POLO GETS READY FOR CYBERSPACE
Byline: James Fallon
London — Polo Ralph Lauren is already an international fashion company. Now it wants to be a global media giant.
The new international ambition follows the formation in February of Polo’s 50-50 joint venture of Ralph Lauren Media with NBC and its affiliates NBC Internet and the home-shopping network ValueVision. The first fruits of that venture will be seen within the next month as NBC and RLM kick off the holiday season with a $5 million print ad campaign and a $10 million TV package for the Ralph Lauren brand.
It will be the first time Ralph Lauren has advertised on television, Douglas L. Williams, group president of global business development for Polo Ralph Lauren, Ralph Lauren Media and Polo.com, told a conference here on luxury goods organized by the British newsletter Luxury Briefing.
At the conference, Williams ran through the details of RLM. As reported in WWD, the venture is a 30-year license under which Polo has complete editorial control. The first $50 million of investment in RLM will be absorbed by Polo’s partners and the venture is expected to be profitable within three years, Williams said.
Polo will receive royalties on the following scale: Nothing on the first $75 million in sales via the venture, 10 percent for $75 million to $200 million, 12 percent on sales of $200 million to $250 million and 15 percent on sales of more than $250 million.
Williams stressed the venture currently is restricted to the U.S. but Polo plans to look for other media partners to launch it in overseas markets.
“The NBC agreement applies only to our U.S. business,” he said. “But the option is open for us to find partners in each country internationally.”
Williams gave no timeframe on when this might occur, but clearly sees as much opportunity for RLM outside the U.S. as in America.
“We want to get it off the ground in the U.S. and learn where the trapdoors are so that when we export it to international markets we make no mistakes,” he said. “We need a team focused on the individual markets in Europe with content applicable to each market.
“One of the mistakes we made in licensing in the past — and then bought back — is that it wasn’t focused on individual markets,” he added, referring to Polo’s $230 million purchase of its European licensee, Poloco SA, in September 1999. “There will be a part of this site that is only U.K. because it has a specific lifestyle. The same in Spain and Italy. But what we will do throughout the company is keep our core heritage with our core principles on the site.”
The Polo heritage is what will drive the design of the site, the brand’s upcoming TV advertising campaign and all future activities, Williams said. Even before the launch, the strength of the Polo brand is in evidence — the company has received more than 500,000 registrations on the site, equally split between men and women. The age range is 18 to 49.
In the first preview of Polo.com’s Web site, due to go live soon, Williams said the site will be broken down into the company’s brands Polo, Polo Sport, Polo Jeans and RLX.
“We do not believe the Internet is ready yet for luxury goods, so you will not see Purple Label nor women’s Collection on the site,” Williams said. “We believe the best way to service those customers remains through our stores.”
In addition to the current collection and highlighted special products, the site will contain features on the lifestyles associated with each of the labels. Clicking onto the RLX page, for example, will call up a feature on climbing or skiing or provide an online chat with an Aspen ski instructor on snow conditions at the resort. The Polo Classics page might feature a book excerpt or a feature on the new trend toward vintage clothing.
“We want the sites to create the same type of lifestyle environments we have in our stores,” Williams said. “Our goal is the successful combination of merchandising and entertainment.”
When the joint venture was announced in February, the new partners estimated the site has the potential to easily generate about 10 percent of Lauren’s total retail volume, currently estimated at $8 billion. The launch will be backed by more than $200 million in advertising support over the next five years. The principals also have not ruled out an eventual IPO.
“We are not only selling clothes. We are selling a dream. We are selling a vision,” Lauren said at the time. “It’s not only selling, it’s the experience of how to buy. This is not about how fast we can get you to the cash register.”
Beyond selling, Lauren said his new media ventures reflect the fact that “fashion, food, living and entertainment — they’re all one thing today. It’s about a total concept of living.”
Other speakers at the conference included Domenico De Sole, chief executive officer of Gucci; Veronique Leblanc, general manager of Holland & Holland; Nick Hurrell, chief executive officer of advertising agency M&C Saatchi and Sir Terence Conran.
De Sole, speaking two days before the Yves Saint Laurent runway show in Paris, outlined Gucci’s well-known multibrand and acquisition strategy. But the Gucci ceo played down growing fears that the luxury goods industry’s consolidation will drive out small- and medium-sized companies.
“I don’t think there will only be three companies,” he said. “The three companies [Gucci Group, LVMH Moet Hennessy Louis Vuitton and Groupe Financiere Richemont SA] will continue to flourish, but at the end of the day what makes this business special is that there is a lot of room for great creative people. There will always be room for small- and medium-sized companies.
“Think about it — six years ago Gucci was broke, no one had heard of Prada or J.P. Tods. So things constantly change. At the end of the day, this is an international business and an international market.”
But De Sole admitted that, to grow beyond their domestic markets, these companies eventually might need a larger partner, like Gucci or LVMH. In addition, Gucci and LVMH will need to make more acquisitions as their core brands reach their full distribution potential. This need coincides with the fact that many family-owned brands are now passing to the second and third generations, who might not be interested in owning the business any longer.
“This is a very good moment and it goes beyond the luxury industry,” De Sole said. “There are now going to be third-generation managers and I think well-managed companies have a lot of opportunities because of the historical situation that’s developing. I still believe there a lot of excellent companies to be acquired — hopefully at reasonable prices.”