Ralph Lauren combines 'drop' and digital to catch the streetwear Gen Z buyer

Profile picture for user slauchlan By Stuart Lauchlan February 5, 2019
Summary:
No mid-life crisis for Ralph Lauren as it leverages digital and social in pursuit of a 'streetwear' customer.
palacePolo
A 'street' bear - Palace and Polo

Last November, iconic US retailer Ralph Lauren teamed up with UK streetwear label Palace to produce a collaboration collection of clothing. There’s nothing particularly remarkable about that, but it’s how the resulting clothing got to market that matters.

Rather than putting the collection into all its stores, the outfits were sold only in a select few, but primarily via the Polo mobile app. The result? The Ralph Lauren website struggled under the weight of demand and, more importantly, a 50 year old fashion retailer tapped into a young demographic at a time when many of its counterparts are well into their mid-life crises.

For CEO Patrice Louvet, winning the attention of the Millennial and Gen Z audiences is validation of what he has dubbed the Next Great Chapter initiative, built heavily around digital, mobile and social platforms. The Palace tie-up is a perfect example of the kind of thinking in place, he says:

We approach the collaboration as an opportunity to reach new and younger consumers with a fresh take on product that still remain true to the DNA of the Polo brand. The collaboration generated over 2 billion impressions globally exceeding our expectations. The Palace collection sold out in under an hour online.

We were encouraged that roughly 75% of the people who purchased it globally were completely new to Ralph Lauren. The collaboration was particularly effective in engaging the Millennial and Gen Z consumers with those purchasing the collection, 10 years younger on average than the typical Polo men consumer.

It’s coming up to a year now since the ‘drop’ concept - put limited amounts of stock out via select channels and rely on scarcity to generate hype and demand - was first put into practice. As well as Palace, December saw the launch of the Winter Stadium collection, sold again via the Polo app and in a few flagship stores. Again it was a success, says Louvet:

Winter Stadium generated over 1 billion impressions globally and achieved nearly 100% sell through on our Polo app in the first day. In addition to attracting new consumers to our franchise, we're excited to see new fan base developing for our drops. Over half of the Winter Stadium shoppers were repeat customers who had already purchased from at least one of our limited editions previously.

It’s clear that the early successes mean that there will be more of this to come, although Louvet acknowledges that it’s a trick that needs to be managed carefully if it’s not to lose its essential novelty value:

We're very careful not to overdo it, because otherwise these things will run out of steam. We've been very intentional on how we play it. But if you look at the results we've got behind Palace, 75% of the consumers who bought Palace were new to the Ralph Lauren brand. On average consumers who bought Palace were 10 years younger than the average consumer for Ralph Lauren. We're also seeing that on Winter Stadium and others.

Social commerce

And of course, that’s the Holy Grail of most fashion houses in 2019, particularly one whose brand has been more preppy than ‘street’. In pursuit of that brand extension, there’s a focus on ‘youth channels to market’, primarily mobile apps and so-called social commerce. On mobile, Louvet says:

We launched our mobile app little less than two quarters ago. Half of the consumers coming through the app are actually Gen Z or Millennials. We are seeing very strong engagement rates. We are seeing fantastic sell-through of our special editions there…that’s an important asset that we have in our digital commerce toolbox that is just at the very early stages.

Social commerce is another area attracting investment. Again this isn’t a concept unique to Ralph Lauren - Debenhams CEO Sergio Bucher has been banging the drum for social shopping for some time. The difference is that Ralph Lauren appears to be executing on it more effectively. Louvet explains:

The ability to shop through WeChat, the ability to shop through Instagram and so on and so forth, which today is still relatively small if you look at total picture, but we expect that to accelerate significantly because the consumer benefit. The ease-of-use there is just very compelling for our consumer target.

The social commerce push is matched by an increase in marketing on social and digital platforms, with the intent of spending 5% of total sales - or around $300 million a year - to deliver results. Ralph Lauren today as 9.8 million followers on Instagram, but that’s a number that can grow significantly.

To help achieve this, Ralph Lauren has been collaborating with celebrities to attract attention. For those who follow the celebrity lifestyle press and saw pictures of the marriage of actress Priyanka Chopra to music superstar Nick Jonas in India in December, that was a Ralph Lauren-dressed wedding that went viral on social media around the world. Elsewhere there have been tie-ups with the likes of Nicole Kidman, Hugh Jackman, Alex Rodriguez, Chris Pine and Lady Gaga among others.

Louvet cites the example of the relaunch of the Romance fragrance and the use of model Taylor Hill as the face of the campaign, complete with her social media following of more then 12 million fans:

[She] really appeals to the younger population incredibly effectively. That’s just an illustration of how we're thinking about building this mosaic of influencers that can represent all the dimensions of the brand and also connect nicely in the local markets with the target audience that we're going after…About one third of the consumers who shop product highlighted in our holiday camping were new to Ralph Lauren and a meaningful portion of these new consumers were under the age of 35.

All told, if everything goes to plan, Ralph Lauren is looking to get its digital commerce contribution up to $0.5 billion by the end of the five year Next Great Chapter period. In its most recent quarter, digital revenue worldwide up was 20% year-on-year, 21% in the US. That’s ahead of plan, according to Louvet, helped by completion of a transition to a new web platform in the US and Europe:

This is really allowing us to provide better storytelling, better brand building, combined with better functionality and consumer experience and we seen that play out in the result. The second part is the consumer experience on our site. We know we have a lot of opportunity to strengthen it.

There's been good progress on functionality over the past quarter ranging from free shipping progress bar to monogramming services to a dedicated Polo shirt shopping experience. And then [we’ve rolled out] some of the technical elements of faster downloads of our pages, quicker delivery to consumers homes and so on. We're going to continue raise the bar on consumer experience and functionality.

My take

It’s good to be able to check in on what looks to be a successful omni-channel retail transformation story, a stark contrast to the woes of others such as H&M. In its most recent quarter, Ralph Lauren turned around a loss of $81.8 million last year into a profit of $120 million on revenues up 5.1% to $1.73 billion.

I confess I’m not a fan of Ralph Lauren’s clothing and I’m sadly well-beyond the new target demographic, but the execution on the Next Big Chapter is to be admired. I’ve accused other firms of making token catch-up moves around digital transformation, such as Debenhams dad dancingapproach. There’s always a risk around trying to ‘borrow’ a cool image by paying celebrities to be your chum, but in Ralph Lauren’s case, it looks to be working. The trick now is going to be sustaining its efforts and not overplaying its hand on the ‘drop’ strategy. One to keep an eye on in 2019.