Ralph Lauren: American Classic

16 07 2009

Ralph Lauren w quote

Over more than 40 years, Ralph Lauren has pioneered the development of the Lifestyle Industry, from humble beginnings as a tie designer. Although the company has experienced financial ups and downs, acclaim and criticism alike, it remains 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 Lauren (Lifshitz) 1945Ralph 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 and money? It has to do with dreams.” -RL

lauren familyAfter 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.”   -RL

centre vs harvard yearbook photoRalph 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.

ralph lauren classicLauren’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.” -RL

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

Ralph Lauren 1960sLauren 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

Ralph Lauren 1978Lauren 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 ($350). While this initially eliminated 2/3 of the retailers carrying Polo, the retailers who remained developed a loyal working relationship with Lauren.

Ralph Lauren Western Collection 1978By 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

RL Luggage 1980Lauren 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.

ralph lauren home shop-in-shopThe 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.

Santa Fe Collection 1981(fall)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

RL Polo brand competitionDifficulties 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.

RL Polo Sport lineHowever, 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.

Ralph Lauren RestaurantAs 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 2007Ralph 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 followedRL Magazine screenshot 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.

RL Madison Ave touch-screen shopping windowThe 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.

Polo ad with QR codeIn 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

Ralph Lauren iconic shotAll 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.

Positioning of Ralph Lauren womens lines

Positioning of Ralph Lauren mens lines

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?

The Great GatsbyIn 1974 the name Ralph Lauren was Annie Hall 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.

1979 Ralph Lauren adsIn 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.”

1999(ralph)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.

RL NY Flagship interiorIn 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.

RL TV screenshotThe 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

Ralph Lauren logo

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

Lauren in TIME Magazine 2006While 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

RL Pink PonyPolo 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.

RL Star Spangled Banner InitiativeBeyond 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

Saipan workersIn 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 bureacratic 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

RL Polo eco-toteIn 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.

David LaurenThis 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

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Fashion History: The American System for Fashion

10 06 2009

Beginnings

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.

sailors' slopsAround 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.

strauss-levi-posterThe 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

postwar dollar princessMany 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.

nyc life 19th centuryIn 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!

late 19th century nyc

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.

1900 nyc

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

1920s nyc

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

1940s-50s production shift

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

1980s production shift

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:

nyc fashion system

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:

fast fashion created by the new york model

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





The History of Fashion Diffusion in Pictures

9 06 2009

In the spirit of Dan Roam’s book, The Back of the Napkin, which Guy Kawasaki and I have been tweeting about today, I decided to see if I could put into pictures what I’ve been describing in this blog. Turns out, it’s pretty fast and I had more fun with markers than I’ve had since I was little! So here’s my first attempt (thanks Dan and Guy!):

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 Cycles

Fashion Diffusion

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

History of Fashion Diffusion

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…





Dolce & Gabbana: The Business

8 06 2009

The Roots

1987_Scianna shot of Marpessa for DG

The Dolce & Gabbana style is inspired by Sicily, represented in a modern context with a hint of the past.

“We had a vision at the beginning, and we remain faithful to it. We believed in the strength of our message, even in periods when everything seemed to go against our beliefs. Our inspiration has always come from Italian culture and from Hollywood glamor. We also like playing with roles, with opposites, with masculine and feminine, black and white, sacred and profane.” ~Domenico Dolce & Stefano Gabbana (SDA Bocconi)

In addition to their own personal backgrounds, the design team developed their brand within a niche opened up by the social climate of the late 80s and early 90s.

The Social Roots of Dolce & Gabbana

Style Codes

Dolce & Gabbana's Hollywood Inspiration

Every brand has its own stylistic codes (or should)… they distinguish the collections from others, and make each item identifiable with the brand. The following are DG’s key codes:

dolcegabbana metal corset jessica stam

hyper-femininity • glamor • youth • zebra & cheetah prints • flowers • black & white • gold • rosaries • corsets & bras • fetish •Mediterranean • Baroque • Neo-Realism • Hollywood • embroidery • black lace • coppole hats • opposites (high-low fabric mixes, gender-bending, love & violence, sex & religion, see & don’t see, old world & modern, etc)

Merchandising is fundamental to DG. Every single item under the brand’s name reflects the brand codes and the influence of the main collection.

