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post #16 of 59
When RLPL first came out, Ralph was adamant on making the brand very discreet, and that it should be known by only those "˜in the know', mimicking the same advertising certain Savile Row and high-end Italian companies use: word-of-mouth and perhaps a small select advertisement in certain "˜affluent' magazines, periodicals, etc... As well, all of the RLPL items were devoid of anything remotely close to associating it with Polo or any other RL brand. This was a brand that was a separate entity and must stand on its own. From the beginning it was sold not only through its own stores but also through NM, Saks, Louis Boston (they have now dropped the brand), etc... Only now has RLPL started to carry the Polo Pony on its polo-shirts, and it is only an option, as RLPL polo-shirts are available without the pony as well, meanwhile every other RLPL item is devoid of exterior insignia or product branding (save for the hideously ugly purple slip-ons with the "˜RL' embroidering in gold trim, ewww). As to the point of generating profit, I would argue that my proof is in the fact that RLPL was made to exist all on its own, which ultimately means generating a profit for RL. I am still adamant that that the logic behind: "I for one am skeptical that they generate much profit from the Purple Label line, seeing how little of it they seem to sell, and how much of it seems to be sold at steep discounts at the end of the season. I could be wrong, but I would bet you alot of money that the Purple Label line is considerably less profitable than the regular Polo line (measured by profit as a % of revenues.)" Is not logical at all. The reason for this is that it is illogical for RL to waste all that time, money, and recourse on a brand that does not generate any profit for the company, especially as since you put it "how little of it they seem to sell", thus it is "seemingly" not well know, thus how could it help RL's imagine if RLPL is not a widely known brand? How could a brand that is know only by a select few truly drive the image of RL to greater profitability? Also, by having a "˜higher' line, you degrade Polo's inherit quality by making items inherently "˜inferior' to RLPL items, why would RL do this, rather than just drive Polo up market? As to RLPL being discounted at the end of season, ye forget that every other manufacture deeply discounts items at seasons end, including RL's other brands, like Polo. As an example, during the summer the Worth Ave. store discounted RLPL at 50% off, at the same time it discounted Polo at 50% off; a similarity forms. Jon.
post #17 of 59
Sorry, my business sense is egging on a reply. I am not sure how the addition or subtraction of RLPL would have any dramatic impact on profits at all. I know nothing about how they operate, but I am assuming that they drop ship purple label items. In essence, St. Andrews manufactures and ships Purple Label suits to retail outlets. They bill Ralph Lauren directly, and Raplh Lauren only places the order once they receive an initial order from a merchant. There would of course be a mark-up before RL even placed the order with their suppliers. With such limited quantities, I highly doubt that they carry any inventory so the only additional costs would be stand alone marketing as any other overheads would be consumed by the group. We know that stand alone marketing is rare, so I am not sure how RLPL would not show a profit on the books. Unless of course, there are significant managements charges from corporate to cover the above mentioned overheads. From a basic point, on the selling of clothes since I have to believe they only place order once they receive them from merchants. They must make money on the label. From an accounting stand point, I doubt the revenues are high enough to merit more than a couple line items in the financials.
post #18 of 59
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Also, by having a "˜higher' line, you degrade Polo's inherit quality by making items inherently "˜inferior' to RLPL items, why would RL do this, rather than just drive Polo up market?
Jon, I would think that if the company wants to sell higher end items at higher prices but retains a name that is saturated with disdain for making subpar quality items in third world countries (as RL does), it is in their best interest to make a new line that is marketed specifically towards affluent consumers. This, in turn, will generate the idea amongst the general consumer that the company is quite capable of delivering high end products, and I would imagine is the first step towards getting a "make over" so to speak for the main company line (Polo, as I see it). I don't doubt that the company makes their best efforts to gain profit on RLPL, but I do believe it was not the primary focus of creating the line. Think about it: if all of the sudden, the company began selling Polo clothing at hideously high prices (even if they were made in Italy with the finest fabrics), it would take several years for the consumer to accept this sudden shift, and would probably result in very low profit. My best take on it is not that Ralph Lauren created RLPL simply as a marketing scheme for the lower lines, but as a way to shift their company from lower to middle-end status to higher end status, without a period of slump during the transition.
