By and  on February 20, 2008

NEW YORK — Now that American Living, the brainchild of Polo Ralph Lauren Corp.'s new Global Brand Concepts division, is rolling out to 600 J.C. Penney stores nationwide, the question is: What's next?

American Living — a soup-to-nuts concept of 40-plus categories from women's to men's wear, children's, accessories and home — isn't only the biggest brand launch in Penney's history, it represents a major business opportunity for Polo. The designer and his team oversaw a seemingly herculean task in creating the first brand for Global Brand Concepts, which his company launched last year as a way to develop private label brands for retailers using the expertise and talent pool at Polo. Penney's became the first customer.

"With the creation of American Living, our goal was to develop a brand that would bring timeless style to the new customer in a way that had never been done before," Ralph Lauren said.

For now, though, Global Brand Concepts has no plans to introduce another one.

"This was really a big project," said Roger Farah, Polo's president and chief operating officer. "It has tested our capabilities to execute a completely new brand, and I think we did a superb job and we'll see what the customer says. I think we want to get a reaction to this, and make whatever adjustments before we are going to take on another brand, although from the beginning, it's always been our intent to use Global Brand Concepts as an incubator for stand-alone businesses."

Penney's has the domestic exclusive for American Living, and Farah cited the brand's global potential with other retail chains as a vehicle for Global Brand Concepts' growth. Penney's alone is projecting that American Living could be a $1 billion brand.

"There is an opportunity to take product and do it on a global basis," Farah said. "Our experiences as a company in Europe and in Asia give us some sense of what the international opportunities for brands are once they are healthy and prosperous. Whether we take American Living internationally over time, or whether we create unique brands for domestic partners or international partners, I think we have high hopes for the long-term potential for this business. Penney's has their stores domestically and our initial focus is on that, but in our mind, the question then becomes, can we do the international distribution in Europe or Asia or South America, where Penney's does not have distribution? We'll see. Particularly, as we want to be careful about the distribution of Ralph Lauren product on a worldwide basis, this gives us an avenue to express our creativity through new channels."Jacki Nemerov, Polo's executive vice president, added, "At this point, a lot of people have been inquisitive about what we are doing and what we can do. I think everyone is waiting to see how our first major project turns out. We have had inquiries, but we have not made our second commitment at this point."

By several accounts, while there is no identification that the collection was done by Polo, the lifestyle collection is full of Ralph-isms, such as preppy touches, Americana references and in-store merchandising that evokes an Ivy League ambience with white beadboard signage and fixtures. The collection comes at the top end of Penney's price range. A roll-sleeve linen shirt, for instance, retails for $60; a cotton dress, for $100; a Madras plaid skirt, for $70; a straight-leg pair of jeans, for $55, and a polo shirt featuring the eagle with American flag brand motif, for $40.

American Living is being sold in Penney's largest stores across the various categories' parent departments, meaning American Living children's wear is in the children's department, while window coverings are in the window coverings department. Shop-in-shop environments will open in stores in Paramus, N.J.; Glendale, Calif., and Montrose, Colo., next month, and there are plans to introduce additional shop-in-shop concepts for some of the retailer's new stores over time.

According to Penney's chairman and chief executive officer, Myron Ullman 3rd, American Living fits right into the Penney's matrix, which centers around four lifestyles — conservative, classic traditional, updated modern and trendy contemporary.

"We believe it is strongly focused on our key customer," Ullman said. "This will clearly be in the best price point brand, but it's an accessible price point. It's aspirational for many of our customers, but certainly affordable."

The launch will kick into high gear on Sunday, when seven American Living TV spots will be aired during the Academy Awards. It will be followed by national magazine ads, newspaper ad inserts and Web and cinema advertising.

The new brand also appears to have made its way right into the store's promotional strategy. At Penney's Valley View Center mall in Dallas on Thursday, American Living hadn't officially launched, but a few items were already on sale in the women's, children's and men's departments, and seemed destined to inspire multiple purchases. Women's sale items included an American Living solid mesh dress at $38, with the option to buy two or more for $22.99 each, and cropped knit shrugs at $34 to $36 each, with the option to buy two or more at $19.99 to $20.99 each.For men, promotions included pastel cotton long-sleeve Oxford-style shirts at $55, with the second one at 50 percent off. The sale appeared to be working, as some large rounder racks were empty and several held only one or two shirts. Other men's promotions included patchwork Madras cotton shorts at $36 to $38 each, with the option to purchase two or more for $20.99 to $22.99 each. Other promotions included boys' American Living stripe mesh polo shirts at $24 to $26 each, with two or more available for $13.99 to $14.99 each.

"We are a promotional department store and are not ashamed of that," Ullman said. "We sell a lot of merchandise at regular price, a lot of merchandise that has been promotionally priced, and things that don't sell at the end of their life cycle are sold at clearance prices. American Living will participate in all three, though probably not as aggressively promotional as some of our merchandise in some categories."

Ullman said that, if merchandise has already been marked down, it's because the overall category it sits in was having a promotion. "If we have a sale of all dress shirts, we wouldn't exclude American Living. But it would be done in its own way and own sensibility," he said.

Ullman said that it was too early to gauge customer reaction — "We can gauge our associates' reaction, which has been very enthusiastic, and it's always a good sign when your own associates want to buy the product immediately," he said — but there are no plans to launch a second brand with Global Brand Concepts.

"This is very large launch from both of us," Ullman said. "It's probably the single largest brand launch in history, in a sense that there are so many different categories across all channels. For us, digesting this is our highest and best use of our time, and making sure we make it as important as we think it can be. While we are always looking for innovation and newness, we are certainly not looking at another project of this scope and size at this point."

Growth over the next few years is expected to arise from within the brand itself, with many categories still to come."We started with the foundation of all the key businesses that are our core competencies, such as men's, women's, women's accessories, children's footwear and home," Nemerov said. "Now, we will be expanding on that for the seasonal categories, like cold weather and swim, slippers and sleepwear. There are many more home categories that are following the launch, like table top, table linens, throw pillows and decorative accessories. We started with the men's business, but we will add a big and tall; we started with a missy business, but will add a women's and petites opportunity. There is a lot of ammunition in our arsenal in terms of the opportunities we see, not only in new categories, but developing existing categories."

Some of the categories are licensed, including handbags and men's clothing, and there will be other licenses in the future. Nemerov declined to disclose the licensees for categories.

Since its launch, there have been rumblings in some retail circles that American Living is too close in philosophy to some other Polo lines sold at the department store level.

"The instinctual way Ralph has addressed customers over the years is the ability to understand where the customer is going and how to lead them," Farah said. "Obviously it will be in any product we produce — the fact that it's got a core of Americana, a core of family, a core of authenticity. I think these are hallmarks of what we believe in and try to do. Anything we do will have some thread of those principles. There are iconic silhouettes in the industry, like polo shirts, and American Living has it appropriate for Penney's."

According to Farah, working with Penney's was educational in many ways, particularly when it came to some of the buying logistics.

"When we set up the showroom, we created an environment that had buying areas off the main showroom set with J.C. Penney computers," Farah recalled. "Buyers looked and saw the line. Within a tight two- or three-day window, they then broke into individual rooms to place the orders on the spot. We had the orders and could get them right to the factory within three days of breaking the line, which has added tremendously to our ability to actually manufacture what will turn out to be millions of units. That is a new way for us to work. I think it was eye-opening for us."

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