From Maison to Vertically Integrated Company

The History

  • dolce (right) & gabbana (left)Domenico Dolce was born in Palermo in 1958; Stefano Gabbana was born in Milan in 1962
  • 1985: the Dolce & Gabbana brand debuts with their first show through Milano Collezioni in the New Talents section (now operated through Camera Nazionale della Moda Italiana)
  • 1988: signs production agreement for ready-to-wear with the Dolce Saverio company, owned by Domenico Dolce’s family
  • 1990s: expansion through licensing
  • 1990: men’s collection is launched
  • 1994: a second line, D&G, is launched
  • 2000s: the company becomes vertically-integrated by acquiring their own production companies (including Dolce & Gabbana Industria in Legnano for clothes and Incisa Val D’Arno for shoes and leather accessories) and their own store network around the world through wholly-owned companies and subsidiaries
  • 2007: the company decides not to renew the license to produce the D&G line with Itierre, and has brings production in-house with the first line, Dolce & Gabbana. Remaining major licenses are with Procter & Gamble (fragrances), Luxottica (eyewear) and Binda (watches).

Growth Strategy

1987 – 1999: strong use of licensing to support brand growth

1999 – 2008: progressive in-house management of line extensions

Communications

dolce & gabbana delacroix-inspired ad, mixing sex & violence

The brand typically incorporates imagery from old Sicilian towns and street markets or images of dramatically staged human interaction, all with a mix of modernity and sensuality, and often provocation. The in-store environment supports the brand image through a mix of materials made to look both antique and modern-chic, romantic and sexy, with a strong element of Hollywood glamor.

dolce & gabbana 2009Dolce & Gabbana’s catwalk uses a stage set to reflect the theme of the clothes, and uses video feed, pictures, etc during the show to further convey the inspiration. This imagery is now being incorporated into the company’s media website in order to archive the collections and demonstrate the brand history and evolution. In fact, the company has put considerable effort into creating the brand environment online this year, both through the formulation of their online blogazine and e-commerce stores.

scarlett johansson for dolce & gabbana beautyCelebrity endorsement is important for the brand’s Hollywood appeal, through both public appearances and dedicated ad campaigns. In addition to young starlets, they use the best and most known photographers and models in their ads.

Gabbana partying

The two designers are also very social, and are often photographed mixing it up in some of Italy’s most glamorous night scenes. Not only does this allow for photo-ops in the world press, but it also serves to validify the brand, as if to say “We live the lifestyle that we are designing for.”

Ownership

The company is still fully owned by Domenico Dolce and Stefano Gabbana, much like Armani and his company. While this freedom from the demands of shareholders seeking quarterly profits allows the designers creative discretion, it also provides them with the luxury of being able to strategically plan for the future. Also like Armani, the company which grew through licensing agreements still earns approximately 35-40% of total annual brand revenues through licensing revenues, although many of the licensees have been internally acquired.

However, the challenge of full ownership is that the company accepts full risk in the case that problems emerge. This is a big risk to take, but in the case of Dolce & Gabbana, it seems to be paying off… literally!

By the way, TIME has a great article on the designers and their company. It’s a couple of years old, but still a good read. Check it out!





Armani: King of Italian Fashion

2 06 2009

Giorgio Armani and the business he developed provide the perfect example of the evolution of the Italian Fashion System from the perspective of the designer. He began as a pure designer, and then gradually acquired various production facilities into his company on his route to becoming a fashion and lifestyle powerhouse.

The Man

Giorgio ArmaniThe following is a general timeline of the designer’s life and business achievements through the end of the 20th Century:

1934: Armani is born in Piacenza, Italy, where he grows to study medicine

1957: Armani abandons his medical studies and begins work as a visual merchandiser and buyer for Italy’s leading department store, La Rinascente

1964: Armani begins working for Nino Cerutti, where he learns tailoring and materials in menswear

1970: Armani and Sergio Galeotti establish a freelance fashion design studio, doing contract design for various manufacturers including Gibo, Sicons, Boulevard and Montedoro. Armani learns what works and what doesn’t work for industrial production.

