Ralph Lauren's $13 Billion Bet

David Lauren is turning his father's empire into a digital leader—and shaking up the fashion industry.

Photo by Francois Dischinger

David Lauren was racked with anxiety. It was 2 a.m. in London and a small crowd of Ralph Lauren employees huddled outside the company's U.K. flagship on New Bond Street, trying desperately to make a technology come to life in an unprecedented way. David, the 39-year-old son of Ralph and the company's executive vice president, was planning to debut a novel 4-D light show in less than 24 hours, to celebrate the launch of Ralph Lauren e-commerce in the U.K. The 4-D project had been months in the making, relying on architectural light-mapping techniques to create an eight-minute holographic video that would be projected onto the storefront. If everything went right, the building would seemingly disappear, replaced by 3-D images of 15-foot-tall models walking down runways and giant polo players galloping across fields. A rendering of Ralph himself would wave to the throng of fans. The exorbitant fourth dimension: the scent of Big Pony cologne, which would be spritzed onto the crowd below.

For now, though, the team was simply hoping for a successful sound check. As the show's instrumental score finally blasted through the dark city streets, a choir of car alarms joined in. "I just thought, Oh my God, I can't believe the sound works," says David, recalling the unease that comes with trying to get every detail right. "We'd never seen anyone do it live. We were just hoping we'd pull it off."

Despite the challenges of that November evening—in addition to the technical complications, David had to get permits to close city streets and convince competing retailers, including Cartier, to let Ralph Lauren project the show from their windows—the 4-D project brought cheers from the thousands in attendance the next day. Hours later, a parallel 4-D spectacle wowed onlookers at Ralph Lauren's New York flagship on Madison Avenue, to commemorate the 10th anniversary of ralphlauren.com in the U.S. The London show inspired two spectators to purchase $50,000 watches on the spot—transactions that hardly offset the cost of the project, estimated at $1.5 million (a figure the company declines to confirm). But the big value came from the 700 million media impressions that videos of the shows received online. "You could do a road show and never reach that many people," says Marshal Cohen, chief industry analyst at the NPD Group.

I needed the right person to run the media company,
"I needed the right person to run the media company," says Ralph Lauren. "David made it work. It's his baby." | Photo by Francois Dischinger

Ralph Lauren is one of the most iconic, successful fashion brands on the planet. With a market cap of $13 billion, it extends from the fashion runways to mass market, from Bergdorf Goodman to JCPenney, from customers seeking a $17,000 Ricky handbag to those interested in an $85 polo. The company encompasses more than 20 interrelated brands—including newcomers Denim & Supply and Collection Denim (launching this month)—and is engaged in an aggressive global expansion, having repurchased most of its licensed businesses over the past 10 years. Going directly for the heart of the fashion world, Ralph Lauren recently opened a new flagship on the Boulevard Saint-Germain in Paris, and this fall, it will launch e-commerce in France. Revenue is climbing steadily, and the company's share price has more than doubled in the past two years.

The Ralph Lauren brand has thrived for decades by bringing to life a classic, even nostalgic aesthetic—an appealing, attractive, exclusive world that consumers have shown terrific hunger for. The risk embedded with this approach is that those consumers, at some point, may view this nostalgia as predictable, even old. David's task is to keep the brand fresh, to make his father's vision feel relevant in a fast-changing modern world. "This is all about the next generation," says Cohen, who calls David "the heir to the throne." He continues: "This brand is steeped in tradition and heritage, but you have to find new horizons." In navigating the digital space, David's creative instincts mirror those of his father's. "Ralph Lauren is not an architect, but he has a vision when he walks into a store," says David, who as head of Ralph Lauren Media oversees global marketing as well as e-commerce. "That's the same vision I have when I go on the Internet. This is how I want the brand to unfold."

It's never easy to be your own man and your father's son, but David is absolutely both," says Anna Wintour.

By associating Ralph Lauren with new digital technology, David has done more than imbue the brand with a current vibe. He has, in the process, made the company a progressive leader among fashion peers. In 2009, David produced an online-only fashion show for Ralph Lauren's heritage Rugby brand that, for the first time ever, allowed viewers to shop the looks in real time. (The industry standard puts six months between the runway and when items land in stores.) Rugby's sales rose 34%. Last year, David and his team introduced the RL Gang, an online illustrated children's storybook featuring live-action video of kids in Ralph Lauren ensembles—which can be purchased as the story progresses; children's sales jumped 300%. While analysts estimate that online revenue currently accounts for just 6% of the company's overall sales, they project it could climb as high as 30% in the years ahead. "It's one of the fastest-growing, best-executed businesses for Ralph Lauren," says Omar Saad of ISI Group.

