A licensing deal with Polo Ralph Lauren can be golden for a manufacturer, as illustrated by the company's thriving sunglasses and fragrance businesses. But, as the megabrand grows, such deals have become more elusive because the company is bringing products in-house to control its destiny.

MANAGING THE BRAND EXTENSION

Over the last seven years, Polo Ralph Lauren Corp. has increasingly taken control of its own destiny, both by opening more of its own stores and by bringing a greater number of product categories in-house.

"As the company has grown and become more successful, our own core competencies increased, so it became more viable to run more businesses ourselves," said Jeffrey D. Morgan, president of Polo Ralph Lauren's product licensing division.

Polo takes back expired licenses or buys them back before expiration when "we feel we can add value to the businesses," Morgan said. He cited getting the European licenses back around 2000, children's wear back from S. Schwab Co. in 2004 and Lauren by Ralph Lauren from Jones Apparel Group in 2003. He said all three had been "major growth drivers for the company."

Each decision is made on the strategic level, evaluating Polo's ability in particular areas, as well as familiarity with the distribution channels — which is why the company's two biggest licenses are in eyewear with Luxottica Group and fragrance with L'Oréal. Other remaining licensing deals include Apparel Ventures for women's swimwear, Hanes for men's underwear, Hot Sox for socks and Echo for scarves and other cold-weather products.

"There is a greater economic opportunity for Polo Ralph Lauren as a company if we get 100 percent of the profit of the business, but there is also an increased risk," Morgan said. "Licensing is an important pillar in the overall wholesale-retail mix."

These moves should not be interpreted as the end of licensing for the company. Bringing in-house licences for products with the Ralph Lauren brand name is balanced by increasing licensed businesses on Chaps and American Living — both moderate-priced brands that don't include the Ralph Lauren name.

"Our decisions on licensing depend on which brands," said Morgan. "We continue to believe the licensing model is right for certain product categories. While we have been reducing the number of licenses on Ralph Lauren-branded product, we have been expanding in Chaps and now in American Living."American Living, an exclusive line for J.C. Penney Co., is the first deal for Global Brand Concepts, which Polo Ralph Lauren formed this year to develop lifestyle brands in exclusive partnerships with retailers without reference to Ralph Lauren.

Morgan added American Living will likely have similar licensed categories and partners as Chaps. Chaps licensees include men's clothing with Peerless, dress shirts with Phillips-Van Heusen Corp. and handbags with Rosetti Handbags and Accessories. Chaps women's accessories, women's apparel, children's wear and home products are exclusive to Kohl's.

"The way we handle licensing is important: Our mission is to partner with the licenses and align the licensed business with our own business," said Morgan. "We are good partners with our licensees and work very closely with them on the business, to manage and protect the brand. We are in it for the long term, as are they."
— Whitney Beckett

A TIMELY ALLIANCE

Their deal may have been in the works for several years, but when Polo Ralph Lauren and Compagnie Financière Richemont joined forces to create a luxury watch and jewelry company this year, it seemed a natural pairing.

Both companies have their roots in family businesses and both are headed by powerful personalities: Ralph Lauren and Johann Rupert, executive chairman of Richemont, whose portfolio of brands includes Cartier, Montblanc, Van Cleef & Arpels and Dunhill.

The deal, which created The Polo Ralph Lauren Watch and Jewellery Co. Sarl, is a 50-50 joint venture based in Switzerland. It will design, create and distribute luxury watches and fine jewelry, with entry prices at $3,000 to $5,000 and top prices in the five-figure range and up. The first products will launch in fall 2008, with the watches making their debut in Geneva next spring.

It was Rupert who originally went to Polo with the idea.

"Since my days living in New York in the Seventies, I have admired Ralph Lauren, and everything he stands for," said Rupert in an interview with WWD.

"Everything is going well so far, and Ralph is an excellent partner — he is a perfectionist, as I expected," said Rupert. "He's really in charge of design, and it will be up to him whether to launch men's or women's watches first. We're taking care of the execution and production of the collection."The alliance is a first for both companies: The high-end watch and jewelry market has so far been uncharted territory for Polo, while Richemont had never formed a joint venture with a designer brand.

