Nike Company History
Founded as an importer of Japanese shoes, NIKE, Inc. (Nike) has grown to be the world's largest marketer of athletic footwear and apparel. In the United States, Nike products are sold through about 20,000 retail accounts; worldwide, the company's products are sold in about 110 countries. Both domestically and overseas Nike operates retail stores, including NikeTowns and factory outlets. Nearly all of the items are manufactured by independent contractors, primarily located overseas, with Nike involved in the design, development, and marketing. In addition to its wide range of core athletic shoes and apparel, the company also sells Nike and Bauer brand athletic equipment, Cole Haan brand dress and casual footwear, and the Sports Specialties line of headwear featuring licensing team logos. The company has relied on consistent innovation in the design of its products and heavy promotion to fuel its growth in both U.S. and foreign markets. The ubiquitous presence of the Nike brand and its Swoosh trademark led to a backlash against the company by the late 20th century, particularly in relation to allegations of low wages and poor working conditions at the company's Asian contract manufacturers.
BRS Beginnings
Nike's precursor originated in 1962, a product of the imagination of Philip H. Knight, a Stanford University business graduate who had been a member of the track team as an undergraduate at the University of Oregon. Traveling in Japan after finishing up business school, Knight got in touch with a Japanese firm that made athletic shoes, the Onitsuka Tiger Co., and arranged to import some of its products to the United States on a small scale. Knight was convinced that Japanese running shoes could become significant competitors for the German products that then dominated the American market. In the course of setting up his agreement with Onitsuka Tiger, Knight invented Blue Ribbon Sports to satisfy his Japanese partner's expectations that he represented an actual company, and this hypothetical firm eventually grew to become Nike, Inc.
At the end of 1963, Knight's arrangements in Japan came to fruition when he took delivery of 200 pairs of Tiger athletic shoes, which he stored in his father's basement and peddled at various track meets in the area. Knight's one-man venture became a partnership in the following year, when his former track coach, William Bowerman, chipped in $500 to equal Knight's investment. Bowerman had long been experimenting with modified running shoes for his team, and he worked with runners to improve the designs of prototype Blue Ribbon Sports (BRS) shoes. Innovation in running shoe design eventually would become a cornerstone of the company's continued expansion and success. Bowerman's efforts first paid off in 1968, when a shoe known as the Cortez, which he had designed, became a big seller.
BRS sold 1,300 pairs of Japanese running shoes in 1964, its first year, to gross $8,000. By 1965 the fledgling company had acquired a full-time employee and sales had reached $20,000. The following year, the company rented its first retail space, next to a beauty salon in Santa Monica, California, so that its few employees could stop selling shoes out of their cars. In 1967 with fast-growing sales, BRS expanded operations to the East Coast, opening a distribution office in Wellesley, Massachusetts.
Bowerman's innovations in running shoe technology continued throughout this time. A shoe with the upper portion made of nylon went into development in 1967, and the following year Bowerman and another employee came up with the Boston shoe, which incorporated the first cushioned mid-sole throughout the entire length of an athletic shoe.
Emergence of Nike in 1970s
By the end of the decade, Knight's venture had expanded to include several stores and 20 employees and sales were nearing $300,000. The company was poised for greater growth, but Knight was frustrated by a lack of capital to pay for expansion. In 1971 using financing from the Japanese trading company Nissho Iwai Corporation, BRS was able to manufacture its own line of products overseas, through independent contractors, for import to the United States. At this time, the company introduced its Swoosh trademark and the brand name Nike, the Greek goddess of victory. These new symbols were initially affixed to a soccer shoe, the first Nike product to be sold.
A year later, BRS broke with its old Japanese partner, Onitsuka Tiger, after a disagreement over distribution, and kicked off promotion of its own products at the 1972 U.S. Olympic Trials, the first of many marketing campaigns that would seek to attach Nike's name and fortunes to the careers of well-known athletes. Nike shoes were geared to the serious athlete, and their high performance carried with it a high price.
In their first year of distribution, the company's new products grossed $1.96 million and the corporate staff swelled to 45. In addition, operations were expanded to Canada, the company's first foreign market, which would be followed by Australia, in 1974.
Bowerman continued his innovations in running-shoe design with the introduction of the Moon shoe in 1972, which had a waffle-like sole that had first been formed by molding rubber on a household waffle iron. This sole increased the traction of the shoe without adding weight.
In 1974 BRS opened its first U.S. plant, in Exeter, New Hampshire. The company's payroll swelled to 250, and worldwide sales neared $5 million by the end of 1974. This growth was fueled in part by aggressive promotion of the Nike brand name. The company sought to expand its visibility by having its shoes worn by prominent athletes, including tennis players Ilie Nastase and Jimmy Connors. At the 1976 Olympic Trials these efforts began to pay off as Nike shoes were worn by rising athletic stars.
The company's growth had truly begun to take off by this time, riding the boom in popularity of jogging that took place in the United States in the late 1970s. BRS revenues tripled in two years to $14 million in 1976, and then doubled in just one year to $28 million in 1977. To keep up with demand, the company opened new factories, adding a stitching plant in Maine and additional overseas production facilities in Taiwan and Korea. International sales were expanded when markets in Asia were opened in 1977 and in South America the following year. European distributorships were lined up in 1978.
