Ralph Lauren has become one of the few fashion brands in recent years to achieve substantial positioning improvement against the trend
The short-term performance and brand image game tests the resilience of luxury goods.
The news that the American fashion brand Ralph Lauren’s GMV exceeded 1.6 billion during the Double Eleven on Taobao, but with a return rate as high as 95%, has recently sparked widespread discussion on social media. It was trending on Weibo yesterday, and so far, Tmall and Ralph Lauren have not responded.
The origin of the matter is that during this round of Double Eleven, Taobao launched large discount coupons such as “7000 off 560” and “3000 off 240” for 88vip members, which were precisely utilized by some consumers.
Ralph Lauren items priced over a thousand yuan, such as a 1980 yuan sweater and 270 yuan socks, were seen as “discount magic” and were suddenly purchased in large quantities before the first wave of Taobao’s Double Eleven final payment day on October 24. The Ralph Lauren store’s items were temporarily shown as sold out and removed from shelves, and then returned using the “seven-day no-reason refund” policy, causing significant losses to the merchants.
In fact, since last year, consumers have already focused on luxury brands with sufficiently high unit prices and fast return processing, such as Coach and Burberry. Burberry was also forced to remove products from the shelves due to being bundled for discounts.
This year’s Double Eleven was originally highly anticipated, not only restoring pre-sales but also having the largest investment in recent years. Platform interconnectivity has also advanced further, supporting multiple payment methods such as Alipay and WeChat Pay. In a previous media interview, Alibaba Group Vice President and Tmall Business Unit President Jia Luo stated that with the implementation of incremental policies, consumer enthusiasm on the Taobao Tmall platform continues to rebound.
During a conference call following the release of the first fiscal quarter results in August this year, Alibaba executives stated that the overall return rate for domestic e-commerce is rising, but Taotian’s return rate is below the industry average, and consumer retention rate, purchase frequency, and feedback on shopping experience have all improved.
However, simply using discounts and low prices to stimulate the Double Eleven to recreate the past grand occasion is unrealistic, as the market cannot ignore the profound issues that have surfaced.
In September this year, internet celebrity Zhang Dayi, who grew with Taobao, announced that her Taobao women’s clothing store, “My Happy Wardrobe,” would indefinitely delay new arrivals. After the announcement, the store held a 50% off clearance sale on Taobao Live.
In 2014, Zhang Dayi founded the clothing store “My Happy Wardrobe,” and during the 2016 Singles’ Day, it achieved sales exceeding 100 million yuan, with a two-hour turnover surpassing 20 million yuan. It once surpassed Uniqlo in daily rankings, becoming the first women’s clothing store on Taobao to exceed 100 million in sales.
Afterwards, the e-commerce company behind the store, Ruhnn Holding, went public and rang the bell in the U.S. in 2019, being called the “first internet celebrity stock.” Just two years later, Ruhnn Holding delisted in April 2021.
Coincidentally, the online celebrity Grace Chow’s Taobao women’s clothing store “GRACE CHOW 周扬青” also announced a clearance sale before Double Eleven, stating that business adjustments are being made to adapt to market conditions and changes in the company’s strategic direction.
The clothing e-commerce companies that grew with Taobao have been collapsing one after another, and the high return rate under the platform mechanism is one of the main reasons.
In June this year, Fang Jianhua, the founder of Huimei Fashion Group, the parent company of the women’s clothing brand Inman, published an article calling for resistance against mandatory shipping insurance. He stated that with intensified platform competition and a general return rate of up to 60% on e-commerce platforms, offering return shipping insurance has become a mandatory requirement for merchants participating in major promotional activities, placing a huge burden on them.
However, some netizens have expressed on social media that some Inman products are of substandard quality and there are discrepancies between the actual items and the pictures, and shipping insurance can protect consumers’ rights.
Under the vicious cycle of high returns and low quality, not only are low-priced clothing struggling to survive, but e-commerce platforms are also spending considerable effort to persuade luxury brands to settle in, which are beginning to face difficulties. The 95% return rate of Ralph Lauren that sparked widespread discussion this time reflects the market’s deeper exploration of e-commerce.