post #19 of 59
Jon: I guess we'll have to agree to disagree.... Nevertheless, a few follow on comments. Given the brand is named Ralph Lauren Purple Label, how can you suggest that it has no association with the Ralph Lauren/Polo, RL, Lauren, etc. brands? If the company wanted the brand to stand entirely on its own, it could have developed an entirely new product line with no association with the Ralph Lauren name. (Of course, which direction the benefits from that association flow is the gist of this dialogue.) Further, the PL clothes seem to be evident in plenty of the Polo ads (e.g. the ones featuring Ralph wearing Savile Row influenced clothing), which is clearly (to me at least) an association of the PL line with the broader Ralph Lauren enterprise. Also, just because the line may not be widely known, that does not mean it is not influencing the desired/targeted audience's attitudes about the Polo products. Again, there are many instances of companies offering products that lose money in their own right but that benefit the overall brand; this may seem illogical to you, but it is not, if the follow-on benefits to the overall brand are sufficiently large. The most well known examples are in the auto business, where a low volume product may lose money but enhance the overall brand image (again, this is arguably what VW is doing with the Phaeton, which will never pay back its development costs, overhead, and manufacturing costs, but which may help drive the image, and hence the price, of the entire VW line. It has also been tried by Chevrolet - the SSR -, Ford - the new GT -, and pretty much all of the supporters of Formula 1). Your comment about markdowns doesn't address the important issue: what percent of Polo revenues are at full price vs. discount, and the same for PL. If, for example, 90% of Polo brand revenues were at full price and 10% at half off, whereas 100% of RLPL sales were at half off, which would be more profitable (or which one might be running at a loss)? Simply stating that both lines are marked down at the end of the season proves nothing. [To truly understand the profit we would also need to know the gross margin and cost structures of the two lines.] FWIW, I've worked as a consultant for over 50 Fortune 500 companies during the last 2 decades, and companies do all sort of things that are pretty stupid; don't ascribe entirely logical (never mind profit-maximizing) rationales to everything that companies do, particularly when those companies are controlled by a dominant personality. Companies do all sorts of things because of internal politics, ego gratification, and many other reasons. [By the way, your response implies that I said the PL brand is "seemingly" not well known. I stated no such thing; perhaps the reason that PL sells so little is not that it is not well known, but rather that it is so expensive (or overpriced?). Ferrari sells very few cars, but that doesn't mean they are not well known.] Andrew: I agree in part with your comments, but there are clearly going to be expenses associated only with the PL line, even in the absence of explicit advertising expenditures. It takes money to develop the products, to market (not advertise) them, and to support them internally. Look at the Licensing revenues that the company gets; you would think it would be 100% profit, since what costs are there? Yet, the company reports only about a 50% profit margin on these revenues; clearly, there are costs associated with supporting these (licensed) products. The same applies to the PL line. Of course, many of these costs will be difficult to attribute to specific product lines, and therefore will have to be allocated. Allocation of fixed costs is inherently arbitrary. Nevertheless, your (implicit) assertion that the PL line has no incremental costs to the company (aside from the product acquisition costs) is inconsistent with experiences of companies in the real world. The addition of new products always leads to higher costs. The business literature is full of analyses of company costs, using Activity Based Costing, which demonstrate that low volume product lines typically create costs far in excess of the assumed/allocated costs (which allocations are usually assigned based on volume, rather than actual work created). The costs of complexity created by product line proliferation are rarely correctly anticipated. I would agree that the PL line is likely, at the end of the day, to have little impact one way or the other on the company's profits. (BTW, I doubt the PL products are drop shipped by St Andrews; they most likely are imported and distributed by the RL Corporation.) Ultimately, a debate which is based on opinions, not facts, is one which will likely not reach a resolution. [I am reminded of an argument two of my friends once had about what would happen 6 months in the future -- they simply kept stating their predictions and rationales, back and forth, ad nauseum. How can you prove a prediction, until things actually come to pass? Without facts, there can be no proof, only opinions.]
post #20 of 59
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Also, by having a "˜higher' line, you degrade Polo's inherit quality by making items inherently "˜inferior' to RLPL items, why would RL do this, rather than just drive Polo up market?