Nike continued its promotional activities with the opening of Athletics West, a training club for Olympic hopefuls in track and field, and by signing tennis player John McEnroe to an endorsement contract. In 1978 the company changed its name to Nike, Inc. The company expanded its line of products that year, adding athletic shoes for children.
By 1979 Nike sold almost half the running shoes bought in the United States, and the company moved into a new world headquarters building in Beaverton, Oregon. In addition to its shoe business, the company began to make and market a line of sports clothing, and the Nike Air shoe cushioning device was introduced.
1980s Growth Through International Expansion and Aggressive Marketing
By the start of the 1980s, Nike's combination of groundbreaking design and savvy and aggressive marketing had allowed it to surpass the German athletic shoe company Adidas AG, formerly the leader in U.S. sales. In December 1980, Nike went public, offering two million shares of stock. With the revenues generated by the stock sale, the company planned continued expansion, particularly in the European market. In the United States, plans for a new headquarters on a large, rural campus were inaugurated, and an East Coast distribution center in Greenland, New Hampshire, was brought on line. In addition, the company bought a large plant in Exeter, New Hampshire, to house the Nike Sport Research and Development Lab and also to provide for more domestic manufacturing capacity. The company had shifted its overseas production away from Japan at this point, manufacturing nearly four-fifths of its shoes in South Korea and Taiwan. It established factories in mainland China in 1981.
By the following year, when the jogging craze in the United States had started to wane, half of the running shoes bought in the United States bore the Nike trademark. The company was well insulated from the effects of a stagnating demand for running shoes, however, since it gained a substantial share of its sales from other types of athletic shoes, notably basketball shoes and tennis shoes. In addition, Nike benefited from strong sales of its other product lines, which included apparel, work and leisure shoes, and children's shoes.
Given the slowing of growth in the U.S. market, however, the company turned its attention to growth in foreign markets, inaugurating Nike International, Ltd. in 1981 to spearhead the company's push into Europe and Japan, as well as into Asia, Latin America, and Africa. In Europe, Nike faced stiff competition from Adidas and Puma, which had a strong hold on the soccer market, Europe's largest athletic shoe category. The company opened a factory in Ireland to enable it to distribute its shoes without paying high import tariffs, and in 1981 bought out its distributors in England and Austria, to strengthen its control over marketing and distribution of its products. In 1982 the company outfitted Aston Villa, the winning team in the English and European Cup soccer championships, giving a boost to promotion of its new soccer shoe.
In Japan, Nike allied itself with Nissho Iwai, the sixth largest Japanese trading company, to form Nike-Japan Corporation. Because Nike already held a part of the low-priced athletic shoe market, the company set its sights on the high-priced end of the scale in Japan.
By 1982 the company's line of products included more than 200 different kinds of shoes, including the Air Force I, a basketball shoe, and its companion shoe for racquet sports, the Air Ace, the latest models in the long line of innovative shoe designs that had pushed Nike's earnings to an average annual increase of almost 100 percent. In addition, the company marketed more than 200 different items of clothing. By 1983--when the company posted its first-ever quarterly drop in earnings as the running boom peaked and went into a decline--Nike's leaders were looking to the apparel division, as well as overseas markets, for further expansion. In foreign sales, the company had mixed results. Its operations in Japan were almost immediately profitable, and the company quickly jumped to second place in the Japanese market, but in Europe, Nike fared less well, losing money on its five European subsidiaries.
Faced with an 11.5 percent drop in domestic sales of its shoes in the 1984 fiscal year, Nike moved away from its traditional marketing strategy of support for sporting events and athlete endorsements to a wider-reaching approach, investing more than $10 million in its first national television and magazine advertising campaign. This followed the 'Cities Campaign,' which used billboards and murals in nine American cities to publicize Nike products in the period before the 1984 Olympics. Despite the strong showing of athletes wearing Nike shoes in the 1984 Los Angeles Olympic games, Nike profits were down almost 30 percent for the fiscal year ending in May 1984, although international sales were robust and overall sales rose slightly. This decline was a result of aggressive price discounting on Nike products and the increased costs associated with the company's push into foreign markets and attempts to build up its sales of apparel.
Earnings continued to fall in the next three quarters as the company lost market share, posting profits of only $7.8 million at the end of August 1984, a loss of $2.2 million three months later, and another loss of $2.1 million at the end of February 1985. In response, Nike adopted a series of measures to change its sliding course. The company cut back on the number of shoes it had sitting in warehouses and also attempted to fine-tune its corporate mission by cutting back on the number of products it marketed. It made plans to reduce the line of Nike shoes by 30 percent within a year and a half. In addition, leadership at the top of the company was streamlined, as founder Knight resumed the post of president--which he had relinquished in 1983--in addition to his duties as chairman and chief executive officer. Overall administrative costs were also reduced. As part of this effort, Nike also consolidated its research and marketing branches, closing its facility in Exeter, New Hampshire, and cutting 75 of the plant's 125 employees. Overall, the company laid off about 400 workers during 1984.
