this market by veering away from the popular “skinny tie” to create wide, colorful neckwear.

A tie was the way a man expressed himself. I believed that men were ready for something new and different. They didn’t want to look as if they worked for IBM. A beautiful tie was an expression of quality, taste, style.  -Ralph Lauren

Ralph Lauren took inspiration from the yearbooks of Princeton, Harvard and Yale, and from old photographs of prominent Americans, as well as his own personal idea of the images that represent the classic American heritage and the “sporting gentleman.” He went on to develop the largest lifestyle company in the world.

In 1987, after the removal of a benign brain tumor, Lauren began a longterm commitment to philanthropy. The Polo Ralph Lauren Foundation was created for the purpose of providing support for philanthropic programs including education, healthcare in medically under-served communities, the arts and community-based initiatives. His family and company have supported historic preservation activities and numerous cancer research initiatives, including the Pink Pony campaign for breast cancer. In addition, Lauren founded the Ralph Lauren Center for Cancer Care and Prevention in 2001.

Lauren’s company was floated on the stock market in 1997, and Forbes now lists him as one of the world’s billionaires. He and his wife, Ricky, have five homes, each filling in a chapter of Lauren’s ideal American existence. There is the apartment in Manhattan and two houses not far away: a beach house in Montauk, at the tip of Long Island, and an estate in Bedford (see Architectural Digest, November 2004), an hour north of New York City. There are also two more distant places: a ranch in Colorado (see Architectural Digest, November 2002) and a two-house retreat in the posh Round Hill resort, near Montego Bay on Jamaica (see Architectural Digest, November 2007).

It seems that Lauren’s childhood dreams have been dwarfed by his larger-than-life reality.

The best thing you can do is go away from this saying, ‘I can do this too,’ because it’s all possible, and I’m living proof.  -Ralph Lauren

Below is a one-hour interview from 1993 where Ralph Lauren speaks with Charlie Rose about his life, his inspirations, and his business. (You may have to drag the scroll bar to get it going.)

The History of Polo Ralph Lauren

1939: A Star is Born

Ralph Lifschitz was born in the Bronx, & later changed his name to Lauren.

1960s: Chasing the Dream

Lauren studied business at City College in Manhattan while working as a glove salesman. He later began working for tie-manufacturer A. Rivetz & Co, who refused to produce his wide-tie design in the era of skinny-ties. Lauren dropped out of school just before graduation, and convinced clothier Beau Brummel to manufacture his Polo line of neckwear. Within a year, Lauren took out a $50,000 private loan from clothier Norman Hilton and founded the Polo Fashions, Inc. business with his brother, Jerry (the name would become the Polo/Ralph Lauren Corporation -PRL- in 1987).

The ties were first sold in small menswear shops and later in fashionable department stores. Bloomingdales originally refused to sell the ties unless Lauren agreed to remove his label in order to reduce the tie-width. Lauren refused, and Bloomingdales had only to look at the success of his sales figures to understand that they were mistaken. Lauren’s colorful wide ties found a niche – even at Bloomies, and the brand was expanded to include men’s business attire and sportswear. The company designed, manufactured and distributed the entire Polo collection.

From the beginning, Lauren established clear stylistic codes that embraced the myth of the American aristocracy by merging classic American style with the refinement, tailoring and sensibility of European fashion.

1970s: Branded Genius

Lauren won the Coty Award for menswear, and immediately produced a line of men’s dress shirts cut for women, in addition to the now infamous Polo shirt with the breast logo. Both lines were a huge success, but by 1972 the company was almost bankrupt. The young entrepreneur had proven himself a genius at establishing a strong brand identity with lightning-speed, but had difficulty managing the finances and logistics of a fashion business.

Lauren invested $100,000 of his own savings into the company and recruited Peter Strom from his post at Norman Hilton to become his business partner. Lauren then owned 90% of the company, while Strom owned 10%.

Strom and Lauren proved themselves a dynamic working team. As Strom reported to the New York Times:

We divide the work this way: I do everything Ralph doesn’t want to do; and I don’t do anything he likes to do. He designs, he does advertising, public relations; I do the rest.

In this spirit of doing what you like and what you’re good at (not bad advice, by the way), Strom and the Lauren brothers scrutinized their business structure and adapted it to what they did best: design and marketing. Manufacturing of the women’s line was licensed out to experienced producer Stuart Kreisler, who was enthusiastic about building the Lauren brand.

Under the licensing agreement, Lauren would design, and Stuart Kreisler would manufacture and distribute the line while sharing advertising costs, with Lauren earning 5-8% of the wholesale revenues. The structure of this agreement would serve as the model for future PRL licensing efforts.

In addition to this agreement, Strom insisted that all retailers carrying Polo products would be required to sell the entire line, including the most expensive suit (which cost $350). While this initially eliminated 2/3 of the retailers carrying Polo, the retailers who remained developed a loyal working relationship with Lauren.

By the end of the decade, Lauren had moved the company from the brink of failure into an emerging powerhouse. He also created a smash-hit Westernwear collection in addition to fragrances for men and women. He designed the wardrobes for The Great Gatsby (1973) and Annie Hall (1978), influencing the way millions dressed -although without the product placement that would bring Armani fame in American Gigalo in the 80s. He had also won the American Fashion Award, and was elected into the Coty Hall of Fame for both menswear and womenswear.

With the company finances back in order, Lauren returned to building his brand image and began to invest in extensive advertising spreads that used powerful imagery to tell the story of the Polo Ralph Lauren lifestyle. A movement that went beyond clothing was born.

1980s: Building the Lifestyle Empire

Lauren continued his brand expansion to include childrenswear, eyewear, underwear, jeanswear, shoes, accessories, housewares, furs, luggage, and a range of other products. However, unlike most companies who suffered brand image dilution from rapid expansion using licensees, the image of Polo was only strengthened. There were several reasons for this anomaly, but the main ones were that Lauren designed everything himself or held final design approval, and retail imaging was carefully controlled by the brand through franchises or shop-in-shops.

Only two product categories gave the brand substantial problems: fragrances and the home collection. The fragrance sales were lacking until Lauren found the right licensing partner in Cosmair, Inc. who was willing to help develop and promote the products. Sales in Polo, Polo Sport, Lauren and Safari fragrances skyrocketed.