What people are exploring is whether e-commerce has actually improved the fashion retail market. In the triangular relationship between platforms, merchants, and consumers, how can platforms become a bridge between merchants and consumers in a challenging environment, rather than disrupting the market environment and brand building?
Taking Ralph Lauren as an example, the negative impact of the high return rate this time is undoubtedly profound, far beyond just short-term economic losses, but also affecting the brand’s high-end image.
Polo Ralph Lauren, founded by Ralph Lauren in 1967, quickly became popular with its style that falls between formal and casual wear, and its classic Polo shirt became a coveted symbol of American style.
Due to the deep association of the brand image with polo shirts and its high exposure in outlet channels, Ralph Lauren has long been considered affordable luxury fashion in the public’s impression. However, in recent years, this inherent perception has begun to change early on.
In 2017, after the current CEO Patrice Louvet took office, he launched Ralph Lauren’s high-end strategic layout, successively terminating cooperation with more than 200 wholesalers such as Macy’s, and significantly reducing the sale of products through discount retailers like TJMaxx to enhance the brand image and attract the attention of a new generation of affluent consumers.
In the past two years, while luxury brands have tightened their budgets, Ralph Lauren has bucked the trend by strengthening its marketing and spending considerable effort on upgrading its positioning. Last November, Ralph Lauren attracted widespread market attention by launching the RL 888 series handbags priced over 20,000 yuan.
The premise of high-end development is the brand’s long-term and firm investment in its own value
In addition, Ralph Lauren has strengthened the influence of its high-end series by spending lavishly on fashion shows and inviting celebrities to watch.
Ralph Lauren currently owns the high-end men’s and women’s fashion brands Ralph Lauren Purple Label and Ralph Lauren Collection, targeting the high-end American casual retro Double Ralph Lauren, the most well-known mid-range brand Polo Ralph Lauren, the more affordable Lauren Ralph Lauren, as well as the golf series Ralph Ralph Golf and home goods series Ralph Lauren Homme, effectively covering a price range from entry-level to high-end.
During the years of reshuffling in American fashion, affordable luxury brands Michael Kors and Coach, PVH Group’s Calvin Klein and Tommy Hilfiger, G-III’s DKNY, as well as designer brands like Alexander Wang and 3.1 Phillip Lim, have all failed to make progress in building higher-end price points. The CK 205W39NYC series launched by Calvin Klein under the appointment of Raf Simons was short-lived, and only minimalist brands The Row and Khaite have succeeded at high-end price points.
Ralph Lauren has become one of the few fashion brands that have achieved substantial positioning enhancement against the trend. Even in the broader luxury market, brands like Burberry and Gucci have implemented brand positioning enhancement strategies, but the process of climbing upwards is very challenging, and it is often difficult to balance brand positioning enhancement with performance improvement, especially during market downturns.
Patrice Louvet previously stated in an interview that to increase brand value, Ralph Lauren’s products will continue to rise in price. Data shows that since 2018, the prices of Ralph Lauren’s products have already increased by 80%.
Although the high-end strategy had been implemented earlier, the trend of quiet luxury and old money style became the driving force for Ralph Lauren in the past three years. This year, as consumer rationality deepens, ultra-high-end quiet luxury brands like Loro Piana and Brunello Cuccinelli have somewhat cooled down, while Ralph Lauren, to some extent, as their lower-priced alternative, has instead maintained its brand popularity and become an essential brand for middle-class consumers in the Chinese market.
In recent weeks, amidst the fervor of the U.S. election, an image of Trump’s son Barron Trump wearing Ralph Lauren has been widely circulated on social media. Although Chinese consumers have long been familiar with the Ralph Lauren brand, interest in the brand seems to be rekindling now.
This year’s strengthening tennis trend globally, especially in the Chinese market, has also benefited Ralph Lauren. Since 2006, Ralph Lauren has been the official sponsor and outfitter of the Wimbledon Tennis Championships, providing clothing for all umpires, ball boys, and court staff. Influenced by this trend, Patrice Louvet revealed that the brand’s Wimbledon capsule series released in the first quarter achieved double-digit growth in revenue.