Faced with shifting consumer interests (i.e., the U.S. market move from jogging to aerobics), the company created a new products division in 1985 to help keep pace. In addition, Nike purchased Pro-form, a small maker of weightlifting equipment, as part of its plan to profit from all aspects of the fitness movement. The company was restructured further at the end of 1985 when its last two U.S. factories were closed and its previous divisions of apparel and athletic shoes were rearranged by sport. In a move that would prove to be the key to the company's recovery, in 1985 the company signed basketball player Michael Jordan to endorse a new version of its Air shoe, introduced four years earlier. The new basketball shoes bore the name 'Air Jordan.'
In early 1986 Nike announced expansion into a number of new lines, including casual apparel for women, a less expensive line of athletic shoes called Street Socks, golf shoes, and tennis gear marketed under the name 'Wimbledon.' By mid-1986 Nike was reporting that its earnings had begun to increase again, with sales topping $1 billion for the first time. At that point, the company sold its 51 percent stake in Nike-Japan to its Japanese partner; six months later, Nike laid off ten percent of its U.S. employees at all levels in a major cost-cutting strategy.
Following these moves, Nike announced a drop in revenues and earnings in 1987, and another round of restructuring and budget cuts ensued, as the company attempted to come to grips with the continuing evolution of the U.S. fitness market. Only Nike's innovative Air athletic shoes provided a bright spot in the company's otherwise erratic progress, allowing the company to regain market share from rival Reebok International Ltd. in several areas, including basketball and cross-training.
The following year, Nike branched out from athletic shoes, purchasing Cole Haan, a maker of casual and dress shoes, for $80 million. Advertising heavily, the company took a commanding lead in sales to young people to claim 23 percent of the overall athletic shoe market. Profits rebounded to reach $100 million in 1988, as sales rose 37 percent to $1.2 billion. Later that year, Nike launched a $10 million television campaign around the theme 'Just Do It' and announced that its 1989 advertising budget would reach $45 million.
In 1989 Nike marketed several new lines of shoes and led its market with $1.7 billion in sales, yielding profits of $167 million. The company's product innovation continued, including the introduction of a basketball shoe with an inflatable collar around the ankle, sold under the brand name Air Pressure. In addition, Nike continued its aggressive marketing, using ads featuring Michael Jordan and actor-director Spike Lee, the ongoing 'Just Do It' campaign, and the 'Bo Knows' television spots featuring athlete Bo Jackson. At the end of 1989, the company began relocation to its newly constructed headquarters campus in Beaverton, Oregon.
Market Dominance in the Early to Mid-1990s
In 1990 the company sued two competitors for copying the patented designs of its shoes and found itself engaged in a dispute with the U.S. Customs Service over import duties on its Air Jordan basketball shoes. In 1990 the company's revenues hit $2 billion. The company acquired Tetra Plastics Inc., producers of plastic film for shoe soles. That year, the company opened NikeTown, a prototype store selling the full range of Nike products, in Portland, Oregon.
By 1991 Nike's Visible Air shoes had enabled it to surpass its rival Reebok in the U.S. market. In the fiscal year ending May 31, 1991, Nike sales surpassed the $3 billion mark, fueled by record sales of 41 million pairs of Nike Air shoes and a booming international market. Its efforts to conquer Europe had begun to bear fruit; business there grew by 100 percent that year, producing more than $1 billion in sales and gaining the second place market share behind Adidas. Nike's U.S. shoe market had, in large part, matured, slowing to five percent annual growth, down from 15 percent annual growth from 1980 and 1988. The company began eyeing overseas markets and predicted ample room to grow in Europe. Nike's U.S. rival Reebok, however, also saw potential for growth in Europe, and by 1992 European MTV was glutted with athletic shoe advertisements as the battle for the youth market heated up between Nike, Reebok, and their European competitors, Adidas and Puma.
Nike also saw growth potential in its women's shoe and sports apparel division. In February 1992 Nike began a $13 million print and television advertising pitch for its women's segment, built upon its 'Dialogue' print campaign, which had been slowly wooing 18- to 34-year-old women since 1990. Sales of Nike women's apparel lines Fitness Essentials, Elite Aerobics, Physical Elements, and All Condition Gear increased by 25 percent in both 1990 and 1991 and jumped by 68 percent in 1992.
In July 1992 Nike opened its second NikeTown retail store in Chicago, Illinois. Like its predecessor in Portland, the Chicago NikeTown was designed to 'combine the fun and excitement of FAO Schwartz, the Smithsonian Institute and Disneyland in a space that will entertain sports and fitness fans from around the world' as well as provide a high-profile retail outlet for Nike's rapidly expanding lines of footwear and clothing.