Infographic: Polo's Power Play Popup-Icon

In the fashion world, Ralph Lauren has "been quietly leading the way," says Cohen. Burberry, which has earned praise (from Fast Company, among others) for its embrace of digital technology, offered pre-orders of collection items from its live-streamed runway show a season after the Rugby debut. "This industry thrives on being avant-garde," Cohen continues, "but when it comes to technology, it's risk averse. It's bandwagon driven."

David Lauren is taking a distinctive approach, and that has put him in an increasingly powerful position at the company. "Our intention was never to launch a website," David says, during one of multiple in-depth interviews. "Our intention was to build a media brand." Anna Wintour Vogue editor-in-chief and doyenne of the fashion world, likens David's passion to that of his father's when he launched the company back in 1967. "There are very few designers who have Ralph Lauren's genius when it comes to envisioning and controlling every aspect and expression of their brand," Wintour says. "It's never easy to be your own man and your father's son, but David is absolutely both."

Ralph and David, pictured here in 1982, at the RRL Ranch in Ridgway, Colorado
Ralph and David, pictured here in 1982, at the RRL Ranch in Ridgway, Colorado.

"My dad is my best friend, my father, and my boss," David says, sitting in his corner office overlooking Madison Avenue. "When I do something that is exciting and he likes it, it feels three times as good as you can imagine." He pauses before continuing. "But when an idea doesn't get responded to appropriately, it means that my dad, my best friend, and my boss didn't like my idea. It's three times the frustration."

The company's headquarters are in a sleek glass skyscraper, yet when you emerge from the elevator on the sixth floor, you feel as if you've entered an extravagant hunting lodge. The aroma of leather and mahogany is transporting. The walls are wood-paneled, the chandeliers are brass, the couches overstuffed. You can hardly believe you're in New York.

But this isn't where David works. He and his team spend their days across the street, in a different kind of space: simple, sparse, modern. David, dressed casually in red flannel, cargo pants, and sneakers on this particular day in May, has a streamlined office, boasting a glass desk, a black lacquer coffee table, and steel bookshelves peppered with sports paraphernalia and treasures such as a Back to the Future hover board signed by Michael J. Fox. ("I idolize him," David confesses.) The one element that echoes the HQ: the Ralph Lauren imagery proudly displayed on the walls.

"As a kid, I used to come to our offices and play under the desks of people I now work with, or who work for me," David reminisces. "I would come in and play with fabrics and make little clothes for my Snoopy. People here feel like family," he says. "But if I couldn't make a difference, I wouldn't be here. My father wouldn't want me to be here."

"They both have strong egos and visions," says Andrew, David's older brother.

"I needed the right person to run the media company," Ralph says. It is several weeks later, and Ralph is sitting in his own office, across the street. In a few hours, he, David, and the rest of the family will be flying to their 15,000-acre ranch in Colorado for the weekend. "David made it work. It's his baby."

A man famously involved in every decision made at his company, Ralph acknowledges an unfamiliarity with the digital world. "It was a project I wasn't really knowledgeable about," he says. And not everything David suggested was immediately embraced. "I didn't get it," Ralph says of the 4-D show, recalling when David first pitched it to him. "I had to take a step back and say, 'I'm not sure of this.' On my own I might not have done it." He was persuaded, he says, by David's passion and insistence.

"They both have strong egos and visions," says Andrew Lauren, 42, David's older brother (who does not work at the company). "That's where they butt heads. In a father-and-son team, there's always the quest for acknowledgment and credit." (This was evident when I asked Ralph about David's launch of Ralph Lauren Media, and Ralph quickly corrected me: "I started the media company. I needed somebody who really understood it, and David was really very good at it.")

The pair see each other daily and talk business on the phone multiple times a day. They make no effort to hide their familial bond in the office—David casually refers to Ralph as "Dad." Says Ralph: "I don't even hear what he's calling me. When I'm with him, he's my son, of course, but he's also my guy who works with me. It's not an unnatural relationship."

Ralph Lauren Media's 4-D show featured architectural light-mapping and generated 700 million media impressions
Ralph Lauren Media's 4-D show featured architectural light-mapping and generated 700 million media impressions.

A few weeks after the 4-D shows, the company celebrated Ralph Lauren Media's 10th anniversary with a party at New York's Peninsula hotel. All of the division's staffers were invited for a glitzy sit-down dinner and dancing. The highlight came when Ralph congratulated everyone on the group's accomplishments. "Ralph is not personally comfortable in the digital space, so he really has a tremendous amount of dependency on David," says media division president Sarah Gallagher. It was a rare opportunity for Ralph Lauren Media employees to lay eyes on their storied CEO and a reminder that David, their affable and personable boss, has an unusually close relationship with the company founder. The 71-year-old Ralph beamed, looked at David, and said, "You have made me very proud."

