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Ralph Lauren’s approach to brand equity, Gen Z, and the metaverse

By Angela Gonzalez-Rodriguez


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Business |ANALYSIS

Image: Ralph Lauren X ZEPETO

Over the past months, Ralph Lauren has taken the lead as a trailblazer into new digital markets. From dressing up Emojis to launching exclusive virtual experiences or debuting limited collections for Roblox and Zepeto avatar customers, the quintessential preppy fashion group is taking the metaverse by storm.

“We are getting into a new space where younger generations are really comfortable,” explained the company’s CEO Patrice Louvet during a conversation at this year’s NRF Big Show in New York. “We are working on how to project the brand and engage customers meaningfully, remaining on brand and on strategy.”

When asked how this innovation roadmap aligns with Ralph Lauren’s original vision for its namesake company, the company’s CEO assured that the designer is “fully involved and engaged”, having led the way when it came to embracing Zoom and other digital workways. “We talk about Roblox and metaverse and he’s full-on; bringing energy and momentum to the company,” added Louvet. The fashion group’s CEO is certain that there’s a growing interest in the metaverse from a consumer standpoint: “We have to be there to win the next generation.”

Louvet went on to share the ties between a 50 years old brand and the younger generations. “There are many parallels between Ralph’s vision and the metaverse; Ralph has created different worlds (think of winters in Colorado, summers in Montauk…) which creates great consistency between our philosophy and what the metaverse brings.”

Where is Ralph Lauren investing when it comes to digital and omni-channel?

The luxury fashion group’s digital investments have remained focused on creating content for all platforms, enhancing digital capabilities to improve the user experience and continuing to leverage Artificial Intelligence (AI) and data to serve its consumers more efficiently. In the fiscal second quarter, the company, in association with Zepeto, launched its first digital apparel collection. It also introduced the exclusive Next Generation-focused capsules for Urban Outfitters and ASOS as well as a new Ralph’s Club fragrance. Ralph Lauren started its second digital-forward Emblematic retail concept in Shanghai.

For Louvet it’s all about “Innovation as a mindset: We have to experiment, o innovate, to try new things.” The executive acknowledged that they “don’t have a recipe to do it well, but we need to be there. First and foremost, this is a fantastic opportunity to interact with younger consumer, to create experiences. You can get into Roblox and get your avatar to have a virtual coffee at a virtual RL coffee shop, create a virtual outfit on Zepeto or visit the Madison store virtually.” Ralph Lauren is also making significant progress in expanding digital and omni-channel capabilities. In their second-quarter fiscal 2022, the company’s digital business continued to be a key growth driver, with accelerated digital sales across all regions. Total global digital sales enjoyed a 45 percent jump, while owned digital e-commerce rose more than 35 percent on a yearly basis.

Ralph Lauren’s plans to monetize the metaverse

Analysts at Morgan Stanley looking into the economics of the metaverse for luxury brands such as Ralph Lauren estimate the market opportunity for luxury goods makers to sell virtually as they do physically could be as large as 57 billion dollars by 2030. That could lift revenue by more than 10 percent, and industry earnings before interest and tax by 25 percent. Using Roblox as an example, where, per Morgan Stanley’s analysis, one in five gamers change their avatars daily, the investment bank analysts highlight that “Image is everything in virtual experiences.”

Last August, Ralph Lauren entered into a new partnership with ZEPETO to “further demonstrate our belief that innovating in virtual worlds is essential to engaging the next generation of consumers.” In addition to the impact this move is expected to have in the group’s innovation efforts, it also marked the first time that Ralph Lauren digital apparel would be available for purchase thus serving as a good way to create another revenue stream. In this regard, Ralph Lauren’s Chief Digital Officer, Alice Delahunt, pointed out at the time of the announcement that “Ralph Lauren has always embraced new environments, and we’re excited to push the boundaries in this emerging arena. Making our product available to purchase and wear digitally and allowing consumers to experience the brand in immersive new ways is the next frontier.”

According to Ralph Lauren’s CEO, they have already sold more than 100,000 units sold on Zepeto during their first week live there. “People want their avatars dressed and looking stylish,” assured Louvet earlier this week from New York’s stage at the NRF annual conference.

For Ralph Lauren, joining forces with Zepeto “builds on the company’s recent launches in the immersive and augmented reality, gaming and digital product spaces, including the highly successful Ralph Lauren X Bitmoji Collection launch, innovation with Snapchat Logo Scan Lenses and the recently-announced partnership with G2 Esports as the first luxury brand to outfit an esports gaming team on a long-term basis.”

“Our engagement in the metaverse is a natural extension of our lifestyle brand which, at its core, has always been about stepping into the worlds of Ralph Lauren,” further said in November last year Delahunt. “Our partnership with Roblox builds on years of digital innovation and underlines our belief in the opportunity that virtual spaces and economies present—especially when it comes to the next generation of consumers.”

Market’s excitement about Ralph Lauren’s digital strategy for the future luxury consumer

The market is reacting eagerly towards Ralph Lauren (RL) digital efforts, with analysts at Cowen saying that the preppy fashion group has prepared itself for growth for the holiday season and beyond. Noteworthy, RL shares trended up in 2021, gaining about 17 percent by the end of the year.

John Kernan from Cowen wrote in a note to investors that, Ralph Lauren remains focused on digital growth, which goes hand in hand with substantial investments in marketing strategies. “Management is leaning into this brand momentum to continue to fuel future growth,” explained Kernan of such marketing investments. “It’s possible that Ralph Lauren could increase its marketing investments to nearly 7 percent to 8 percent of sales,” Kernan estimated for ‘MarketWatch’. The retail market expert added that at Cowen they “believe Ralph Lauren has multiple initiatives in place that could elevate the brand and reaccelerate growth longer term, including improving quality of sales and distribution; evolving product, marketing investments and enhanced customer experience to reach new customers, including Gen Z and Millennials.”

Similarly, the Equity Research team at Zacks points out that “RL’s focus on expanding digital and omni-channel capabilities, through investments in the mobile app, omni-channel and fulfillment, bodes well.”

Ralph Lauren