1974-5: The first Giorgio Armani menswear collection is produced under license from GFT, followed by his first womenswear collection. Jackets and evening dresses were an instant hit.

1975-82: Armani establishes vast line extensions, including Giorgio-Armani-Borgonuovo 21 (men’s and women’s); Giorgio Armani-Le Collezioni (men’s worldwide and women’s N. America); Mani (men’s N. America and women’s ROW); Armani Junior; Armani Underwear, Swimwear and Accessories; Emporio Armani; Armani Jeans; and, Armani Bridal Collection

1982 TIME cover1982: TIME Magazine dedicates a cover to Armani, who is the first designer to be featured on the cover since Christian Dior

1984: Armani ventures into brand extension through the launch of Armani Fragrance, the license of which is ongoing with L’Oreal

1987: Armani continues brand extension in Armani Eyewear through a licensing agreement with Luxottica, which was canceled 3 years ago and moved to competitor Safilo

1991: Armani offers further brand extension on the US market through the launch of Armani Exchange

1990-2000: Armani practices business consolidation and vertical integration by acquiring production facilities and direct retail ownership, and establishing additional Joint Ventures in production and distribution

2000: Armani launches his first online store, www.armaniexchange.com, on the US market, as well as his line extension into housewear with Armani Casa

2005: Among his numerous line extensions, Armani launches Armani Prive, his first haute couture collection. He provides live online streaming of the collection’s first runway show via MSN.com

2006: Armani gets ahead of the game in Corporate Social Responsibility by joining (RED), an organization committed to fighting AIDS in Africa

2007: Armani launches another online store – this time for the Emporio Armani line – on the US market, along with associated blogazine and soundtracks at www.styletraxx.com

2008: Armani launches one of the first online luxury stores for a singular brand on the European market with Emporio Armani

Armani’s Brand Signifiers

Roots

In the 1970s and 80s, as Armani’s sisters and female friends were heading into the business world, he noticed a common complaint that there was no practical business wardrobe available for women. Since Armani was coming from menswear and tailoring, he took the men’s jacket and deconstructed it from a rigid and straight form into a soft form, fitted for women. This seemingly gender-ambivalent form was exactly what professional women were looking for. Now with businesses in men’s and womenswear, Armani continued to develop his brand through product and line extension, always focusing on his brand codes and the roots of the brand for consistency.

Female Prototypes

Marlene DietrichArmani, like many designers (and marketers), had an image of the ideal customer whom would wear his clothing, and later buy his additional products. Actresses Marlene Dietrich, Lauren Bacall and Greta Garbo were referenced for their supreme confidence and understated beauty bursting with sexuality, in addition to more modern actresses such as Lauren Hutton, whom he dressed in American Gigalo, along with Richard Gere.

Of course, his ideal woman is also very tall and slim. Nothing typical there, right?

Home Town Colors

milan's galleriaLike Dolce & Gabbana to Sicily, Armani drew inspiration from the business center of Italy, the City of Milan. In addition to the classy dress code of the Milanese, Armani used a color pallet derived from the industrial, polluted, Gothic city.

He incorporated the drab colors of black, white, blue, grey and beige (and his favorite blend, dubbed “greige”) to create a distinct selection that would unify his various product categories and lines.

In later years, Armani would take more than influence from another adopted home: he used a chemical composition from the Obsidian native to the Italian island of Pantelleria, where he has long kept a vacation home, for his cosmetics line.

An Evolving “Core Business”

Brand Extension (Moving into other product categories- remember this began in France)

Over the decades, Armani has amassed capabilities for the design, production and retail arms of his company, allowing the core of his business to expand while maintaining control over the total brand image. Throughout the years, brand extension has grown the company as follows:

armani chocolate1975: Ready-to-wear (RTW)

1980s: RTW + Accessories

1990s: RTW + Accessories + Men’s Accessories + Home

2000s: RTW + Accessories + Men’s Accessories + Home + Home Expansion + Watches & Jewelry + Hospitality (Hotels & Resorts) +Restaurants + Nightclubs + Chocolates (!)….