"I was very much against joining this company," David says today. "It was difficult to say, 'I want to work for my dad.'" David's interest wasn't fashion. As a sophomore at Duke University in 1990, David launched a magazine for twentysomethings called Swing, which strove for a youthful take on current affairs. It was David's defense of his so-called apathetic generation. Publisher Hachette Filipacchi acquired Swing after David graduated, building the circulation to 200,000, but in 1998, after four years, the monthly magazine shuttered. Disheartened, David spent the following year traveling and pondering his future.

Ralph implored David to consider the family business. Recognizing the potential of the Internet, Ralph suggested that his son run a media operation within Ralph Lauren. David resisted. He was far from a techie; his web literacy was limited to checking email. But he was also forward-thinking enough to see that the company's future might lay online. With much uncertainty, he accepted his father's offer. In preparation, he hired a 16-year-old tutor to improve his computer skills. Still, when he walked into the Ralph Lauren offices to begin work, he seemed unconvinced that he'd made the right decision. "I wasn't sure he was totally happy that first day," says Ralph. "I said to myself, 'This is the end of David.'"

That was in 2000. David's initial goal was to build an e-commerce website that featured original entertainment content—a well-trod marketing maneuver today but eye-openingly ambitious a decade ago, particularly for a fashion house. Ralph Lauren Media (the division started as a joint venture with NBC Universal, but the company gained full ownership in 2007 after buying out NBC's 50% stake for $175 million) pulled together 40 employees (mostly from inside the company) and began cranking. That year, Ralph Lauren launched the luxury industry's first e-commerce site, created Ralph Lauren Magazine, an online publication with original articles, and Ralph Lauren TV, an original web channel covering fashion, design, and sports, and featuring celebrity interviews. Together, the pieces formed what David calls "merchantainment," the blending of commerce and content. This strategy echoed Ralph's own distinctive print-advertising moves from 30 years ago: The goal was not to push specific Ralph Lauren products, but rather to sell the idea of the Ralph Lauren lifestyle.

Tennis champ and RL brand ambassador Boris Becker tries out interactive windows in 2007
Tennis champ and RL brand ambassador Boris Becker tries out interactive windows in 2007. | Sang Tan/AP

After seeing the 2002 flick Minority Report, David was inspired by the film's special effects, in which Tom Cruise's character interacts with and manipulates holographic images. David saw the futuristic scene as an opportunity: What if the windows of their retail stores could feature interactive images, and passersby could view Ralph Lauren merchandise and make purchases? David placed a call to the office of director Steven Spielberg to ask how the technology could be replicated; it was science fiction, he was told, not reality. Undeterred, David launched his team on a long-term R&D project, and in 2006, Ralph Lauren introduced the first interactive, shoppable windows in their New York stores. The pioneering technology was fawned over by the media, and, in an unlikely turnabout, garnered a "How'd you do that?" call from Spielberg himself.

"Because of David's youth and enthusiasm, he really got the digital world and he got it early," says Richard Kirshenbaum, chairman of advertising firm Kirshenbaum Bond Senecal + Partners, and a close friend of David's. As Ralph Lauren Media hit its stride, David continued to blend media and retail in inventive ways, keeping the company on the forefront. It was the first luxury company to build smartphone applications with mobile-tagging capabilities. Says Marie Driscoll of Standard & Poor's Equity Research: "David doesn't operate in one-offs."

"Our intention was never to launch a website. Our intention was to build a media brand," says David Lauren.

That's not to say that moving one of the most iconic American brands into a tech-savvy space was without its challenges. "People thought it would hurt our luxury capability," David says. To convince naysayers, he spent time visiting the company's retail stores with a laptop, showing them the opulent experiences being created on the web. "We had to get the retail group to think of us not as a threat, but as an enabler," says media division president Gallagher. "It certainly helped to have someone with the last name Lauren as an advocate."

"The Internet came at the right time for us," David contends. "Our stores are like movie sets. Our ads are like still lifes of movies. The web let us create truly interactive, immersive movies." He continues, "It's not about the technology. It's about the brand."