The home collection, on the other hand, received widespread praise for brilliant comprehensive design, but suffered at the hands of the licensee. It was originally licensed for production and distribution to the J.P. Stevens Company, who had difficulties getting the products to retailers on time and demonstrated poor quality control. In addition, they required that retailers construct specific free-standing boutiques within their stores to display the items- at a cost of $250,000 each! Retailers obviously balked at this figure. The result: low-quality home goods and expensive requirements for stores = unhappy customers and retail partners. It took the company years to recover the home collection.

Nevertheless, all Polo products embraced an idealized aspect of the American cultural experience, and this concept was reflected in the store design and advertising. The Santa-Fe collection was added to the brand in 1981, providing Navajo-inspired designs that were a global success. To produce the ultimate in-store brand experience, the company went through an elaborate process of historic restoration to create the first flagship store in the 1890s Rhinelander mansion on Madison Avenue, opened in 1986. This would be followed by the development of a London flagship on Bond Street and the brand’s largest international store in Paris.

The company now has stores in more than 31 countries, and controls more than 50 brand outlets at a significant distance from regular retailers to prevent inter-brand competition while controlling the brand image.

1990s: New Frontiers

Difficulties did not allude the brand. The recession of the early 90s saw cutbacks in Polo’s retail operations. According to retailers and various news sources, many manufacturers had begun copying Lauren’s designs and selling them at lower prices.

However, PRL continued to roll in the cash with the introduction of the Polo Sport and Double RL Jeans lines, and Lauren received the CFDA Lifetime Achievement Award in addition to awards for best menswear, womenswear and retailer.

The company’s continued success positioned them for the profitable sale of 28% of the company to a Goldman Sachs & Co. investment fund for $135 million in 1994. The company then went public in 1997 on the NYSE when Lauren sold 18 million of his personal shares for $465.4 million. He still retained 90% of company voting rights, enabling himself to maintain control over the direction of the brand.

Throughout the 90s, the company continued with brand expansion projects, and shifted several of its licensing agreements in an effort to provide high-quality products at several price points, thus embracing the full lifestyle offering. By the end of the 1990s, nearly 300 licensing agreements were in place. Of the brand’s 200+ retail outlets, about half were operated through licenses, and yet the brand image remained intact.

As the new century approached, the company continued to grow while maintaining a strong image rooted in the idealized dream of American culture. Ralph Lauren further diversified the brand through the development of the Purple Label (tailored menswear) in 94 and the opening of the RL restaurant in Chicago in 99. He also began to demonstrate the philanthropic nature of the company before it became fashionable, spearheading efforts in historic preservation in the States and the fight against cancer.

In the late 90s, the company acquired Club Monaco to get a handle on the younger market which competitor Tommy Hilfiger had captured, yet had remained allusive to Ralph Lauren. The RALPH line was then created to target the “daughter of the Lauren market”.

2000s: Media Master

Ralph Lauren had grown from a tie-designer into a lifestyle mogul in just 30 years, creating the industry path to success that others would scramble to follow. However, the company’s spirit of innovation didn’t stop with the 90s.

In 2000 the company formed a multimedia marketing joint venture with NBC and affiliates, and ValueVision (operator of the Home Shopping Network). With the new media capabilities this partnership enabled, the company began to explode with cutting-edge communications strategies that would leave the rest of the industry years behind.

PRL’s first television campaigns began immediately. Polo.com was developed in 2000, providing one of the first mono-brand e-commerce sites in fashion history. It was followed in 2001 by the online magazine outlining all things celebrity, sport, art and culture that would appeal to the ideal American persona that Lauren had built. That same year, Runway.Polo.com was launched, providing fashion fans with a look behind the scenes in collection-development and fashion shows, while offering style and beauty tips. Just one year later, the Home site was launched, exploring every item in the collection and offering decorating tips to readers.

By 2003 the International Website had launched, providing a glimpse into the Ralph Lauren lifestyle for the first time for many new markets around the world. The Create-Your-Own project also debuted online, enabling users to interactively “design” their own Polo shirts by selecting from available color combinations and graphics. The venture proved very successful and was repeated in subsequent years.

The technological integration continued with the creation of the Virtual Window Shop, a touch-screen monitor on the window of the Madison Avenue store that allowed customers to shop “online” anytime, even after the store’s closing hours. More than increasing the number of virtual shoppers at the store site, the window really served to generate hype and publicity for the brand. The window piece was featured in most fashion publications worldwide, in addition to business news and technology publications. The window, in effect, became a tourist destination.

In 2008, consumers with SmartPhones were enabled to shop from the pages of their favorite magazines by scanning Quick Response (QR) codes in PRL ads with their mobile phones. Several iPhone applications were also launched to attract brand fans to interact from anywhere they could get a signal.

In the never-ending brand battle to win the hearts of the next generation, PRL launched the Rugby line in 2004 (yes, that’s before Gossip Girl) in an effort to attract the “burgeoning college” market. The Rugby line provides aspirational lifestyle products in a preppy, youthful style through a vertical retail format (meaning the PRL controls logisitics, distribution and retail). Rugby.com was worked over in 2008 to provide e-commerce, mobile commerce, media content, and the make-your-own features that had proven so popular with Polo.

By 2007, its 40th year in business, Polo Ralph Lauren was a $4.3 billion enterprise with a presence in 80 countries. Offerings at nearly every price point — from value to luxury — covered men’s and women’s apparel, home goods including paint, accessories, fragrances and eyewear at the time of the brand’s anniversary celebration and commemorative book release.

Lauren himself has been awarded the CFDA’s American Fashion Legend Award and the first-ever Voter’s Choice Award, and continues to lead and support numerous philanthropic endeavors.

PRL remains a flexible business model, integrating retail, wholesale and licensing to most effectively provide the world of Ralph Lauren to consumers. The company’s brand names include, among others: Ralph Lauren, Polo by Ralph Lauren, Ralph Lauren Purple Label, Black Label, Blue Label, Lauren by Ralph Lauren, Polo Jeans Co., RRL, RLX, Rugby, Ralph Lauren Childrenswear, Ralph Lauren Baby, Ralph Lauren Home, Lauren by Ralph Lauren Home, American Living, Chaps, and Club Monaco.