Nike celebrated its 20th anniversary in 1992, virtually debt free and with company revenues of $3.4 billion. Gross profits jumped $100 million in that year, fueled by soaring sales in its retail division, which expanded to include 30 Nike-owned discount outlets and the two NikeTowns. To celebrate its anniversary, Nike brought out its old slogan 'There is no finish line.' As if to underscore that sentiment, Nike Chairman Philip Knight announced massive plans to remake the company with the goal of being 'the best sports and fitness company in the world.' To fulfill that goal, the company set the ground plans for a complicated yet innovative marketing structure seeking to make the Nike brand into a worldwide megabrand along the lines of Coca-Cola, Pepsi, Sony, and Disney.
Nike continued expansion of its high-profile NikeTown chain, opening outlets in Atlanta, Georgia, in the spring of 1993 and Costa Mesa, California, later that year. Also in 1993, as part of its long-term marketing strategy, Nike began an ambitious venture with Mike Ovitz's Creative Artists Agency to organize and package sports events under the Nike name--a move that potentially led the company into competition with sports management giants such as ProServ, IMG, and Advantage International.
Nike also began a more controversial venture into the arena of sports agents, negotiating contracts for basketball's Scottie Pippin, Alonzo Mourning, and others in addition to retaining athletes such as Michael Jordan and Charles Barkley as company spokespersons. Nike's influence in the world of sports grew to such a degree that in 1993 Sporting News dubbed Knight the most powerful man in sports.
Critics contended that Nike's influence ran too deep, having its hand in negotiating everything in an athlete's life from investments to the choice of an apartment. But Nike's marketing executives saw it as part of a campaign to create an image of Nike not just as a product line but as a lifestyle, a 'Nike attitude.'
Nearly everyone agreed, however, that Nike was the dominant force in athletic footwear in the early to mid-1990s. The company held about 30 percent of the U.S. market by 1995, far outdistancing the 20 percent of its nearest rival, Reebok. Overseas revenues continued their steady rise, reaching nearly $2 billion by 1995, about 40 percent of the overall total. Not content with its leading position in athletic shoes and its growing sales of athletic apparel--which accounted for more than 30 percent of revenues in 1996--Nike branched out into sports equipment in the mid-1990s. In 1994 the company acquired Canstar Sports Inc., the leading maker of skates and hockey equipment in the world, for $400 million. Canstar was renamed Bauer Nike Hockey Inc., Bauer being Canstar's brand name for its equipment. Two years later Bauer Nike became part of the newly formed Nike equipment division, which aimed to extend the company into the marketing of sport balls, protective gear, eyewear, and watches. Also during this period, Nike signed up its next superstar spokesperson, Tiger Woods. In 1995, at the age of 20, Woods agreed to a 20-year, $40 million endorsement contract. The golf phenom went on to win an inordinate number of tournaments, often shattering course records, and to become only the second golfer in history to win three 'majors' within a single year, more than validating the blockbuster contract.
Late 1990s Slippage
For the fiscal year ending in May 1997, Nike earned a record $795.8 million on record revenues of $9.19 billion. Overseas sales played a large role in the 42 percent increase in revenues from 1996 to 1997. Sales in Asia increased by more than $500 million (to $1.24 billion), while European sales surged ahead by $450 million. Back home, Nike's share of the U.S. athletic shoe market neared 50 percent. The picture at Nike soon turned sour, however, as the Asian financial crisis that erupted in the summer of 1997 sent sneaker sales in that region plunging. By fiscal 1999, sales in Asia had dropped to $844.5 million. Compounding the company's troubles was a concurrent stagnation of sales in its domestic market, where the fickle tastes of teenagers began turning away from athletic shoes to hiking boots and other casual 'brown shoes.' As a result, overall sales for 1999 fell to $8.78 billion. Profits were falling as well--including a net loss of $67.7 million for the fourth quarter of fiscal 1998, the company's first reported loss in more than 13 years. The decline in net income led to a cost-cutting drive that included the layoff of five percent of the workforce, or 1,200 people, in 1998, and the slashing of its budget for sports star endorsements by $100 million that same year.
Nike was also dogged throughout the late 1990s by protests and boycotts over allegations regarding the treatment of workers at the contract factories in Asia that employed nearly 400,000 people and that made the bulk of Nike shoes and much of its apparel. Charges included abuse of workers, poor working conditions, low wages, and use of child labor. Nike's initial reaction--which was highlighted by Knight's insistence that the company had little control over its suppliers--resulted in waves of negative publicity. Protesters included church groups, students at universities that had apparel and footwear contracts with Nike, and socially conscious investment funds. Nike finally announced in mid-1998 a series of changes affecting its contract workforce in Asia, including an increase in the minimum age, a tightening of air quality standards, and a pledge to allow independent inspections of factories. Nike nonetheless remained under pressure from activists into the 21st century. Nike, along with McDonald's Corporation, the Coca-Cola Company, and Starbucks Corporation, among others, also became an object of protest from those who were attacking multinational companies that pushed global brands. This undercurrent of hostility burst into the spotlight in late 1999 when some of the more aggressive protesters against a World Trade Organization meeting in Seattle attempted to storm a NikeTown outlet.