Rupert said the Polo deal would likely remain a one of a kind for him — for some very personal reasons: "I would do more joint ventures if you could find me some more Ralph Laurens. But the reality is, there aren't too many out there," he said. "And, at my age, if I'm going to form a joint venture, I am going to do it with someone I admire and whom I have fun with. "It's all very simple. It's nice to have fun making money with someone you admire."
— Samantha Conti

THESE BOOTS ARE MADE FOR WALKING

It's been just over two years since Polo Ralph

Lauren brought its shoe business back in-house — and footwear is a burgeoning category for the company.

The firm repurchased its footwear license from Reebok in 2005 for $110 million, ending a nine-year deal with the athletic company. During the Reebok era, the Polo Sport collection was born and the moderate women's and casual businesses matured. But the company had not yet penetrated the upscale segment, so once footwear was under the Ralph roof again, building the luxury business became a major priority.

"Our number-one mission is to create a world-class footwear operation within the world-class organization that is Ralph Lauren," said Joel Oblonsky, president of the Lauren and Chaps footwear divisions.

As Polo rolls out its new lines, it is incorporating plenty of signature looks like equestrian-inspired styles and logo details. The 80-piece women's Ralph Lauren Collection line for spring features contrast patent riding boots, rope-strap sandals and bold floral details, in line with the ready-to-wear motif.

Prices follow the range of all the collections, starting at around $89 for a Lauren ballet flat and running up to $4,500 for a Collection crocodile boot.

"It is time for us to concentrate and define what our shoe collections are — and what the message is," said Jerome Espinos, president of the high-end women's Collection and men's Purple Label footwear businesses.The emphasis on luxe is already paying off at retail — the Collection line was recently introduced at Harrods in London and Colette in Paris. On the men's side, Ralph Lauren Men's was recently added to Bergdorf Goodman in New York. And the made-to-order Purple Label line has shown impressive growth within the company's own retail stores, according to Espinos.

Still, the luxury segment remains a small part of the total volume — and that's by design, Espinos said. "It's an exclusive, expensive product," he said.

At the same time, the company has been working to fuel expansion in its moderate businesses. It recently introduced a Chaps line for women, which is sold at Kohl's, as well as the American Living collection, which will be available at J.C. Penney next spring as part of an exclusive deal.

The Lauren Ralph Lauren business for women is also undergoing rapid expansion. Starting in January, the brand will be stocked in nearly 400 U.S. retail stores, including Bloomingdale's and Houston-based Tootsies. "I intend for Lauren Ralph Lauren to be a top 10 women's shoe brand in the very near future," said Oblonsky.
— Lindsay E. Sammon

THE EYES HAVE IT

What fun would it be to drive with the top down on a bright, blustery day without a cool pair of shades? Why, none at all.

Few understand the needs of their customers quite like Ralph Lauren — who surely has an array of sunglasses at his disposal for jaunts in one of his many convertibles. Polo offers eyewear for pretty much any recreational activity: from glamorous Hollywood-ready styles to more casual tortoise looks.

In February 2006, Luxottica Group SpA signed a 10-year licensing deal for the design, production and worldwide distribution of prescription frames and sunglasses for Polo Ralph Lauren, taking over from previous licensee Safilo Group. The new partnership, which had an advance payment of $200 million in royalties, is expected to generate an estimated $1.75 billion in sales over the span of the agreement.

"Ralph Lauren combines a distinctive sense of design with the most opulent materials, creating a unique, fine blend of modern yet timeless collections," said Luxottica group marketing director Fabio d'Angelantonio. "Ralph Lauren Group was uniquely able to create a specific lifestyle and environment including multiple subbrands and collections and categories, all equally successful and renowned. We believe that this characteristic [makes] the brand one of the most successful, globally."Last year, Ralph Lauren opened a Manhattan boutique dedicated solely to its assortment of eyewear near its flagship at 811 Madison Avenue. The 525-square-foot space has walls of carved mahogany, cream leather shelves and framed black-and-white photos throughout. It showcases eyewear from the Ralph Lauren Collection, Polo, Ralph Sunglasses and Chaps.

"The right accessories convey a modern, glamorous attitude," said Ralph Lauren when the store opened. "Eyewear is no exception."

So far, there are no plans to open additional eyewear stores.

Last May, the firm celebrated the opening of its Moscow store with a limited edition, numbered frame, and soon it will introduce Ralph Lauren Purple Label eyewear for men.

"Ralph Lauren is a portfolio brand," added d'Angelantonio. "All the subbrands in the portfolio are very well known already. Our challenge is to make sure that the specific personality and the identity of each is appropriately translated and expressed into the eyewear collections in both sun and optical."
— Sophia Chabbott

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