In spite of 4th quarter losses at the end of Fiscal Year 2009 (which closed on March 28, 2009), net revenues for the year grew 3% to $5.02 billion from $4.88 billion in the previous year. These gains are attributed to increased wholesale and retail sales, but have been diminished by the loss of some licensing fees as PRL has bought back licensing rights in key markets to strengthen the brand image abroad. The company continues to focus on longterm growth, enhancing development abroad — especially in SE Asia — and pushing the pattern of innovation in products and operations in the coming years.

The current economic crisis ensures that Fiscal 2010 will be challenging for PRL, but the company strategy of brand protection (bound by brand building and extension, specialty retail including web, and international expansion) has most speculators confident that the company will continue to thrive.

Ralph Lauren: The Brand

All lines of PRL represent the idea of the American Aristocrat, rich in European heritage with a mix of New England urbanity and a rugged country flair.

The look embraces a style that is sporty, preppy, wealthy, traveled, and timeless while remaining modern.

Within this ideal, each line represents its own niche, although there has reportedly been some confusion among customers as to what each line stands for (perceived brand overlap). This is understandable, given the number of lines the company has produced. Below I have placed some of them into positioning maps by style and price-point (there are many lines missing from this map, some available only in specific markets- like Lauren for Men, others discontinued or owned by the company but not in use). Obviously, all styles from elegant to athletic fall within the broader “classic” category.

PRL Communications & Marketing

In the early years, Polo Fashions was marketed solely through the efforts of the department stores that carried the brand’s products. The advertisements included store window features and newspaper ads.

In addition, Ralph Lauren was one of the first designers to have his own shop-in-shop within individual department stores. Through the techniques of set design, he created a specifically branded environment to house his products while reflecting the attitude of the Ralph Lauren lifestyle.

Film would serve as Ralph Lauren’s inspiration in his collections and in his future marketing efforts. Many have complained that he is not a “true” designer, taking images from films and other sources and designing collections around them. But what creative has not done this?

In 1974 the name Ralph Lauren was catapulted into the fashion industry forefront after the release of The Great Gatsby, a monumental film in which Lauren designed the wealthy characters’ wardrobes.

Just three years later, Lauren would again work with a film to create t he looks for Annie and Alvy, the main characters of Woody Allen’s infamous Annie Hall. With this film, Allen created a classic film school staple in ironic comedy, and Lauren created a style icon in Diane Keaton.

In the mid-1970s, PRL dedicated about $400,000 per year to marketing efforts. Once or twice a year, the company produced 20-page spreads to be released to several major magazines, instead of the standard one- or two-page ads most other brands released monthly. The spreads looked like movie stills, capturing the lives of characters within a film based on upper-class Americana.

Lauren explained the marketing strategy:

When we appear, we’ll be a star. It’s like Frank Sinatra. If you see him once a year on TV, it’s an event. If you see him every week, it’s no big deal.

Over the years, as PRL released more lines targeting different age groups of men and women within the brand’s style, the ads were adapted, always maintaining a cinematic style. All advertising images continue to represent a chapter of the American story, from an elite perspective.

Lauren himself had come to personify the lifestyle he was selling, and appeared in many ad campaigns and in various magazines with his family.

In addition to traditional media advertising, PRL had continued to focus on the physical environment of each store, having grown from shop-in-shops in the 70s to hundreds of flagships and freestanding stores worldwide. Each store is designed for the specific environment, from New York to Milan to Palm Beach. While decorative features my be unique for each site, all embrace a classic upper-class American lifestyle image.

After PRL’s media partnership with NBC was established in 2000, TV spots were added to the communications strategy, finally demonstrating the brand in actual film shorts for apparel, home and fragrances.

The media partnership also provided the capabilities PRL needed to develop a branded website that could capture the Ralph Lauren sensibility, lifestyle, and clothing. Directed by Lauren’s son, David, the website contains products and media content, intended to bring the brand to life in the virtual realm. Lauren has described this combination of merchandising and entertainment as “Merchantainment.” Added to this feature is Ralph Lauren RL TV, which includes behind-the-scenes footage of fashion shows and photo shoots, Lauren-esque celebrity and athlete interviews, and any additional content that might appeal to the ideal Ralph Lauren lifestyle-consumer.

In 2008, applications were released to integrate these functions on the iPhone and other smartphone devices.

Examples of PRL’s cinematic commercial spots are everywhere on YouTube. Here is just a handful:

The Polo Ralph Lauren Business

Now a publicly-traded company, the Polo Ralph Lauren business model is built around six primary objectives designed to keep the brand strong while bringing in the big bucks:

• Creating unique businesses primarily centered around one core and heritage-driven brand;
  • The ability of PRL to maintain a singular “American Aristocrat” image has provided unity across the brand in all product categories, and has enabled the company to take a leadership role in this now-saturated market. (If you create the market, you basically own it until someone else does it better, and so far nobody has done it better than RL.)

• Diversifying and expanding products and prices, distribution channels and geographic regions;
  • PRL is creating something for everyone in most price ranges to ensure that anyone who WANTS to own a piece of this imagined American lifestyle can.

• Improving brand control and positioning;
  • When the company has direct control over distribution and quality control, they can ensure that the brand represents the same image everywhere. This is important in an era when customers travel the world and have access to infinite information online. If the brand is poorly represented in one market, a customer seeing this is less likely to think the brand’s product is worth a high price in a more successful market.

• Focusing on selective strategic partnerships;
  • The company needs the best partners to represent their image properly, produce products and deliver them with expertise, and reduce costs in line with company goals. When PRL selected a poor licensing partner for their Home Collection, a lot of damage was done to the brand through low quality products, delayed delivery, and high costs.

• Implementing infrastructure improvements that support a worldwide business;
  • This doesn’t just mean building the best “American-style” stores in key markets, but creating a logistics system that enables the company to do efficient business around the world and training employees everywhere to represent the image of Ralph Lauren in the same way throughout various cultures.

• Funding expansion through strong operating cash flow.
  • This enables the company to use its own money from sales and royalties to fund activities that would otherwise require great external debt. Not only is this good financial management, but it gives the company the freedom to invest in critical initiatives without having to depend on an external party.

Currently, PRL is focused on growing the brand internationally, opening stores in new markets and strengthening the perceived brand image in key areas.