Seeking to recapture the growth of the early to mid-1990s, Nike pursued a number of new initiatives in the late 1990s. Having initially missed out on the trend toward extreme sports (such as skateboarding, mountain biking, and snowboarding), Nike attempted to rectify this miscue by establishing a unit called ACG—⁄ort for 'all-conditions gear'--in 1998. Two years later, the company created a new division called Techlab to market a line of sports-technology accessories, such as a digital audio player, a high-altitude wrist compass, and a portable heart-rate monitor. Both of these initiatives were aimed at capturing sales from the emerging Generation Y demographic group. In early 1999 Nike began selling its shoes and other products directly to consumers via the company web site. Nike announced in September of that year that it would buy about ten percent of Fogdog Inc., which ran a sporting goods e-commerce site, in exchange for granting Fogdog the exclusive online rights to sell the full Nike line. The company finally earned some good publicity in 1999 when it sponsored the U.S. national women's soccer team that won the Women's World Cup. With its record of innovative product design and savvy promotion and an aggressive approach to containing costs and revitalizing sales, Nike appeared likely to stage an impressive comeback in the early 21st century.
Principal Subsidiaries: Cole Haan Holdings Incorporated; Nike Team Sports, Inc.; Nike IHM, Inc.; Bauer Nike Hockey Inc.
Principal Competitors: adidas-Salomon AG; Callaway Golf Company; Converse Inc.; Deckers Outdoor Corporation; Fila Holding S.p.A.; Fortune Brands, Inc.; Fruit of the Loom, Ltd.; FUBU; HI-TEC Sports USA Inc.; Levi Strauss & Co.; Nautica Enterprises, Inc.; New Balance Athletic Shoe, Inc.; Polo Ralph Lauren Corporation; Puma AG; R. Griggs Group Limited; Rawlings Sporting Goods Company, Inc.; Reebok International Ltd.; Rollerblade, Inc.; Russell Corporation; Sara Lee Corporation; Skechers U.S.A., Inc.; Spalding Holdings Corporation; The Stride Rite Corporation; The Timberland Company; Timex Corporation; Tommy Hilfiger Corporation; VF Corporation; Wolverine World Wide, Inc.
Reebok History
1890-1930's
J.W. Foster and Spikes of Fire
Reebok's United Kingdom-based ancestor company was founded for one of the best reasons possible: athletes wanted to run faster. So, in the 1890s, Joseph William Foster made some of the first known running shoes with spikes in them. By 1895, he was in business making shoes by hand for top runners; and before long his fledgling company, J.W. Foster and Sons, developed an international clientele of distinguished athletes. The family-owned business proudly made the running shoes worn in the 1924 Summer Games by the athletes celebrated in the film "Chariots of Fire."
1950-1980
A Gazelle Named Reebok, A Company on the Move
In 1958, two of the founder's grandsons started a companion company that came to be known as Reebok, named for an African gazelle. In 1979, Paul Fireman, a partner in an outdoor sporting goods distributorship, spotted Reebok shoes at an international trade show. He negotiated for the North American distribution license and introduced three running shoes in the U.S. that year. At $60, they were the most expensive running shoes on the market.
1980's
By 1981, Reebok's sales exceeded $1.5 million, but a dramatic move was planned for the next year. In 1982, Reebok introduced the first athletic shoe designed especially for women; a shoe for a hot new fitness exercise called aerobic dance. The shoe was called the Freestyle™, and with it Reebok anticipated and encouraged three major trends that transformed the athletic footwear industry: the aerobic exercise movement, the influx of women into sports and exercise and the acceptance of well-designed athletic footwear by adults for street and casual wear. Explosive growth followed, which Reebok fueled with new product categories, making Reebok an industry leader.
In the midst of surging sales in 1985, Reebok completed its initial public offering (stock symbol is NYSE: RBK). A year later, Reebok made its first strategic acquisition, The Rockport Company. Rockport was a pioneer in using advanced materials and technologies in traditional shoes and the first company to engineer walking comfort in all types of dress and casual shoes. In the late 1980s, Reebok began an aggressive expansion into overseas markets and Reebok products are now available in more than 170 countries and are sold through a network of independent and Reebok-owned distributors.
Creating innovative products that generate excitement in the marketplace has been a central corporate strategy ever since Reebok introduced the Freestyle. In the late 1980s, a particularly productive period began with The Pump® technology and continues today, with breakthrough concepts and technologies for numerous sports and fitness activities.
1990's
In 1992, Reebok began a transition from a company identified principally with fitness and exercise to one equally involved in sports by creating several new footwear and apparel products for football, baseball, soccer, track and field and other sports. That same year, Reebok began its partnership with golfer Greg Norman, resulting in the creation of The Greg Norman Collection.
In the late 1990s, Reebok made a strategic commitment to align its brand with a select few of the world’s most talented, exciting and cutting-edge athletes. Since then, the company has focused on those athletes who represent the top echelon of sports and fitness.
2000
In 2000, Reebok and the National Football League announced an exclusive partnership that serves as a foundation of the NFL’s consumer products business. The NFL granted a long-term exclusive license to Reebok beginning in the 2002 NFL season to manufacture, market and sell NFL licensed merchandise for all 32 NFL teams. The license includes on-field uniforms, sideline apparel, practice apparel and an NFL-branded footwear and apparel collection.