Though the Ralph Lauren brand is all about easy luxury, the man behind it comes from anything but. Ralph—born Ralph Lifshitz—grew up in a working-class neighborhood in the Bronx, the same part of New York where he and his wife, Ricky, would make their first home. David's Manhattan upbringing was far different, though he and his siblings were spared some of the worst excesses of privileged New York life. "My parents are famously not part of the gestalt of the fashion industry,"he says, citing his father's regular presence at nightly dinners as he was growing up. The Laurens were tight-knit. Summer Friday evenings were spent watching films off a projector. (Family favorites include Cary Grant classics and "stories of rags to riches," says Andrew, with whom David shared a bedroom for 16 years.) That sense of togetherness, according to Ralph, afforded his children the confidence to step out from behind his shadow. "They're not followers. They're proud of what they can do," he says. "Even when they were growing up, I'd ask if they'd want to borrow my car, and they'd say, 'No, I'll take the train, I'll take the bus.' They're not relying on the company."

When Ralph talks about David's childhood, the business mogul disappears; he is simply a father speaking fondly about his son. "When David was little, he zoomed around the house on his little bikes in his little robe and slippers. I'd look at him and think, This guy is going somewhere," Ralph recalls. "He's a very sweet boy—man," he corrects himself.

In his adolescence, David exercised a vivid imagination. He loved comic books and superheroes, and created secret identities for himself. (These identities, however, are now locked in the family vault. "I know all about those, but I'm not going to tell. He may kill me," says Ralph.) Today, his imagination is evident in his unwillingness to accept the impossible. "The best thing about my brother is he's curious," says Andrew. "He wants to know what's out there, what's been done, and what could be done better."

A shoppable, online children's storybook, the RL Gang, has led to a 300% increase in sales of kids' clothes
A shoppable, online children's storybook, the RL Gang, has led to a 300% increase in sales of kids' clothes.

The weight of the family business, David says, was never placed on the shoulders of the Lauren children. "My parents always told us, 'Just be happy,'" he says. Andrew was a film buff growing up; he now runs his own production company and has produced such critical hits as 2005's The Squid and the Whale. Younger sister Dylan, 37, used to create art out of candy as a child; she now owns Dylan's Candy Bar, an empire in its own right. David's passion for media, by contrast, led him to the family business. "He found a place that felt comfortable, but it also gave him a certain amount of freedom from my dad," says Andrew.

David was glowing as his father walked down the runway of New York's Skylight Studio in February, accepting applause for the 53 China-inspired pieces of his fall 2011 collection. Ralph, dressed in all black, looked proud of the gowns that lifted the crowd—a veritable who's who of the fashion industry—to their feet. As he stopped to embrace his family members, it was hard to miss the genuine admiration David feels for his father. "Of course David looks up to his dad," says Gallagher.

While David will never take a designer's walk down the runway, there is industrywide speculation that the prince of Polo will eventually succeed his father as CEO. David is happy to discuss certain personal milestones—he beams when discussing his upcoming nuptials to model, designer, and longtime girlfriend Lauren Bush—but he is mum about his future at the company. "My role has been growing every year," he simply says. "I'm very fortunate." Despite his age, Ralph shows no immediate interest in slowing down. (Even after selling 11.35 million of his shares in the company in 2010, estimated at $919 million, Ralph still holds 76% voting power.) "At some point he will say, 'I can't do this all the time,' and it's not out of the question that one of us would step in," says Andrew, clearly trying not to single out his brother (Andrew has no plans to join the company). "But time will tell. David is succeeding where he is."

"David is, and will be, a major person in the company," Ralph says of the years to come. "I can't say today where we're going, but David will be very important."

On a rainy May morning, David meets with his team to discuss this month's U.S. Open, of which Ralph Lauren has been the official outfitter since 2005. They're discussing the merits of an interactive virtual tennis court called "The Serving Challenge," which was first shown off at Wimbledon. David is excited about how that experience could be extended: You serve a tennis ball against a video monitor and the ball appears on screen, continuing its journey virtually; the serve's speed and accuracy are tracked, and both info and video are emailed to the participant, along with stats about their athletic prowess. For the U.S. Open, David wants his team to place the Serving Challenge in the Herald Square windows of Macy's, allowing shoppers to participate; rackets would be provided by Ralph Lauren ambassadors stationed outside the store. "This will catch people, and it could be viral! People will email their videos to their cousins," David says. "We can post the videos online and drive people to the web. It's a gimmick, but it could work."

His eager speech is met by concerned faces. Worried about cost, technology, and logistics, his team offers up other ways to promote the Open at Macy's. In the end, David is forced to accept defeat. ("Every time he comes back from a cocktail party he has some new, wild idea," says Gallagher.) But he shrugs it off, confident that in the long run, if he keeps pushing, Ralph Lauren will be the better for it: "I've stopped looking over my shoulder. I won't be burdened by doing anything that's me too," says David. "It's so rare that opportunities come along where you get a little theater, you know?"

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