Additional plans outlined in the annual report include further brand extension and product diversification (expanding the Lauren line in Europe, and growing the offering of accessories), increasing direct-to-consumer marketing in key markets (including TV, print, online, etc. and focusing first on Paris), and cost-saving strategies (reducing operational costs and profit margins to provide a lower price range to customers).

International Expansion of PRL

While proving a lifestyle powerhouse in the States, Ralph Lauren wanted to continue his market expansion overseas. Like many consumer goods companies, the method of expansion used by PRL was essentially: find quality manufacturers and distributors in key markets, and form licensing agreements with them. This practice would give the company a foot in the door of foreign markets, using local experts. When opportunity struck, PRL would buy back the licenses or acquire the licensee companies to bring control in-house.

As part of our growth strategy, we seek to extend our brands, expand our geographic coverage and increase direct management of our brands by opening more of our own stores, strategically acquiring or integrating select licenses previously held by our licensees and enhancing our operations. -2009 PRL Annual Report

Beginning in 1998, PRL began buying back many of its European licensing rights while continuing to open flagship stores (London, Paris and Milan) in addition to outlets in France, the UK and Austria. In 2005, PRL’s business in Europe counted for 15.7% of worldwide wholesale net sales (up 150% from 2000). At that time, the company announced its goal to move the European market from a $700 million business to a business worth $1 billion by 2010. This goal was achieved in March 2009 when the net revenue for Europe totaled more than 20% of worldwide sales at just over $1 billion.

PRL worked hard to achieve this goal of growth in Europe, not only by building flagship stores in key cities, but also by increasing their focus in wholesale (selling through external retailers including key boutiques and department stores). Today, about 2,100 stores carry PRL lines through wholesale in the US, compared with about 3,900 stores in Europe. -Much of this difference is due to the fact that, in Europe, there are many different department store chains and other retail avenues that are unique among individual countries.

While PRL owns many branded stores in the US, in Europe the business is still supported greatly by third parties who are trusted within the local markets. This has the effect of giving the PRL lines a foot in the door, but it also adds a new level of complication as the company must deal with many different distributors while maintaining the same global image.

According to the company’s annual report, PRL’s latest goal is to repeat this growth strategy in Southeast Asia, which is comprised of China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand (bringing the Asia-Pacific market to 1/3 total company revenues). Sales in Japan alone have increased by more than 500% since 2007 (to $393 million), and PRL anticipates even greater results in China. The company plans to transition their retail and wholesale operations in Southeast Asia from licensees to internal ownership by 2010, and will continue to integrate the businesses they have already acquired in Japan into the PRL  infrastructure.

Philanthropy, Ethics & Sustainability at Polo Ralph Lauren

Polo Ralph Lauren has made strategic investments in support of particular “WASP” sporting events, naturally including polo. In addition, the company has served as the official outfitter not only for the Wimbledon but also for the US Olympic and Paralympic teams. Beyond athletics, the Lauren family has made philanthropy a part of the company’s mission for 20 years.

Ralph Lauren has been an active philanthropist since the mid-80s, when he had a benign brain tumor removed. Afterwards, he became an important leader for the fight against cancer (from fundraising to founding or funding research and treatment initiatives and a clinic), but he has also participated in AIDS charities such as God’s Love We Deliver.

Philanthropic efforts also surround a theme that is close to the culture of the brand: historic restoration of American icons. Whether in the rich environment of his adopted homestead in Bedford, NY or in the winter getaway island of Jamaica, Ralph Lauren has created and funded numerous restoration projects that serve to maintain historical landmarks near to the hearts of Americans.

Beyond architectural restoration, a team funded by Lauren has recently completed restoration efforts of the original American flag, which inspired the writing of the US national anthem. The flag is now housed within the Smithsonian Museum in DC.

In addition to charities based on Ralph Lauren’s personal interests, or the interests close to the image of the brand, PRL has recently (and quietly) explored a new chapter of activity, focusing on ethical production in response to accusations of abuse.

A Note on Ethics

In early 1999, a highly-publicized lawsuit was filed in the California courts on behalf of sweatshop workers in the Northern Marianas Islands against 18 US retailers and manufacturers, accusing them of violating RICO racketeering statutes that specifically prohibit peonage and involuntary servitude, and allow suits against anyone benefiting from such an enterprise. Among those accused were retailers Nordstrom’s and J.C. Penney, as well as PRL competitors J Crew and Tommy Hilfiger.

As a protective measure, PRL agreed to require and help finance independent monitoring of its own and other factories in the Islands. The company also agreed to settle a class-action lawsuit over substandard working conditions in factories on the Pacific island of Saipan, where another series of lawsuits had originated regarding substandard working conditions.

In the case of the Saipan lawsuit, defendants included PRL competitors Calvin Klein Inc. and Tommy Hilfiger USA Inc.; retailers The May Department Stores Company and Sears, Roebuck & Company; and major PRL licensee Warnaco, Inc.

Since settling the Saipan lawsuit, PRL has received low but improving marks from labor watchdogs around the world. While they have been supportive of factoring monitoring and send staff to monitor factory working conditions, they have found difficulty in obtaining a squeaky-clean reputation. Along with the other companies who must operate through licensees and third-party contractors, it is difficult to know exactly what is going on with producers at all times – this is why brands such as PRL often buy back their licensees to regain control over their brand little-by-little.

As PRL has continued to expand over the years, many production efforts have been licensed to companies who manufacture through factories in Southeast Asia and other parts of the world where labor prices are still low enough to meet current company practices set to achieve consumer-approved prices. Through language barriers and bureaucratic roadblocks, it is often difficult to understand just what factories are producing what products. (It is a common practice for less ethical producers to show brand staffers and inspectors only the factories where the highest standards are met, while other factories are kept off the record.)

As PRL moves into the Southeast Asian market, one would hope that they can regain more control over their manufacturing efforts in the region. While PRL has made many cutting-edge advances in marketing and communications, and seems to have an endless supply of ideas for lines that satisfy consumer demand, they will need to pay more attention to the idea of “ethical fashion,” which is becoming increasingly important to consumers worldwide.

Sustainability

In 2007, PRL retained the services of GreenOrder, a strategy and management consulting firm specialized in sustainable business. They worked with the company to identify PRL’s environmental impact throughout the product cycle, to identity and prioritize opportunities for improvement, and to outline steps for achieving new sustainable business goals.

