Ralph Lauren has only grown its North American digital sales by 3% since the first quarter of this year, a large concern considering that is far less growth than its peers, according to a new Credit Suisse report emailed to Retail Dive.
As part of the process to clean up its North American business, Ralph Lauren is trying to limit "daigou" sales, a form of cross-border exporting in the luxury industry. Credit Suisse describes these consumers as Asian buyers that purchase items via a U.S. website promotion and transport them to China or Korea. It may take a few quarters before the problem is resolved and North American digital sales can increase, according to Credit Suisse. North American domestic sales, however, were up year over year in the high teens.
The brand also noted in its meetings with Credit Suisse that it plans to take the pandemic as a time to aggressively pivot from low-value online customers and pursue higher-margin customers, a demographic which the company believes to be more accommodating of its recent price increases, reduced promotions and higher-end selection of products.
Though many retailers have seen e-commerce growth in Q2, Ralph Lauren is among other apparel brands trying to get e-commerce operations on track as the pandemic pushes customers online.
Part of that process for Ralph Lauren is defining a customer base that is more high-end than its current one, and simultaneously pulling back on promotions. To do that, the retailer is creating "smart customer profiles" in some regions that help it to better target advertisements and avoid sending promotions to customers who are willing to buy at full-price.
Although Ralph Lauren is pulling back on promotions, it's not clear that higher-income consumers will be rushing to buy luxury goods during the pandemic. Ralph Lauren, alongside other high-end brands like Michael Kors and Jimmy Choo, has faced the impacts of the crisis, with revenue falling 66% in Q1.
Ralph Lauren is also working to reduce its wholesale distribution, but the brand still has a substantial department store presence. However, in order to better oversee the Ralph Lauren aesthetic and consumer targeting in wholesale, the company is "one of very few brands" to integrate its digital team with Macys.com, Credit Suisse said.
Its collaboration with Macy's in the wholesale channel comes as the department store begins to recover from its own recent losses. Though Macy's physical store sales declined by 61% in the second quarter, its e-commerce sales increased by 53% and the department store narrowed its loss from the previous quarter.