Line Extension (Moving into other retail channels, target markets or price ranges; this began largely with Armani)

Armani has developed more than ten different lines under his brand. Some have been very successful (like Emporio Armani, which has the same target market as Dolce & Gabbana or Gucci), while others were less successful (Mani, which was a lower-priced line, now essentially replaced by Armani Exchange). Below you will find a graphic I made to illustrate the quality/style differences in the main Armani lines, based on a discussion I had with the marketing manager of Emporio Armani.

Armani brand architectureContesting the King

As Armani developed his brand structure, he continued to add only lower-level lines to his portfolio, with his original Giorgio Armani line (ready-to-wear) at the top. In order to avoid diluting the line too much with the constant reduction of quality, he finally added his haute couture line in 2005 as a balance.

While Armani is the uncontested master of Italian brand and line extension, and there is no question of brand uniformity, he has had a challenging time conveying the unique characteristics between his lines, particularly when dealing with certain product categories.

For example, would you know the difference between the two lines, based on these ads? For some, the distinctions are vague. (For others, not so much!)

ea shades

ga shades

In addition, Armani has had problems developing bags and shoes. He never quite nailed the category’s design, and didn’t find a good licensing partner to assist him. As he has acquired many other production capabilities and know-how from former licensees, this gap in ability presents a major set-back. In the future, with many high-end designers depending on accessories sales, Armani may suffer greatly.

Founder’s Dilemma

Additional problems Italy’s reigning King of Fashion is facing is known as the “Founder’s Dilemma” – how to hand down the brand after retirement, without losing the relevance of the brand. This si a typical challenge seen in businesses where the founder is the life and personality of the brand. As we have seen, many of the French brands have achieved a successful brand transition through rock-star designers with their own distinct personalities (such as Lagerfeld at Chanel, or Galliano at Dior), while other brands have a quieter approach (Maison Martin Margiela silently designs for Hermes).

Financial Independence

As the financial burdens inherent to the fashion industry continue to rise, requiring constant innovation both on product design, business and communication strategy, Armani remains the only major fashion player to be the only shareholder of his company. He has never even taken out a bank loan! This has afforded him total control over his business and design decisions, however, one must question what will happen when he retires or the economic downturn and extensive company expansion catches up with him.





More on YSL

31 05 2009

For those of you interested, the 1992 Documentary on Yves Saint Laurent (made in collaboration with Vogue’s Hamish Bowles) is available on Youtube.

Enjoy!





Dior & LVMH: The French Business Model for Fashion & Luxury

30 05 2009

Christian Dior (1905-1957) was born in Normandy, France, and in his short 52 years managed to revolutionize the business model for the fashion industry. Years later, his company would become a key holding of Bernard Arnault’s LVMH, the conglomerate that revolutionized the business model for luxury.

There are many available histories of Dior himself online, so let’s dive into the business side of things.

The Brand’s Origins

As many are well aware, Dior became famous with the New Look after WW2, and was integral to bringing French fashion back to the forefront after the occupation years.

Dior was the first to exploit his name with licensing agreements, which at the time tailored products to local markets and offered unique price per value products at varying price ranges. (It is very difficult to do this today- a company must maintain consistency across all markets because information is so easily exchanged over the internet and worldwide travel. People don’t like to see plastic pens being offered by their favorite luxury brands in certain markets when they are paying the big bucks for couture by the same brand at home. If products are to be specialized for separate markets, they must remain within the same quality and price range as all products offered elsewhere.)

new-look-diorDior was the first to give a name to each collection, alluding to future generations of designers, both high and low end, who name their collections based on an inspirational theme. He used garment models and made spectacular fashion shows, which are of course used by everyone today (we’ll see how that keeps up as carbon footprints and insane exchange rates mixed with a faltering economy effect travel plans).

Many copies of the New Look and subsequent collections were made around the world, proving that one man could influence the style of the world while isolated in his studio. This is no longer possible today.

From Single Brand to Luxury Conglomerate

LVMH CEO Bernard ArnaultBy 1984, as a result of diminished stylistic value after the death of the brand’s namesake and a brand image spread thin through various uncontrolled licensing agreements, Dior was on the verge of bankruptcy. Bernard Arnault took a major stake in the textile group Boussac Saint Fréres, to whom Dior belonged, and converted it into the Christian Dior S.A. Holding.  Just 5 years later, in 1989, the holding became a major shareholder of LVMH at 42%. Arnault had become the president and chairman of the largest luxury group in the world in a number of years. Christian Dior was divided into the CD Couture Management Group and the LVMH management group for a brand turnaround.