As a result of the process, PRL has developed new shipping practices that cut greenhouse gas emissions. They have also started to focus on green development for new stores and offices, and have implemented internal practices to reduce papaer and energy consumption.

The Founders Dilemma (Solved)

Because most fashion companies are branded around the personality of the designer – from Tom Ford to Yves Saint Laurent – there is often a huge challenge presented when the founding designer retires or, as was the recent case with Gianfranco Ferre, dies. In the past, companies like Dior brought on outrageous celebrity-status designers to bring new energy and media exposure to their brands after the loss of the namesake designer.

More recently, this practice is changing because people care less about a wild designer than a continued aesthetic and symbolic value presented by a brand. However, finding a head designer that can perfectly transition the values of the namesake into a new generation is quite a difficult thing.

This is not the case with PRL. David Lauren, Ralph’s oldest son, has been an integral part of his father’s business. Today, David is in charge of Polo Ralph Lauren’s marketing, advertising and corporate communications and the driving force behind the company’s new look (that’s Senior Vice President, at only 37 years old). He has brought polo.com to the forefront of digital fashion initiatives, and is highly invested in the success of the company.

David Lauren has unique experience that would make him a great fit (from an outsider’s view, anyway) as successor to his father’s position. First of all, he has grown up within the Ralph Lauren lifestyle, and from an early age experienced the American rituals that his father only dreamed of as a child. He understands the business as well as anyone could because he grew up with it.

While in college at Duke, David founded a magazine called Swing, which had broad readership among its targeted 20-something market, but folded after 5 years. David then joined his father’s company, and was the force behind the Rugby line as well as polo.com. He has shown that he can connect with the younger markets, a mission that often alluded his father.

Since PRL is now a public company, issues of succession are not controlled by Ralph Lauren alone. However, David has proven himself a likely candidate when a time for transition emerges.

Sources

investor.ralphlauren.com, polo.com, wwd.com, fundinguniverse.com, askmen.com, infomat.com, architecturaldigest.com, time.com, nytimes.com, harbus.org

Roots in Sportswear

Claire McCardell was probably the most influential American designer to be associated with New York design through her simple collections of sportswear, adhering to a basic and unchanging set of stylistic and practical criteria. Beginning her collections in 1940 to her death in 1958, her designs stood as the antithesis to the Parisian New Look.

Other prominent sportswear designers to emerge around or after WW2 included Charles James (who was commercially unsuccessful in ready-to-wear, and later returned to couture), Mainbocher (who relocated from Paris to NY with a clean aesthetic style), and later Bill Blass, Betsey Johnson and Scaasi (a native Canadian who drew great inspiration from the NY lifestyle and culture).

While the Parisian couture movement after the war was aimed at recreating a national high art, NY couturiers were much more open and exposed to influences in commerce and pop culture. Many creative forms were evolving through the work of Pollock, Rothko, Warhol, Oldenburg and others, and American fashion designers’ receptiveness to these creative changes sustained their relevance. Furthermore, the ethnic/cultural melting pot of NYC called for a basic aesthetic that would suite everyone, leading to the American style of simplicity through clean lines, colors and patterns.

Casual, easy-to-wear (and maintain) items originally developed by McCardell paved the way for subsequent designers to rework the new classics, based on the cultural movements of the day. Think: Halston, Geoffrey Beene, Perry Ellis, and later Calvin KleinDonna Karan. and

Brands & American Culture

Basics = Glamor

American brands grew famous not only through ease-of-use, but by applying glamor to the basics. Calvin Klein was really the first to bring this strategy onto the international stage with cK Jeans.

Sex Sports Sells

American brands maintained a wholesome edge by applying sport motifs to marketing campaigns. Ralph Lauren is really the champion here (ha, champion), naming lines in his arsenal after waspy sports (polo, rugby, etc.).

No Logo???

American companies were first to mark-up and sell basics by brand name. While this began in the US, it is now a global trend. I’m looking at you, GAP.

The Challenge of Democratic Fashion

American designers have a tradition of taking inspiration from the streets and pop culture. A brand image based on a lifestyle within pop culture makes US brands highly appealing in the mass market, and allows for an easy shift from product specialization (dresses) through licensing of additional products (underwear, sunglasses, perfume) to a total-living product range (clothes, accessories, furniture, house paint). However, it also presents some limitations outside of the US market, namely in Europe.

There exists a problem of perception of US brands, making it difficult for them to gain market share in Europe.

If a consumer thinks a country’s production system is geared towards the mass market, she will have problems associating that country’s products with high-end, exclusive quality. This perception is furthered when a brand enters a foreign market at the lowest price point.

Most high-end designers enter the market at the top level, and then trickle-down into the mass market. (Even Armani, who just added a couture line in 2006, began in high-end ready-to-wear.)

cK and some other US brands have entered the EU market at the most accessible lower levels (underwear), and then have problems moving into the upper end. Once you position yourself at the bottom of the market, it is very difficult to move up against market perception. It would be similar to the GAP opening a couture line in the eyes of the European market.

Change is Gonna Come

Against this perception is the current economic crisis, which is leveling the playing field in production quality as European brands are increasingly forced to outsource into developing countries, making the “Made in the USA” mark gain relative global superiority. Also, younger American designers are becoming increasingly coveted around the world (Marc Jacobs, Vera Wang, Thakoon, Philip Lim, Jason Wu, etc) by demonstrating modern global aesthetic relevance in combination with the US style that is down-to-earth and easy.

As the classic European brands look to shake the dust off by employing entertaining head-designers and pumping millions into blowout marketing campaigns, the American brands maintain relevancy by willingly passing the generational torch to young designers (bringing youthful vigor to the whole industry); paying attention to and anticipating market shifts; and by sticking to the tradition of ease and multi-cultural simplicity.

To that, I would reply, “Me!”

Sadly, today’s WWD article is not referring to yours truly, but to the latest Topshop marketing campaign, which is so exciting and thoroughly integrated that I couldn’t NOT write something about it.

For one week starting tomorrow, New Yorkers can borrow one of 30 Topshop bicycles (for free) and cruise around the city to prescribed destinations. There will even be a bike valet outside the store to take care of customers’ own bikes as they shop.Topshop has been building up to this event for a couple of weeks, event featuring a style section on their website for “how to cycle in style.”

