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Question about ralph lauren lines

Discussion in 'Classic Menswear' started by JFK, Jul 26, 2004.

  1. BGW

    BGW Well-Known Member

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    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.
     
  2. imageWIS

    imageWIS Well-Known Member

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    I would argue that RL is a model, a model businessman [​IMG] (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.
     
  3. HRHAndrew

    HRHAndrew Well-Known Member

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    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.
     
  4. shoefan

    shoefan Well-Known Member

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    Why do wholesalers exist though they make no products of their own? Â 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. Â 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. Â 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.
    Â 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. Â Your beliefs are clear, but opinions are not facts. Â 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. Â 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.
     
  5. esquire.

    esquire. Well-Known Member

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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.
     
  6. kalra2411

    kalra2411 Well-Known Member

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    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.
     
  7. jcusey

    jcusey Well-Known Member

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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.
     
  8. Mike C.

    Mike C. Well-Known Member

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    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.
     
  9. shoefan

    shoefan Well-Known Member

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    Exactly. It took you 3 sentences to say what I spent probably 100 sentences on.
     
  10. imageWIS

    imageWIS Well-Known Member

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    "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.
     
  11. kalra2411

    kalra2411 Well-Known Member

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    Ever heard of Ispat? I understand what you are saying, but you are not reading what I have said, as I have addressed the issue of which you speak, again your are not being specific to the comapny, you are trying to use bookish theories.
     
  12. imageWIS

    imageWIS Well-Known Member

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    (esquire. @ 28 July 2004, 3:37) 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.
    Yes, the overtly (ludicrously?) expensive stores that are located in areas of immense property values may be only show pieces that help sell the brand and do not create any profits for the company (hopefully they break even)...but how many of those are there? Off the top of my head in the US, the stores that probably do not generate a profit are: 1)\tNYC: Madison Ave 2)\tChicago: N. Michigan Ave 3)\tPalm Beach: Worth Ave 4)\tBeverly Hills: Rodeo Dr 5)\tBoston: Newbury St (very nice store btw...ok, all the stores are nice) Ok, so that's 5 RL stores that probably do not generate a profit out of 55 retail RL stores and 118 Polo outlet stores. Obviously the company generates net sales of $1,170 million from these stores (plus the 61 Club Monaco retail, 7 Club Monaco outlets, and 22 Polo Jeans outlets). Jon.
     
  13. kalra2411

    kalra2411 Well-Known Member

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    Come to think of it Jcusey, I was not that clear in my first post, and I am sorry, basically what I am saying is;

    1. Nobody would knowingly want to make a loss.

    2. However, I am sure that Ralph Lauren realise that Purple Label may not be where the money is. (note; may as I do not know thae specifics of RL; and nor do any of you, to what I can perceive.)
     
  14. kalra2411

    kalra2411 Well-Known Member

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    (Mike C. @ 28 July 2004, 7:49)
    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.
    Yes, the overtly (ludicrously?) expensive stores that are located in areas of immense property values may be only show pieces that help sell the brand and do not create any profits for the company (hopefully they break even)...but how many of those are there? Off the top of my head in the US, the stores that probably do not generate a profit are: 1)\tNYC: Madison Ave 2)\tChicago: N. Michigan Ave 3)\tPalm Beach: Worth Ave 4)\tBeverly Hills: Rodeo Dr 5)\tBoston: Newbury St (very nice store btw...ok, all the stores are nice) Ok, so that's 5 RL stores that probably do not generate a profit out of 55 retail RL stores and 118 Polo outlet stores. Obviously the company generates net sales of $1,170 million from these stores (plus the 61 Club Monaco retail, 7 Club Monaco outlets, and 22 Polo Jeans outlets). Jon.
    Jon, how come you seem to have very good buisness sense here, but on the NM card thread you were talking nonsense.
     
  15. jcusey

    jcusey Well-Known Member

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    Ah, yes, I failed to realize that you were talking in specific real-world examples.
     
  16. imageWIS

    imageWIS Well-Known Member

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    kalra, I already posted this: Link Jon.
     
  17. imageWIS

    imageWIS Well-Known Member

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    (kalra2411 @ 28 July 2004, 7:33) Ever heard of Ispat? I understand what you are saying, but you are not reading what I have said, as I have addressed the issue of which you speak, again your are not being specific to the comapny, you are trying to use bookish theories.
    Ah, yes, I failed to realize that you were talking in specific real-world examples.
    I hope that my Internet writing ignorance does not show, but was that meant as sarcastic post or should I have taken it at face value? Jon.
     
  18. jcusey

    jcusey Well-Known Member

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    Face value? [​IMG] No, of course not.
     
  19. retronotmetro

    retronotmetro Well-Known Member

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    Without knowing either the exact revenue generated by sales of the RLPL product line OR the cost structure behind it, arguing about its profitability or lack thereof may be fun, but it is complete speculation. I would guess that on such a small relative volume, it isn't a tremendous money loser unless their product managers are asleep at the forecasting switch.

    If it runs at a break-even, there's no reason to kill it regardless of whether it creates a promotional halo. RL himself obviously has fun with it, and if it isn't losing money and isn't tying up resources needed elsewhere, why would he stop doing it?

    If it runs at a modest loss, but achieves a promotional goal, there's again, probably no reason to kill it IF senior management views that loss as a promotional expense. Promotions always cost money--advertising dollars are what keep the media alive.
     
  20. imageWIS

    imageWIS Well-Known Member

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    (imageWIS @ 28 July 2004, 7:50) I hope that my Internet writing ignorance does not show, but was that meant as sarcastic post or should I have taken it at face value?
    Face value? [​IMG] No, of course not.
    Well, I had to be sure...I don't want any misunderstanding, that is how problems start. Discussions should be point/counterpoint, as long as the other person understands the point; if not the shit hits the fan faster than you can say "˜locked thread'. [​IMG] Jon.
     

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