Jon, I would think that if the company wants to sell higher end items at higher prices but retains a name that is saturated with disdain for making subpar quality items in third world countries (as RL does), it is in their best interest to make a new line that is marketed specifically towards affluent consumers. This, in turn, will generate the idea amongst the general consumer that the company is quite capable of delivering high end products, and I would imagine is the first step towards getting a "make over" so to speak for the main company line (Polo, as I see it). I don't doubt that the company makes their best efforts to gain profit on RLPL, but I do believe it was not the primary focus of creating the line. Think about it: if all of the sudden, the company began selling Polo clothing at hideously high prices (even if they were made in Italy with the finest fabrics), it would take several years for the consumer to accept this sudden shift, and would probably result in very low profit. My best take on it is not that Ralph Lauren created RLPL simply as a marketing scheme for the lower lines, but as a way to shift their company from lower to middle-end status to higher end status, without a period of slump during the transition.
But, RL has always been somewhat (or has been directly) high-end. Ever since RL clothed the cast of The Great Gatsby, the elegance and price of RL has been there. From mimicking T&A shirts and Chester Barrie suits and Edward Green shoes, to RL actually subcontracting from these companies to make his clothing for him, to the selling of a certain (WASP, for my vocabulary's current lack of a better word) fabled lifestyle which is bound to affluence, RL has always aimed towards the higher-end of the spectrum. During the 80's and before RLPL, RL Polo's were twice as much (more than twice?) in Europe than in America for the simple reason that they were marketed towards the higher spectrum of the market and for good reason, he wanted to establish Polo as a high-end line that could cater to the same people in Europe that purchased "˜established' European clothing brands. And this continues to this day, with the expansion of a brand new store on (New?) Bond St and the upcoming store in Milan. As I have noticed, RL has taken the Porsche approach by slightly modifying their product every year, but at the same time slightly raising their prices. The most dramatic increase in prices I can recall is this year with the aforementioned raise in the price of a standard Polo shirt from $52.50 to $65.00, without an increase in quality mind you. Of, course this is partially due to increasing competition (Lacoste comes to mind) and their wanting to compete at the same "˜price' level. Consumers seem to accept whatever is thrown at them; the recent ebay suit thread should be an indication of that. The average consumer would accept a price increase without giving it second thought. Polo has sold cashmere sweaters, cardigans, etc...fro many years at extremely high prices, that almost reach RLPL's, at the same time they are made in Italy and as far as I have been able to ascertain, the quality is right in line or a minute notch below RLPL (perhaps less handiwork?). Jon.
post #21 of 59
Really interesting argument over the role of the label. I happen to side with the majority on this one, RLPL is not designed to make a huge sum of money on its tailored goods. There simply isn't enough volume, and there isn't enough total revenue to make it worth the massive time investment by Ralph Lauren himself without a substantial halo effect. Image -- I really think your argument is faltering here. First, RLPL is a tailored goods line first and foremost. Peter Rizzo described tailored goods as the "backbone" of the line. The fact that they mark up some sweaters does not really have a huge bearing on the profitability of the line. Second, a tremendous benefit of RLPL has been to showcase the brand name. It allows RL to dress emmy award nominees and the like, which is great advertising. It allows beautiful clothes to be attached to the RL name. In a sense all other lines are diffusions of the Purple Label, because they benefit from the association. Third, RL Co. invests larger sums advertising RLPL than would be expected if it was purely a stand alone operation. RL does runway shows for the line and ran those relatively large ad campaigns featuring himself as a model. Fourth, recent evidence seems to point to using RLPL to sell the lower lines. RLPL was showcased in Milan as a spearhead for creating broader RL market penetration in Europe. When Randy Federgreen, RLPL VP was asked about the PL led Euro expansion he remarked ""We're bringing Ralph Lauren; we're bringing the best of America." This hardly seems like distancing the PL brand from the blue label and down. The Europe business model is freestanding stores, where all of the lines will be sold together. PL outfits in the windows can draw in a lot of business and add a sense of elegance to the brand. ("In Europe, it's all about our own freestanding stores," Lauren noted in the Daily News Record February 11, 2002 "We plan to open a lot more Polo, Ralph Lauren and home stores there."). Contrast this with the alternative department store model where high end luxury chains might carry only PL, and lower end stores only Blue Lapel and below. That would be more indicative of a desire to keep the PL brand name distinct.