Everyone who borrows a bike will receive a fashion map which will take them round a choice of three separate routes via Topshop’s favorite New York haunts. The route will include snacks at Tea & Sympathy, a visit to DIY- clothing emporium Home Ec from the owners of boutique clothing shop ‘Flirt‘, and a trip to Pixie Market to browse the up-and-coming designer offerings. According to the press release, the map will also include a few hidden gems.

Now, lending out bicycles for a sort of indie fashion city-tour is a cool idea, but here’s what turns the PR event into a lasting marketing scheme: the shoppers and cyclists will be shooting pictures of each other, or will have their pics taken by a nightlife photographer (Nicky Digital) in the store. The goal is to have everyone create their own content to be posted on social networking sites Chictopia.com (an online community for fashion peeps), Flickr, and Topshop’s Facebook page. They’ll be encouraged to do this through an online competition, the winners of which will receive a bike of their own.

Followers of Topshop’s Twitter feed will get clues to a scavenger hunt inside the store, where hidden tickets will admit finders to a screening of Michelangelo Antonioni’s “Blow-Up” on June 26 at The Yard in Brooklyn, an outdoor party space that is also on the Topshop map.

This is also a pretty good way to encourage people to build a community around the brand, first by introducing people through a fun social activity, then by recording their interactions and activities, and creating continuity of the new community online through content and tagging… and with a follow-up event!

While the green movement is certainly at play somewhere in the growth of bike popularity, I think another implied message here has something to do with the Sartorialist craze. Scott Schuman resides in New York, and is a big fan of shooting chick-on-a-bike shots, which his followers go wild for. Of course, most of the shots ares somewhere between fashion-forward and downright classy, and this is a good way for the Topshop brand to say, “Here you go ladies… go out and find the Sartorialist.”

It also serves to introduce the Topshop brand to New York (as if that were necessary) by featuring brand “complimentors” on the fashion map. By featuring cute little indie boutiques, cafes, and young designers, Topshop is implying that this is a community to which they belong. Whether we could actually consider the multi-national Topshop chain to be a part of this community in reality is debatable at best, but their core customers certainly affiliate with it.

Throughout the past few years, many luxury companies have followed the model of growth that includes frantic brand-buying sprees and diversification into complementary categories such as interior design and technology.

Based on the conversation among industry leaders that just closed in Monte Carlo at the Financial Times’ Business of Luxury Summit, that very trend is what will be avoided in the future, as luxury companies seek to preserve an image of quality in the eye of the consumer.

The Honeymoon is Over

During the boom years, many luxury companies ventured into secondary product and service endeavors spanning the range from cell phones to hotels, under the strategic principles that 1) these outshoots serve to further their brand image, 2) their reputation of quality could transcend from the product category they had built a name upon, and 3) that “everyone else was doing it” – they didn’t want to be left out of the game.

Pushing the Brand Image

The idea that these complementary product categories could further the brand image began from the right perspective. After all, what better way to promote a fashion label’s home collection than to furnish an entire hotel under the brand name? When coupled with the managerial expertise of EMAAR Hotels & Resorts, the Armani brand has done just that. However, the brand image of Armani was established in sartorial minimalism and modernity, and while that can be reflected in some ways through the environmental design of a hotel, to convey the brand experience through hospitality is another matter. With tourism lagging in the economic crisis, it is doubtful that Mr. Armani wants the concept of minimalism conveyed through empty hotels.

The real problem emerges when the brand image is exposed to elements outside of the company’s core capabilities. Just as in licensing out fashion products for manufacture or sales to external parties, final control over the product and customer experience is lost. This poses a significant risk.

Transcending Quality

While the concept of co-branding is a nice way to give more consumers access to a brand they love, the benefits are often shortsighted. While the Total-Look trend died in developed markets in the 80s, co-branding projects served as a way to reignite the flame. Fashion companies went beyond the traditional accessories categories typically reserved for leather goods (shoes, bags, belts, etc) and began to venture into tech projects. Although this allowed several die-hard brand enthusiasts to more adequately encompass their life in a brand of choice, it also allowed some brand outsiders to have a “piece of the brand image” without the purchase of more traditional items.

I have several points on this: for the fashion-cell phone explosion, brands from Prada to Dolce & Gabbana and Armani have played the game, coupling brand imaging in aesthetics with the technological capabilities of LG, Motorola or Samsung, respectively. However, the development process for the Prada cell phone was tedious and expansive, and Prada had to sacrifice some brand imaging points while LG had to sacrifice some cutting-edge technologies to bring the project to fruition. An equal compromise in aesthetic and technological appeal serves neither the fashion brand nor the technology company. The expertise of neither brand could be fully conveyed in the project, driving the perception of quality down. This is what happens when you venture too far from your core capabilities, without enough understanding of the new category.

On the other hand, Hermes worked on a limited-edition co-branding project with Bugatti to create the Bugatti Veyron Fbg par Hermes. While Bugatti pumped this high-performance dream car full of the best automotive technology on offer, Hermes stuck to their core capabilities in leather goods and sartorial excellence to outfit the vehicle in the finest interior upholstery and complementary accessories. The resulting product is a $1.5 million car that definitely will not be driven by every brand enthusiast, but it certainly represented the best of both brands! Furthermore, the project achieved greater market exposure for Hermes and Bugatti through a lot of positive press coverage in both the luxury, fashion, automotive and leisure categories.

Playing the Game

For years, the idea that luxury was an easy business to make money from prevailed. Companies entered the sector and shortened product cycles, product categories offered, store locations, and so on in an effort to milk the market for all it was worth. According to Bernard Arnault, “Some investors pushed by the frenzy of doing something were going to invest in almost everything. As luxury was perceived as an industry where you can make money easily, they were pushed to buy brands without knowing how to make them work.”

As consumers were hungry for “more, more, more,” the luxury companies were all too happy to provide it, with little consideration for consequences beyond the immediate bottom line. Referring back to brand diversification, CEO and founder of Tod’s Spa Diego Della Valle noted, “Several times I had to fight for our vision against external pressures, which were demanding we did perfumes, or mobile phones. My answer was that it wasn’t our competency. If I want a mobile phone, I want to buy it from Nokia.”