Zendaya created approximately $3.6 million in media value for Ralph Lauren
By sponsoring sports events, Ralph Lauren is committed to associating the brand with a high-end lifestyle. In the Chinese market, Ralph Lauren has also opened several Ralph Lauren Houses to comprehensively showcase the high-end lifestyle and its rich series.
By offering coffee and a restaurant, the store has attracted considerable foot traffic at its locations in Shanghai Kerry Center, Beijing Sanlitun Taikoo Li, and Chengdu Taikoo Li, subtly embedding the brand image of an American high-end lifestyle into consumers’ minds.
Although entry-level models and outlet channels still account for a relatively high proportion of the brand’s current business, there are early signs of a shift in consumer perception of the brand.
Ralph Lauren’s store located in Taikoo Li Sanlitun, Beijing
In store management, the output of a high-end image is given higher priority. Sources say that although the best-selling styles in Ralph Lauren stores are still Polo shirts and knitwear, the brand requires stores to stock high-end Purple Label items to ensure the communication of the brand’s high-end image.
After closing 20 department store locations in the United States last year, Ralph Lauren plans to close another 45 underperforming department store locations this fiscal year. Focusing on retail rather than the previously relied-upon wholesale business not only allows for better control of pricing and inventory, but more importantly, it also accelerates the process of elevating the brand’s image.
Patrice Louvet stated that Ralph Lauren will continue to drive robust growth in its retail business, attracting approximately 1.3 million new consumers in the first quarter, primarily affluent and younger consumers. Despite intense market competition, Ralph Lauren has not increased promotions, maintaining its brand value while enhancing long-term value creation.
In the recent round of brand upgrades, Ralph Lauren’s performance in the Chinese market has been particularly outstanding.
According to the latest performance data released by Ralph Lauren, in a quarter where luxury brands collectively struggled, the group’s revenue in the second fiscal quarter increased by 6%, mainly driven by the European and Asian markets, with the Asian market growing by 10%.
The company’s global same-store sales increased by 10%, benefiting from strong retail performance and pricing strategies. The gross profit margin rose to 67%, and the operating profit margin reached 11.4%, exceeding expectations due to improved brand positioning and cost control. Ralph Lauren expects revenue growth of 3% to 4% for fiscal year 2025, with an increase in operating profit margin of 110 to 130 basis points.
The Chinese market, as the most responsive leading market, is likely to be followed by other markets, continuing to drive Ralph Lauren towards stronger growth.
At present, the return rate of Ralph Lauren’s e-commerce has sparked discussion, which partly reflects the brand’s current popularity in the Chinese market. However, shaping the brand’s high-end image is not easy, and the path to upgrading brand positioning is very fragile and cannot withstand interference. Any luxury brand that pursues brand value does not want to be associated with discounts or other actions that may weaken its image, as this move could render previous long-term marketing efforts futile.
For the platform, the return of goods after discounts also disrupts the luxury ecosystem it has painstakingly built over the years, affecting the confidence of luxury brands. Luxury brands were once very hesitant to enter Chinese third-party e-commerce until the launch of Tmall Luxury Pavilion in 2017, after which brands gradually established a large matrix of luxury brands.
Compared to self-operated e-commerce, what attracts luxury brands most to third-party e-commerce platforms is their proud consumer data. The most fatal consequence of discounts and returns might be that with the influx of non-target consumers, it could affect the accuracy of user profiling.
In a market under pressure, platform business is becoming increasingly difficult to conduct, as unexpected events triggered by platform promotions will occur from time to time. Not only in the e-commerce market, but also in the offline market, high-end malls are feeling passive due to price wars in fierce market competition. Earlier this year, promotional activities during the Qixi Festival in high-end malls in Wuhan troubled luxury brands like LV, which is known for never offering discounts, as they are well aware of the damage discounts can do to the foundation of luxury goods.
The Ralph Laurens hope to stand at the pinnacle of the luxury pyramid, rather than becoming the sales champion of promotions.
