As online shopping is starting to gain more and more popularity, high-end retailers are opting to move their business in the virtual environment, saving big bucks on rent and salaries. The latest company that decided to close its Fifth Avenue flagship shop is Ralph Lauren, its iconic polo shirts being moved to a cost-effective digital platform.
The Way Forward Plan
Last year, Stefan Larsson – the company’s former CEO – announced a new long-term financial project dubbed Way Forward Plan. In short, Larsson proposed that Ralph Lauren focus on reducing headcount, closing stores, and investing in its core brands. According to the press release:
“[Ralph Lauren has] a powerful, authentic brand with unique elasticity, and we will bring our Company to a stronger place than ever before by connecting our brand voice more closely to consumers and evolving our operating model.”
The revolutionary business plan accurately predicted a drop in net revenues, staying ahead of the curve by reinvesting in the essence of the brand and keeping up with the latest, virtual shopping trends.
If all goes according to plan, the company will save approximately $140 million by the end of the next fiscal year. The $370 million from inventory-related costs, employee severance fees, and lease termination charges were included in the financial predictions.
For the moment, the biggest headache comes from its rental agreement. Back in 2014 when Ralph Lauren signed the lease for the Fifth Avenue location, it agreed to a 15-year contract. Real estate experts estimate that the yearly rent reaches approximately $25 million.
Currently, the company’s plan is to close only the Fifth Avenue store, but the seven remaining New York locations will be thoroughly analyzed. The brand is looking to achieve a maximum level of client experience.
Starbucks or Ralph’s Coffee?
Besides the transition from Fifth Avenue to an online domain, the company is also planning on expanding on other, untapped retail concepts. Ralph Lauren mentioned that they are currently toying with the idea of Ralph’s Coffee. No other details were released so the concept could cover a Starbucks-like coffee shop or a gourmet store.
Other iconic Ralph Lauren products like its signature scents, accessories, decorations, linen, and clothes will benefit from a rebranding, the customer’s preferences being a top priority for the brand.
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