With market pressures mounting, brands began to churn out an ever-increasing supply of product collections. The highest brands of luxury in fashion found themselves competing on the same playing field of “fast-fashion” powerhouses such as H&M and Zara. You might be thinking, “How did this NOT seem like a problem?!” However, as long as the money was rolling in, shareholders were happy and companies felt little incentive to buck the trend in strategy.

The problem really emerged when the frantic consumer spending cycles ground to a halt after years of proliferation, luxury labels slashed their prices, and core customers were left wondering what they were paying for in the first place.

Saving the Marriage

Just like any relationship on the rocks, luxury companies and their customers have to go back to their core values to re-build the bond that has been broken by years of inconsistency.

At the end of the day, a luxury company should represent solid quality and categorical leadership. The key words here are quality and leadership. When luxury brands diverge from their core capabilities where they exhibit the highest level of expertise, it is a letdown to all brand loyalists. When they chase the market instead of leading it, they let the brand down.

Many of the CEOs speaking at the Financial Times’ Business of Luxury Summit confirmed this attitude, including Berndt Hauptkorn, CEO if the privately held group Labelux. “During this period of growth, there were concepts that were superficial, that didn’t deliver in terms of product quality,” Hauptkorn said, arguing these brands won’t survive the economic downturn unscathed. “There will be a shakeout because there was overcapacity in the market. It will be a market with stronger brands and with a clearer message.”

Preserving Quality

The industry has begun to realize that once the economy recovers, customers will place a particular emphasis on values like quality and craftsmanship, but also exclusivity, as well as commitment to social and environmental responsibility. Companies that have remained true to their capabilities and core message throughout the boom years have seen less damage and a faster rebound than others in the recession.

In an effort to protect the intrinsic value of luxury brands, companies and production regions are going back to their most valued resources in production to strengthen intrinsic values in quality. According to Imran Amed, editor of Luxury Society, “In the end, it is the enduring quality and craftsmanship that count the most because this goes right to the heart of the way luxury products are conceived and created. Combined with great design, service and innovation, craftsmanship is what enables us to deliver lasting products that resonate with a new consumer mindset fixated on value.”

While most luxury brands have cut back on retail space, collection sizes, and various departmental employees, for the luxury-savvy brands a focus remains on preserving the original craft of the brand. This includes the protection of craftsmen and artisans that produce their high-quality products, in addition to sustainable practices both environmental and strategic.

Having been through several recessions since he began creating the world’s largest luxury group in 1985, Arnault stated that his key to success includes a solid long-term outlook: a generational business concept, not a 3-5 year plan. This allows a company to move forward with the big picture, and reduces the impulse to act on short-term trends in the market. “It is a natural tendency of companies during a crisis such as the one we are in to cut costs, drop prices, and stop expanding, because it has the most immediate impact on numbers,” he says. “But what we have learned in the many crises we have been through is that this is a mistake, especially when it comes to luxury.”

Mr. Arnault also believes the government investment, reactive companies and a refusal to change course in spite of the current market crisis will help companies and production regions to preserve their capabilities. However, while some long-term-minded companies such as Chanel, Bulgari and Hermès have taken affirmative steps to preserve the dwindling numbers of craftsmen that produce their goods, other companies have stood by while production has been outsourced to unskilled worker regions abroad in the effort to feed the speeding consumer cycles of the boom years. While this labor pool of skilled workers is all but lost in the UK, there are efforts to retain and nurture growth there as well as in France and Italy.

Follow the Leader

In addition to increasing fashion cycles to pander to the whims of a fast-fashion-oriented market, luxury companies have been tailoring their products and marketing campaigns to lure existing customers.

The very history of luxury illustrates the point that luxury brands and designers provide items for the customer, which are so exciting the customer hadn’t even thought of them. This is what originally made customers line up at the doors of the original artisans and designers- to see something new.

The recent years of endless market research, managerial consensus and client-centric focus on demand has diluted the interesting aspects of luxury. According to Jean-Noel Kapferer and Vincent Bastien, authors of Luxury Strategy – Break the Rules of Marketing to Build Luxury Brands,  “Luxury brands today are the trailblazers of tomorrow’s taste. Once a consumer segment is identified it is too late to exploit it. …There is no surprise in existing demand. This is why all classic luxury… was created through emotional intuition.”

They go on to say, “As a cultural creator, luxury brands should set their own high standards. Listening to the consumer is the best route to a lack of differentiation, and failure to inspire the dream – the two levers of desire that are the only paths out of the recession in the luxury world.”

While that does not mean companies should ignore the customer altogether (of course not), it does basically state the obvious that luxury players must be leaders in quality and innovation at all times, without submitting to frivolous market demands that might inflate the bottom line temporarily, but in the long run will break the bank and eventually the brand.

However, it should also go without saying that in order to be a leader, luxury brands must appeal to new consumers in Gen X & Y as Baby Boomers retire. In order to do that, they must earn their trust through demonstrated quality, sustainability and a legitimate brand story.  And where will the new market hear that story? Online.

More Info

Financial Times’ Business of Luxury Report 2009

http://www.ft.com/reports/business-luxury-2009

Luxury Society Issue 5: Return to the Craft

http://beta.luxurysociety.com/articles/a-return-to-craft

Luxury Execs Emphasize Exclusivity and New Focus

Luxury Execs Emphasize Exclusivity and New Focus – WWD.com

Shared via AddThis

Menswear

The American clothing industry was born in the early 1800s for menswear. Up until this point, menswear was produced by tailors, for those whom could afford it, or at home as womenswear would continue to be produced for at least another half-century.

Around this time, tailoring businesses in the Northeast (NYC, Boston and Philly) began to produce and sell inexpensive ready-to-wear clothing to sailors on leave. These clothes were called slops, and were indicative of poverty or bad taste to the rest of society, but they provided a starting point from which the ready-to-wear market grew. The industry would further expand through the production of service and army uniforms.

In the early 1850s, a mass market of middle-class consumers emerged with industrialization. Brooks Brothers was among the first companies to serve this market, having begun in 1818 as a tailor-shop and growing to 75 tailors and 1,500 manufacturing employees by 1857.

