لخّصلي

From a traditional paradigm, the term "luxury e-commerce" is an oxymoron. The high-volume,
hands-off approach of online sales is a direct contradiction to that of the high touch, human
relationship-based luxury retail industry. It is for this reason that, until recently, many luxury
brands have avoided e-retail - the belief is that it cheapens their image (Okonkwo, 2010).
However, the successful experiences of certain companies in specific regions are gradually
giving many luxury retailers a reason to reconsider e-commerce. For example, the luxury
retailer Ralph Lauren has experienced huge success in e-commerce (see Figure 1), and is on a
mission to proliferate their multi-channel sales model across the globe. South Korea is one of
the most recent locations in which Ralph Lauren has chosen to roll out an e-retail initiative.
Explosive economic growth across Asia has rapidly expanded the market for luxury goods and
services. In South Korea, this growth has been particularly strong and consistent, as has South
Korean consumers' appetite for luxury. This strong market growth, confluent with the reputation
as the world's most wired country, makes South Korea an attractive target for e-commerce
implementation.
The Ralph Lauren team came to us with a rather broad request: to help them investigate the
potential challenges of their e-retail initiative in South Korea. Through our research, we found
several interesting and pertinent optimization models that could be modified to plan for Ralph
Lauren's e-retail operation in South Korea, but as we delved into these models we realized that
they didn't address Ralph Lauren's paramount mission in Korea, which is to "elevate the brand".
We took a step back and zeroed in on our focus question: how could Ralph Lauren elevate its
brand while simultaneously launching an e-commerce initiative in South Korea?
We believe the insights gained from our study will help Ralph Lauren utilize "systems-thinking"
to make strategic and operational decisions in South Korea that can elevate their brand image.
These insights might also apply to other luxury retailers considering an e-commerce initiative in
South Korea or other countries. This thesis presents several thought models that incorporate
factors like inventory policy, brand strength, mediation, customization and online sales mix -
which may make this research of interest to sales, marketing, operations and supply chain
professionals.
In South Korea, the luxury market is growing and its customers are evolving. The number of
young luxury consumers is on the rise, and their values, communication channels, and service
demands are different than older luxury consumers. Korean luxury consumers no longer attach
themselves to a brand simply because of its name or country of origin. Customers seek more and
more differentiation and are yielding their loyalty to the brands that can provide the most
customization, superior service, and highest value. Korean customers seeking value will also be
price-sensitive shoppers - which can be a huge challenge for luxury retailers who don't use
discounting as a sales lever. In the particular case of Ralph Lauren, a major obstacle is reversing
the damage done to their image by its licensee, who harvested the brand over the past decade.
For companies like Ralph Lauren, success or failure in a particular market is heavily reliant on
brand image. The opportunity for growth is huge in South Korea, but to capture this potential,
Ralph Lauren will have to differentiate itself and elevate its brand. Managing a brand image can
be extremely challenging when dealing solely with a brick-and-mortar retail operation; this
challenge is intensified when luxury companies introduce an e-retail channel. When e-retail is
initiated, luxury companies can face rejection from customers who see this as a commoditization
of their merchandise. Understanding how different factors such as e-retail, inventory strategy,
and additional services affect brand image can help luxury companies optimize their supply
chain and gain an edge over their competitors.
This thesis suggests several pertinent questions, as well as their possible answers, about how a
luxury brand in South Korea might be affected when e-retail is introduced. By analyzing eluxury
from a systems perspective, we were able to gain insight and prescribe several actions that
could help Ralph Lauren elevate their brand. These insights could help Ralph Lauren realize the
full potential of the Korean Luxury market - both online and offline.
The relationship between stock-outs and overall brand image varies not only by label, but also by
product category within each label. Since floor space in the South Korean stores is extremely
limited, higher-end Collection items, as well as unique or stand-alone merchandise (vintage
refurbished items) should get priority stocking in-store. A strategic selection of Blue Label items
should be co-mingled in the brick-and-mortar store among the high-end SKUs - particularly the
accessories. This should not only elevate the Ralph Lauren brand as a whole, but also create
aspirational demand for Blue Label customers to "buy up" to the Collection level.
There is a clear opportunity for the e-commerce platform to enhance store operations - providing
a virtual stock room for store associates to fulfill demand from. iPad's @ or similar tablets can
be used to complement the limited assortment on-site. Store associates can provide greater
service to customers by giving them the opportunity to customize their merchandise as well as
their delivery details. Website design should mirror the experience of the brick-and-mortar
operation. The site should not only tell the story of the brand, but also segment out merchandise
according to customers. For example, Collection customers who enter the Collection portion of
the website should also have easy access to most Blue Label merchandise, because they are
likely to "buy down" to Blue Label fairly often. However, the Blue Label segment of the site
should only strategically display certain Collection Label items (like accessories) - to elevate the
attractiveness and inspire demand for the Blue Label items, while not harming the Collection
image.
Complete integration of the customer experience should be part of Ralph Lauren's everyday
operational practice. "Clicks and bricks" cannot be thought of as separate business units, but
rather pistons in the same engine that drives brand image. Just as e-retail should try to bring the
"store experience" online, the brick-and-mortar stores should try to bring e-retail into their daily
operations in a way that is consistent with Ralph Lauren's goal of elevating the brand. Store
associates should leverage the broad SKU assortment available at the central DC to enhance their
customer service capabilities. Behavioral drivers should be in place to reward store associates
for creating an online sale (similar to Store-Net in the U.S.). If the customer makes an online
purchase from a Ralph Lauren store, the mediation they experience can be mitigated by giving
the customer a tangible item to walk out with. These items might be small (so that several can be
stocked in a store) but they should not be worthless trinkets. Single batch, unique accessories
that customer find value in will elevate the brand image and eliminate mediation.
Ralph Lauren should leverage IT enhancements and social networks to tap into the "viral effect"
of e-commerce, but be careful to avoid marketing hazards in the blogosphere. Marketing should
be honest and consistent and convey the brand image and lifestyle they want to attain. All of the
systems and networks should enable Ralph Lauren to create personal relationships with
customers while telling the story of the brand.
Overall, our analysis of the e-luxury opportunity in South Korea is positive. We agree that Ralph
Lauren has synergies to be achieved by bringing e-retail to the traditionally brick-and-mortar
business, and the market is ripe for implementing such a strategy. We found several mutually
reinforcing factors that seem to indicate Ralph Lauren is perfectly positioned to drive towards its
twin goals of elevating the brand and introducing e-retail. It will be interesting for supply chain
professionals to further analyze this initiative as it rolls out in South Korea and across Asia, and
we look forward to re-examining Ralph Lauren's position a decade from now to see how eluxury
has played out.