post #22 of 59
I would argue that RL is a model, a model businessman (sorry, cheap shot). I never mentioned a "huge sum of money"; I only originally and continually stated that RL should focus on keeping RLPL profitable. Obviously RLPL will not generate the revenues Polo will, it would be foolish to believe otherwise. What I am trying to indicate is that having a unprofitable division at RLPL that will continue to exist, regardless of its unprofitably is illogical. That being said, I mention this as a direct statement of earnings made by the RLPL brand name, not by speculation as to the "˜halo effect' (substantial or otherwise) that the RLPL brand might have on other RL products and brand names. "First, RLPL is a tailored goods line first and foremost." Not as of late. Yes, RLPL's primary backbone was at one time sartorial items, but as of the past few seasons they have pushed more and more towards luxury sports (sorry "˜cruise') wear. Most RL stores that carry some RLPL items carry primarily sportswear; if the stores are large enough (Madison, Worth, Rodeo, etc...) they also carry the sartorial items. By Blue Label, you mean Polo or the new women's "˜Blue Label' line? Just trying to make sure we are on the right page. Jon.
post #23 of 59
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(BTW, I doubt the PL products are drop shipped by St Andrews; they most likely are imported and distributed by the RL Corporation.)
Admittingly I know nothing about how the clothing business works, but why would RL even entertain this idea? With such a limited distribution of product, and no in house production I can't see where it makes business sense. It would just be adding unneccessary overhead. I wouldn't run it that way if it was my business, and wouldn't invest in a company that did.
post #24 of 59
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Quote   (BTW, I doubt the PL products are drop shipped by St Andrews; they most likely are imported and distributed by the RL Corporation.)Quote Admittingly I know nothing about how the clothing business works, but why would RL even entertain this idea? With such a limited distribution of product, and no in house production I can't see where it makes business sense.  It would just be adding unneccessary overhead. I wouldn't run it that way if it was my business, and wouldn't invest in a company that did.
Why do wholesalers exist though they make no products of their own?   Because, in certain circumstances, the cost of shipping many small shipments from numerous different suppliers to large numbers of end customers is very inefficient, and can be done more efficiently by aggregating and then disaggregating at an intermediate location.  The question of distribution economics is a subject with alot of complexity. Relative to RLPL, there may be significant economies of scale in bringing in large shipments from the St Andrews (and other suppliers of PL items), then disaggregating/"breaking bulk" and reaggregating the products for shipment to the various retail outlets -- these shipments may well include Polo and other Lauren labels, as appropriate.  Note that there is the added complexity of customs, which might well be handled more economically for a few large shipments than for many small, "drop shipped" lots.
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What I am trying to indicate is that having a unprofitably division at RLPL that will continue to exist, regardless of its unprofitably is illogical. That being said, I mention this as a direct statement of earnings made by the RLPL brand name, not by speculation as to the "˜halo effect' (substantial or otherwise) that the RLPL brand might have on other RL products and brand names.