2001
In 2001, Reebok formed a long-term strategic partnership with the National Basketball Association under which Reebok designs, manufactures, sells and markets licensed merchandise for the NBA, the Women’s National Basketball Association (WNBA) and the National Basketball Development League (NBDL), the NBA’s minor league. Reebok secured the exclusive rights to supply and market all on-court apparel, including uniforms, shooting shirts, warm-ups, authentic and replica jerseys and practice gear for all NBA, WNBA and NBDL teams. Reebok also had exclusive rights, with limited exceptions, to design, manufacture, market and sell headwear, T-shirts, fleece and other apparel products for all teams in most channels of distributions. In 2006, Reebok transferred the NBA rights to the adidas Brand.
2002
In 2002, Reebok launched Rbk – a collection of street-inspired footwear and apparel hook-ups designed for the young man and woman who demand and expect the style of their gear to reflect the attitude of their lives: cool and edgy, authentic and aspirational. Inspired by street fashion, Rbk’s marketing is culturally relevant as well. With many of the industry’s most marketable and valuable sports assets on its roster, Reebok rolled-out an integrated marketing campaign that fused together sports, music, technology and entertainment, and was designed to connect the Reebok Brand to millions of new consumers around the world. The global marketing campaign was launched in early 2002 and featured select Reebok athletes paired with some of the music industry’s most successful hip-hop and rap artists. Reebok tapped into something the industry had not yet seen, and became a pioneer in the fusion of sports, music and technology.
2003
2003 was a landmark year for Rbk. Reebok formed an unprecedented partnership with rap musician Jay-Z, which included the design and marketing of the "S. Carter Collection by Rbk," which launched in April. With the partnership, Jay-Z became the first non-athlete to have a signature athletic footwear collection. The launch of Jay Z’s first shoe was extremely successful around the world. Later that year, Reebok teamed up with another superstar of the rap world, 50 Cent. The result was the equally successful “G Unit Collection by Rbk.”
2004
In 2004, Reebok became the world’s leading producer of hockey apparel and equipment with its acquisition of The Hockey Company. The Hockey Company’s brands, CCM, Koho and Jofa, are among the most respected in the sport.
Reebok has a long-term licensing agreement with the National Hockey League, under which the company serves as the supplier of authentic “on-ice” game jerseys to all 30 NHL teams. It also has the exclusive worldwide rights to manufacture and market authentic, replica and practice jerseys using the names and logos of the NHL and its teams. Reebok also has exclusive agreements with the Canadian Hockey League, the American Hockey League and the East Coast Hockey League.
2005
In early 2005, Reebok launched Rbk Hockey, a new and innovative line of ultra-high performance hockey equipment, sticks and skates and signed hockey phenom Sidney Crosby, who has lived up to his billing as the league’s next great player. In two short years, Rbk Hockey has become one of the most visible and in-demand hockey brands on the market.
In 2005, Reebok launched its largest global integrated marketing and advertising campaign in nearly a decade. "I Am What I Am" is a multi-faceted campaign which links all of the brand's marketing and advertising efforts under the "I Am What I Am" umbrella. The campaign encourages young people to embrace their own individuality by celebrating their contemporary heroes. Celebrities featured in the campaign include music icons Jay-Z, Daddy Yankee and 50 Cent; top athletes Allen Iverson, Donovan McNabb, Curt Schilling, Kelly Holmes, Iker Casillas and Yao Ming; screen stars Lucy Liu, John Leguizamo and Christina Ricci; and skateboarder Stevie Williams.
2006
In January 2006, adidas-Salomon AG acquired Reebok, forever altering the worldwide sporting goods industry landscape. Shortly after the close of the acquisition, Reebok Chairman and CEO Paul Fireman announced he was leaving the company to pursue other interests, and Paul Harrington was named President and CEO of the Reebok brand. Today, the adidas Group, which includes the adidas, Reebok, TaylorMade-adidas Golf and Rockport brands is a global leader in the sporting goods industry and offers a broad portfolio of products. Products from the adidas Group are available in virtually every country of the world. Activities of the company and its more than 80 subsidiaries are directed from the Group's headquarters in Herzogenaurach, Germany.
2007
Reebok launched Run Easy, one of the most comprehensive running campaigns in the brand’s history. The goal of the campaign was to inspire consumers around the world to fulfill their potential and celebrate their individuality. The message of the campaign was that while many other brands speak about the "blood, sweat and tears" of running, Reebok celebrated the camaraderie, joy and fun of running – Run Easy.
In addition, Reebok's partnership with the National Hockey League took center stage with the unveiling the Rbk Edge Uniform System, a complete, team-wide redesign and re-engineering of the NHL uniform, and the opening of the NHL Powered by Rbk retail store in New York City.
Reebok also launched its "There are Two People in Everyone" marketing campaign for the second half of 2007 in select regions. The global marketing campaign highlights Reebok’s unique brand point of view of celebrating the individual’s balance between sport and life. The campaign, featuring international sport stars such as Allen Iverson, Yao Ming, MS Dohni and Nicole Vaidisova, declared that there is more to an athlete than his or her sport.