Reviving Dior

ferre for dior 1991-2Because the French luxury brands are typically older than those borne of Italy, the UK and the US, they have already faced the brand transition that must occur if a brand is to continue after the death or retirement of the founder (“founder’s dilemma”). We have yet to see examples of this in the US market, with a few notable exceptions, but in Italy, two prominent houses are currently undergoing the transition this year: Valentino and Gianfranco Ferré.

dior by john galiano 1997It was, in fact, Gianfranco Ferré who was placed as the Art Director of Dior in 1986, however, he did very little to move the brand forward. After understanding that fashion needs a wow-factor, the company wisely placed wild boy John Galliano at the helm of Dior in 1996. Galliano had a way of making headlines, and advanced through the company as quickly as he helped bring Dior back to the forefront of the fashion scene. He began as the Head Designer of women’s haute couture and ready-to-wear collections, and became the Art Director for all Dior women’s brands by 1999.

John GallianoGalliano created a buzz through his design of outrageous characters on the runway, making his fashion shows a mix of art exhibit and theater. However, in addition to revamping the look of the brand through his couture creations, he also focused on beautiful ready-to-wear and accessories and cosmetics (the real money makers today). This is where the real success of the brand’s renewal came from.

CD fragrancesAs you can see by looking at the CD and LVMH websites, a great deal of the marketing budgets are set aside for fragrances (64%) and only a small portion for fashion (6%). Today’s Christian Dior is therefore not so much a house of haute couture as it is a part of the luxury cosmetics industry. However, without the built-in marketing genius of Galliano and his couture shows, all other lines and products under the brand would be devalued. He is needed to sell the dream.

Conglomerates: The Modern French Model for Luxury

Today the French model gives complete freedom to designers in high fashion only. In the end, even the wildest designer must be able to design the bag of the season and design ready-to-wear that is in fact wearable. This is often done in collaboration with marketing and merchandising teams.

lvmhLuxury conglomerates such as LVMH allow line and brand extension, as well as brand-buying to serve various levels of clients and all the needs of the high-end clients. LVMH carefully manages brands to have the correct balance of cash cows and strugglers. They also work to ensure that there is limited collaboration between brands within the holding to limit the dilution of brand identities (this includes dedicated production staff per brand, often within the same facility). When buying a tired old brand, the holding company must also decide if it’s worth the time and effort needed to revamp the brand.

A Sustainable Element

edun logoThe most recent brand acquisition of LVMH is the ethical fashion label Edun, brainchild of U2’s Bono and his wife, Ali Hewson (LVMH took a minority stake, estimated at 45%).  This brand has been at the forefront of sustainable fashion and advocacy, and has implemented guerrilla marketing tactics and pop-up stores recently. It also provides a great compliment to the LVMH portfolio, at a time when consumers want their purchases to mean something beyond frivolity. Caring is the new black, and philanthropy is beginning to represent status at an increasing rate. One would hope that the brand’s acquisition will not hamper their youthful marketing or ethical initiatives. There is every reason to believe that the brand will be nurtured to continue in this way, in spite of the lackluster economy.

At this month’s annual shareholders’ meeting, Chairman Arnault announced that first-quarter revenues gained 0.4 percent to 4.02 billion euros, or $5.26 billion, and added “April continues this trend, with a very slight improvement” [WWD] Louis Vuitton continues to be the group’s biggest cash cow, continuing to grow with their no-sale-ever policy. The profits from the booming brands are used to further nurture the newcomers, and those brands whom might be struggling.

For me personally, coming from a background in sustainability, it is inspiring to see this recent development within LVMH. The idea that the primary example of French luxury, the powerhouse of LVMH, has made a commitment to advance Edun also suggests that the holding will create synergies between the ethical brand and it’s other holdings. Perhaps the future of luxury may be a sustainable one, after all.

By the way, the LVMH site has included some information on the main page about CSR activities the holding participates in.

A word on digital marketing (because I must): the LVMH site also hosts an online magazine, which is a nice start, but it proves *visually non-engaging* at best. Keep working, guys!