 But, you've in no way proved that RLPL is profitable, nor have you proved that RLPL is not designed for image enhancement, i.e. to increase a system-wide profits, rather than as a standalone profit maker.  Your beliefs are clear, but opinions are not facts.  It may not make sense to you that RLPL is designed to provide a halo for the rest of the Lauren products, but that doesn't mean it isn't a logical or legitimate rationale. I have, many times, heard companies assert that, though a product loses money, it has broader benefits in driving sales and profits of other products.  Whether these assertions are in fact correct, this doesn't change the fact that products or product lines do continue to exist even when they lose money. I do agree that in the long run, RLPL must be perceived by the company to increase profits (either directly or through its benefit to the other brands); if not, they will eventually kill it off -- unless it is the personal interest/pet project of Ralph, then all bets are off.
post #25 of 59
The flagship of RL in NYC is a example of something that loses money each month, but is kept afloat to provide a halo effect for the company. I don't know what the exact figures are, but they're not that signifigant to a company like RL.
post #26 of 59
I have not read properly beyond Jon's second post on the issue, as I have work to do, however, here is my view. My first and most important point is no company would ever do something to lose profit, even if in return they will receive repute. Profit is the most important factor. What the problem here is that everyone is trying to put forward a bookish theory to explain things (you must all be academics). You cannot do that - you need to take into account the specifics of that company, which would be impossible without a vast amount of research (or if someone here worked for Ralph Lauren). Moreover, nobody has yet to include useful specifics of Ralph Lauren, related to whether Purple Label is simply for repute, or to make money as well. One must think of the company's objectives, and what they are, obviously, for fashion companies it is hugely different to any other, in that often they WILL rely on other things to make the majority of profit. However, this is only the case for those, which have a runway in Milan or Paris, as the show will be the major profit source, and not selling merchandise - examples of this are Dior et cetera. Though it may well be argued, that Dior does sell a large amount of women's accessories, it is still the case that most money comes from the fashion show, and media. In the case of Ralph Lauren, whereby the collection display does not account for a majority of the profit made (source; Companies House data, United Kingdom for Ralph Lauren Worldwide - percent of revenue from display of collection and related media response 10%). Thus, objectives for Ralph Lauren will obviously be shareholder satisfaction, which is indeed profit and not repute. I would like to go further into the issue, however, I am wasting valuable working time.
post #27 of 59
Sigh. It is possible to maximize profit even while taking a loss on a particular product or product line. Ever hear of a loss leader? More than that, it's possible for management to think that they're maximizing profit while taking a loss on a particular product or product line.
post #28 of 59
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The flagship of RL in NYC is a example of something that loses money each month, but is kept afloat to provide a halo effect for the company. I don't know what the exact figures are, but they're not that signifigant to a company like RL.
Boutiques are notorious for loosing money, especially the ones on pricy real estate (Rodeo, 5th Ave, etc...). In this case though, it is obvious the more outrageous ones, such as the Rhinelander Mansion (RL flagship in NYC) and the SoHo Prada store, are more for marketing purposes and brand prestige.
post #29 of 59
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Sigh. It is possible to maximize profit even while taking a loss on a particular product or product line. Ever hear of a loss leader? More than that, it's possible for management to think that they're maximizing profit while taking a loss on a particular product or product line.
Exactly. It took you 3 sentences to say what I spent probably 100 sentences on.
post #30 of 59
"But, you've in no way proved that RLPL is profitable" Did I not say: "I hope that when RL aims RLPL toward something, it is profit, as RLPL has from a financial standpoint been less than viable, costing the company money rather than making it." ? I mentioned that it does not make sense as to direct profitability, I cannot speculate as to a greater "˜halo' effect, nor is the case that I cannot understand the "˜halo' effect, just that it is beyond my current writings which are directed at profits made only through the sale of RLPL items. And as Mike C. pointed out: "Look at any fashion house and see where the money is coming from, it's the fragrances and licenses." And then RLPL fragrances appeared on the market, and the only reason I can assume this is to profit from the RLPL brand name (directly)...or is the RLPL fragrance an attempted to make people purchase Polo fragrances? (Which, incidentally has been on the market for quite sometime and has been popular all on its own). Jon.
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