2008
Reebok’s global marketing campaign, ‘Your Move’ launched in March of 2008 and evolved Reebok’s positioning as the brand that celebrates individuality and supports those who choose to do things their way. Expressed as a global brand campaign, ‘Your Move’ was an invitation to people to do it their way in sport and in life. The ‘what’s your move?’ ad was a literal expression of this philosophy: key assets including Thierry Henry and Alexander Ovechkin showed us their moves and invited consumers to show us theirs.
In the summer of 2008, Reebok and driving ace Lewis Hamilton announced a multi-year partnership at a spectacular 3-D event in Amsterdam, home of Reebok’s European Headquarters. At the event, Reebok unveiled “The Athlete within the Driver,” gave media a rare insight into Hamilton’s demanding fitness regime. Hamilton revealed how Reebok’s Smoothfit training footwear and apparel range helped him to train better than ever before.
Adi Dassler - the man who gave adidas its name
Adolf Dassler was inspired by a single idea when he made his first shoes in 1920, at the age of just 20. His vision was to provide every athlete with the best footwear for his respective discipline. It was this principle that guided him right up until his death in 1978.
His first shoe, made from the few materials available in the difficult post-war period, was produced from canvas. A passionate athlete himself, from the very beginning Adi Dassler was in close contact with sports participants and was always present in person at important sports events.
Adi Dassler focused his work on the classic disciplines of track and field. In the mid 1920s he was already experimenting with spikes. Athletes wore special shoes from his workshop for the first time at the 1928 Olympic Games in Amsterdam.
In the mid 1930s Adi Dassler was already making 30 different shoes for eleven sports, and he had a workforce of almost 100 employees. In less than two decades adidas advanced to become the world’s leading sports shoe manufacturer. After the turmoil of the Second World War, Adi Dassler made a fresh start. In 1947, with 47 workers, he began putting into practice the knowledge gained from the prewar period and also new ideas. Adi Dassler made the first post-war sports shoes using canvas and rubber from American fuel tanks. In 1948 he introduced adidas as the company name, a combination of his own first and last name.
The breakthrough came for Adi Dassler when Germany won the Soccer World Cup in 1954. In the legendary Final against Hungary, the German team wore boots with screw-in studs – by adidas. Parallel to the rapid developments in sport, Adi Dassler strove to specialize and optimize his products. Adi Dassler was the first entrepreneur to use sports promotion in order to make the public aware of his innovations. He started using well-known athletes as advertising for his products. Many famous athletes such as Jesse Owens, Muhammad Ali, Max Schmeling, Sepp Herberger and Franz Beckenbauer counted themselves among the friends of the Dassler Family.
Aggressive publicity became one of the cornerstones of his corporate policy. From now on, Adi Dassler came up with a product innovation for every major event, documenting the superiority of adidas footwear. In constant contact with active athletes in a wide variety of disciplines, he developed the optimal shoe for almost every sport. Together with his son Horst, Adi Dassler created an international company that was, and still is, present at all the world’s major sporting events.
From the mid 1960s, adidas also started producing apparel for competition and training. Ball production began in 1963, and ever since 1970 the Official Matchball at all major soccer events has been an adidas product. Adi Dassler died in 1978, at the age of 78. Carrying on his heritage and his ideas, his name and his developments will continue to help athletes in their efforts to push the limits of performance, on into the new millennium.
Following the death of the company founder, Adi Dassler’s widow Käthe and his son Horst took charge of running the company. Horst Dassler perfected the opportunities offered by sports promotion. Under his guidance, adidas became a global leader in the sector of innovation in sports marketing. He was also responsible for establishing the brand in France. Horst Dassler died unexpectedly in 1987, at the early age of 51.
In 1989, adidas was transformed into a corporation (“Aktiengesellschaft”). At the beginning of the 1990s, after a difficult transition period, adidas returned to its roots and its original objective. Producing top products in top quality again became the company’s guiding principle. In 1991, adidas launched adidas EQUIPMENT, a line of performance-oriented, functional footwear and apparel. With streetball in 1992, adidas started specifically addressing a younger target group. In 1993, Robert Louis-Dreyfus took over management of the company. The Frenchman initiated the comeback of the Three Stripes. In 1995, the adidas share was one of the most interesting new introductions on the stock market. In 1997, adidas AG and the Salomon group combined to form adidas-Salomon AG. In 1998 TaylorMade was separated from the Salomon Group and combined with adidas Golf. Since 2001, Herbert Hainer has been leading the Group. In October 2005, the Salomon business segment, including the related subsidiaries and brands Salomon, Mavic, Bonfire, Arc’Teryx and Cliché, was sold to the Finnish Amer Sports Corporation. On January 31, 2006, Reebok International Ltd. was acquired providing the new adidas Group with a footprint of around € 9.5 billion ($11.8 billion) in the global athletic footwear, apparel and hardware markets.
The adidas Group at a glance
adidas – a name that stands for competence in all sectors of sport around the globe. The vision of company founder Adolf (“Adi”) Dassler has long become reality and his corporate philosophy the guiding principle for successor generations.
