*Ralph Lauren to Hang Internet Shingle
Polo.com will tout Polo Ralph Lauren's version of American lifestyle through e-commerce, content and community. The site will operate under the auspices of Ralph Lauren Media, Polo Ralph Lauren's 30-year alliance with NBC.
"We're not only selling clothes, we're selling dreams," Ralph Lauren, chairman/CEO of Polo Ralph Lauren, told a news conference in New York yesterday. "Right now, we're in the Internet business. We're going to be in e-commerce, but we're going to be selling products in a way that's not been done yet."
The U. S.-only online store will initially sell Polo and Ralph Lauren apparel, accessories, gifts and home goods for men, women and children. All products will be marked at suggested retail price, a move aimed to maintain parity with Polo's 27 bricks-and-mortar stores in the U. S.
According to the agreement, Polo Ralph Lauren will own 50 percent of the New York-based Ralph Lauren Media joint venture. NBC companies like the flagship NBC network, home shopping TV and online service ValueVision, NBCi, and CNBC.com will hold the rest.
As a quid pro quo, New York-based NBC will support Polo.com with $100 million-worth of TV advertising on the flagship NBC network and $10 million-worth of online ads at CNBC.com.
NBCi will chip in with another $40 million in online promotion and distribution. ValueVision will commit $50 million in cash. These commitments will be spread over five years.
From its side, Polo Ralph Lauren will include the Polo.com Web address in its yearly $100 million print ad campaign.
All product for Polo.com will be supplied by Polo Ralph Lauren at cost. The company will also handle returns, exchanges and personal assistance at its retail stores as part of the online-offline collaboration.
Fulfillment, distribution and customer service for Polo.com will be ValueVision's responsibility. ValueVision will convert an existing 300,000-square-foot distribution center in Bowling Green, KY, exclusively for this purpose.
"This is probably the most exciting thing that we have been involved with in a long time," said Bob Wright, president/CEO of NBC and chairman of NBCi. "I think it'll be a ground-breaking venture in terms of what we can do by combining all of our resources."
Jeffrey D. Morgan, president/CEO of Ralph Lauren Media, said two things will be essential to the success of the online venture: first, bringing new customers to the Polo brands, and, next, building enough loyalty in their ranks to encourage them to repeatedly shop at Polo.com.
"How are we going to do that? My focus, and the focus for the entire organization, is going to be on the customer experience, what can we do to meet or exceed [that]," said Morgan, the former worldwide publisher of Men's Health magazine.
Forrester Research estimates online sales of general apparel in 1999, 2000 and 2001 respectively at $1 billion, $2.6 billion and $5.1 billion. By 2004, projected online sales of $22.5 billion will comprise 11 percent of all apparel sold.
For accessories, Forrester projects 1999, 2000 and 2001 online sales at $438 million, $751 million and $1 billion, respectively. The Internet in 2004 will account for 9 percent, or $3.5 billion, of total accessories sold.
Polo Ralph Lauren expects the Web site to be profitable in its fourth year. But apparel - Polo's core business that last year accounted for a large chunk of its $8 billion sales - is known to be the scourge of online retailers. Historically, apparel is the No. 1 return for online retailers. Most consumers like to see, touch and try clothes.
Lisa Allen, senior analyst at Cambridge, MA-based Forrester, doesn't think that will be a big issue in Polo Ralph Lauren's case. Consumers likely to shop at Polo.com typically will be familiar with the brand, know their sizes, color and style preferences, she said.
Nor does she worry about the issue of channel conflict or retailer resentment, an issue that last year forced San Francisco denim giant Levi Strauss & Co. to stop direct sales at Levi.com. In fact, the ad dollars going into Polo.com promotions will lift overall sales of Polo Ralph Lauren products across company-run or department stores, she said.
"Manufacturers, in large part, aren't used to selling direct to retailers," Allen said. "They don't have experience developing relationships with individual customers. They don't have experience in providing customer service, fulfillment and distribution.
"Now, Lauren is a little different in that regard because it does have company-owned stores or boutiques. But [going online] raises their level of involvement in direct-to-consumer selling to a new level."