The unyielding persona of founder Ralph Lauren, coupled with the primacy of global grunge and the desire for on-line shopping, may have mortally wounded the iconic Ralph Lauren Corporation (NYSE:RL). The company appears to have hurt itself with its management style, and it is at the mercy of market forces favoring globalization of grunge as well the theory of “creative destruction” of Austrian-born economist Joseph Schumpeter.
Founded in 1967 as a purveyor of all things from the domain of Anglo-American upper class fashion, the company has just announced that it will close a major store at 711 Fifth Avenue, New York as part of a corporate restructuring to result in a charge against revenue of about $370 million. The flagship men’s and women’s stores on Madison Avenue will continue. Currently about $78 per share, the stock price of Ralph Lauren Corporation is down 55% in the past five years. The company is not alone in its retailing malaise and downward trajectory. Recent management changes at Givenchy, Barneys, Diane von Furstenberg, and Carolina Herrera reflect turmoil in the up-scale world, and some basic, low cost retailers such as Sears, Macy’s, and Target and Kohl’s are also seriously ailing.
For decades Ralph Lauren has defined an American standard of expensive preppiness, in an Anglophile culture evocative of the duke and duchess of Kent, the Henley Royal Regatta, and the grass polo fields of England. It also seems that Ralph Lauren’s brand of preppiness has taken part of its inspiration from the Sloane Rangers of London’s West End, well-known for their Barbour oil skins and Green Wellies initiated by the 1st Duke of Wellington who defeated Napoleon at Waterloo — but adding some wholesome East Coast innocence to the look.
The decline of such a highly visible and flamboyant company may provide business schools with case studies for years to come. However, it is safe to say that the founder himself was unwilling to cede control of the creative side of the company to his new CEO, Stefan Larsson, formerly with Old Navy. If a CEO cannot control design, innovation, and brand positioning, there really is not much left to do that cannot be done by others in finance, control, shareholder communications, and HR. It is no wonder that Larsson quit.
Further, we are witnessing a cosmic struggle between the forces of tradition and elegance, and those of global grunge, which I have written about in these pages. And global grunge is winning: the Beau Brummel look has been superseded by the appearance of an unmade bed, festooned with Velcro and wired devices that indulge. One needs only to visit an airport to see this species. And seen en masse from the air, it could resemble a migration on the Serengeti ecosystem.
Moreover, some of today’s millennials would rather order cheap, torn jeans from an old armchair than get out of the house and go for a walk. And why apply yourself to going through a task when there is an electronic channel or special app to do it for you? For a country that seems to like fitness, technology has only encouraged sedentary behavior — not the lifestyles and athletics such as sailing and tennis promoted by the Ralph Lauren brand. It is well known that generations reject the values and styles of the previous one, and some of this is to be expected. However, technology has also created ten of millions ensconced in their own robotics. And fashion is just not one of their interests.
Amazon, which offers an array of low cost product, is of course reported to be the beneficiary and usual suspect of this turmoil. Further, Ralph Lauren has a remarkably low market share via the Amazon channel in comparison with brands such as Nautica, Tommy Hilfiger, and Tommy Bahama, according to one industry analysis.
The early 20th century vision of Joseph Schumpeter seems accurate: companies must reinvent themselves with new business models of design, manufacturing, and distribution to counter market entrants with new technology and processes. Not doing this means that failure is an option.