The mid-19th century “gold rush” had an even greater effect on the US fashion system. Mr. Levi-Strauss realized that the gold prospectors would need tents, and ordered a special resilient fabric from France to serve this market demand. The fabric was called serge de Nîmes (serge, from the French city Nîmes), which we now know as denim. In addition to using this fabric for tents, Levi-Strauss recognized that it could easily be transformed into utilitarian work trousers. American jeans were thereby born, and the development of the US fashion manufacturing system was well underway.

Alongside the invention of the sewing machine for industrial use by Isaac Singer, the US manufacturing industry was fully supplied with a growing immigrant labor force. However, the real key to success in this mixture was the alignment of distribution with production. Department stores and specialty stores began to focus more retail space and marketing efforts towards clothing. This alignment allowed the US fashion industry to move beyond workwear and menswear through superior production methods integrated with distribution, and a strong market orientation.

Even today, the US model for the fashion business is centered around vertical chains (meaning that they produce what they sell, like the GAP), department stores (although they are growing weak in the current economy), and a continued solid market orientation.

Womenswear

Many early-American women made their own clothes at home or locally, as thrift was a strong post-colonial value along with the patriotic challenge to the dominance of English/European taste. However, in the time of prosperity following the Civil War there was borne an interest in Parisian couture, and many American-made items were viewed as unsophisticated. While some could afford imports from France, most were American copies inspired by French fashion, yet they carried French labels to reassure their clientele (much like Italian labels are often used in the Chinese market today for Chinese-produced goods). The shadowing of Parisian style would continue well into the 1900s, the market demand of which fueled the growth of the American fashion industry.

In the late 19th century, the concentration of transportation systems, manufacturing facilities, immigrant workers and skilled tailors in New York allowed for the rapid development of a concentrated fashion production region. In fact, New York had already become the capitol of ready-to-wear production by 1900, but by 1925, 78% of the fashion produced in Manhattan was in womenswear! The isolation of Europe from the United States during WW1 allowed for the American style to flourish. By the interwar years, the increasing trade of US ready-to-wear and growing consumer confidence in the “correctness” of the American way of life worked to solidify confidence in the American style.

WW2 went further to isolate the Parisian fashion capitol from the rest of the world, accelerating the idea of American sportswear and encouraging the isolationist attitude of the fashionable American woman, who increasingly viewed European fashion with suspicion rather than envy. By the mid-20th century, New York had become the fashion focus of the American woman, and the starkly functional and smart product style would remain the legacy of US fashion.

New York: Fashion Capitol, USA

The story of the development of  NYC into one of the world’s leading fashion producers is pretty long and complex, so I’ve taken another tip from Dan Roam and sketched it out for the sake of brevity!

Paving the way for a NY Fashion District: pre-existing commercial and manufacturing facilities, along with fashionable aspirations and a less conservative attitude than other US cities.

Growing the NY ready-to-wear industry: huge immigrant labor pool & commercial demand

Regional growth & womenswear localization: centralizing women’s fashion, outsourcing other production to suburbs

Challenging the leader: a second production region emerges around Hollywood, fueled by the film industry and a new wave of Eastern immigrants

Challenging domestic production: companies begin widespread outsourcing of production to Taiwan and the Pacific

Why New York?

In spite of the 200+ years of clothing production evolution in the US, and several challenges posed by outsourcing for cheaper labor supplies, New York has remained the fashion capitol. How did it come to assume this position? Much like the fashion regions that would later develop around production in Italy, within New York an entire community of design, production, distribution, commerce and marketing existed (and much of it exists today). There are several groups that contributed to this phenomenon, among them:

While the sweatshops have luckily vanished from New York, they still remain the curse of the ready-to-wear industry, having simply been moved to developing countries. In fact, the compact total-system for fashion that is found in New York has led to the global trend in “fast fashion,” which demands cheap labor for rapid production and affordable prices. Put simply:

However, as “fast fashion” begins to slow down after years of increasing velocity (because, frankly, we are all getting sick of having our clothing be made obsolete as soon as we bring it home- where’s the real value?), consumers are seeking more ethical alternatives to sweatshop-produced goods.

As New York has been at the heart of this movement and has led the way in both fashion marketing and production systems (whether domestic or outsourced), it seems likely that the movement towards ethical fashion will be centered from the market-driven capitol of NYC.

American Fashion Values

These same “values” and themes remain common to the American fashion system:

• Comfortability/Casual
• Sportswear & Jeans
• Practicality/Utility
• Sophisticated-Preppy
• Value for Money
• Clean Lines/Ethnically Neutral
• Apply Glamor to Basics
• Use Sport Motifs for Marketing

UPDATE!

Here is an incredible multimedia glimpse at the history of 20th Century American Fashion History from FIT.

Sources include: personal notes, Fashion, by Christopher Breward & Strategic Management in the Fashion Companies, by S. Saviolo & S. Testa

Fashion Cycles

Fashion cycles can be long (for classics) or quite short (for fads). Most items that are introduced into the fashion world barely register as a blip. If an “opinion leader” picks up the look and it gains a steady following, a trend is born. It becomes a classic if it sticks around for a while without losing followers. If it never gains substantial momentum, we see a fad. (Yes, that is my Anna Wintour stick figure for the Opinion Leader.)

Fashion Diffusion

Throughout the history of fashion, different Opinion Leaders have prevailed and the means of transmitting popular trends throughout culture have shifted accordingly.

Those trends that do register now have more followers worldwide than ever before, and that is due to the system of fashion diffusion. This mass following makes it difficult for the fashion system to keep up, when it has to both churn out new looks every 4-6 months and produce enough items to supply a global market.

The every-increasing speed of fashion diffusion has led some to question the future of the industry, and to question whether or not high-end fashion can be considered a part of the luxury industry today (as luxury is typically defined as something unique).

It has reached a period where fashion moves so fast that it is detrimental to the fashion business – people not buying because they know in five minutes they’re not going to like it any more, because it won’t be new… It’s too fast. Either it’ll keep on getting faster, or we’ll get fed up and stop buying. ~ Tom Ford in Pop Magazine, SS 2002

What Now?

We have to up our game and evolve the fashion business model again. New systems of diffusion have been transforming the fashion industry since its birth, and the digital revolution is no different.

I think this is actually a great opportunity to bring fashion back into an art form by using digital communications to bridge the gap that now exists between the designer and the consumer and by using the medium to demonstrate the more creative processes of the design houses, which are limited on the sales floor by mass market constraints. We’ve got a long way to go…