The idea was as simple as it was brilliant. Adi Dassler’s aim was to provide every athlete with the best possible equipment. It all began in 1920, when Adi Dassler made his first shoes using the few materials available after the First World War.
Today, the adidas product range extends from footwear and apparel to accessories for all kinds of different sports. The key priorities are: running, football, basketball and training.
The adidas name dates back to 1948, deriving from the first two syllables of Adi Dassler’s first and last name. After a period spanning almost 70 years, the Dassler Family withdrew from the company in 1989, and the enterprise was transformed into a corporation (“Aktiengesellschaft”).
French-born Robert Louis-Dreyfus was Chairman of the Executive Board from April 1993 to March 2001. It was he who initiated adidas’ flotation on the stock market in November 1995. Since 2001, Herbert Hainer has been leading the Group. adidas Group – In 1997, adidas acquired the Salomon group, and the company’s name changed to adidas-Salomon AG. The Salomon group also included the TaylorMade golf brand.
In October 2005, the Salomon business segment, including the related subsidiaries and brands Salomon, Mavic, Bonfire, Arc’Teryx and Cliché, was sold to the Finnish Amer Sports Corporation. The company changed its legal name to “adidas AG” following shareholder approval at the Annual General Meeting in May 2006.
On January 31, 2006, adidas-Salomon AG acquired Reebok International Ltd. The closing of the Reebok transaction marked a new chapter in the history of the adidas Group. By combining two of the most respected and well-known brands in the worldwide sporting goods industry, the new Group benefits from a more competitive worldwide platform, well-defined and complementary brand identities, a widerrange of products, and a stronger presence across teams, athletes, events and leagues.
And in June 2006, the company’s name is changed to adidas AG. The adidas Group has well over 31,000 employees worldwide, with more than 2,600 working at the company’s headquarters in Herzogenaurach. A team of designers, product developers and experts for biomechanics and material technology carries out research in Portland and at adidas’ second technology centre in Scheinfeld near Nuremberg.
In Scheinfeld models, prototypes and made-to-measure performance products are also manufactured and tested. It is here that adidas maintains the only sports shoe production facility still in existence in Germany.
More than 150 subsidiaries guarantee marketplace presence for products of the adidas Group around the world. Sales and distribution of adidas products is grouped in four regions worldwide: Europe/Emerging Markets, North America, Asia/Pacific and Latin America. Today, the adidas Group is Europe’s biggest supplier of athletic footwear and sports apparel.
Polo Brand
"What began forty years ago with a collection of ties has grown into an entire world, redefining American style. Ralph Lauren has always stood for providing quality products, creating worlds and inviting people to take part in our dream. We were the innovators of lifestyle advertisements that tell a story and the first to create stores that encourage customers to participate in that lifestyle.
RalphLauren.com takes this participation to a new level, as a rich and exciting interactive destination. When you’re transported into the world of Ralph Lauren online, you can shop for great products for yourself and your home, learn about adventure, style and culture in RL Magazine and RL TV, find one-of-a-kind vintage pieces and exquisite gifts and much, much more. Back when all this started, I felt sure that there were no boundaries for Polo. I’m even more sure of that today."
Statistics:
Public Company
Incorporated: 1968 as Polo Fashions, Inc.
Employees: 11,000
Sales: $2.44 billion (2003)
Stock Exchanges: New York
Ticker Symbol: RL
NAIC: 315 Apparel Manufacturing; 54149 Other Specialized Design Services
Company Perspectives:
Polo has become a brand with unmatched recognition in the marketplace, offering the best of menswear, womenswear, childrenswear and home design. Polo's design excellence works in concert with its disciplined business approach, and these two traits together have allowed the Company to set the standard for the industry.
Key Dates:
1968: Polo Fashions is created by tie salesman Ralph Lauren.
1974: The first ads appear in NYC newspapers.
1978: Polo cologne is introduced.
1983: An extensive, licensed home furnishings line debuts.
1986: The flagship store opens on Madison Avenue.
1997: Polo/Ralph Lauren goes public.
2003: The European headquarters moves from Paris to Geneva.
Company History:
The Polo/Ralph Lauren Corporation (RL) has become one of the best-known fashion design and licensing houses in the world. Founded by American designer Ralph Lauren in the late 1960s, the company boomed in the 1980s as Lauren's designs came to be associated with a sophisticated and distinctly American attitude. The company's first products were wide ties, but it soon designed and manufactured an entire line of menswear before entering the more lucrative women's fashion market as a designer and licenser. By the 1980s, the Polo/Ralph Lauren name helped sell a wide array of products, including fragrances and accessories for men and women, clothing for young boys and infants, and a variety of housewares, shoes, furs, jewelry, leather goods, hats, and eyewear. Menswear accounted for 42 percent of 2003 sales of $2.44 billion. Womenswear was the next largest segment (25 percent), followed by fragrances, accessories, children's, and home. Brands include Polo, Lauren, Chaps, and Club Monaco. The company licenses nearly 300 manufacturers and 100 retail outlets around the world. RL also runs 240 of its own stores in the United States.
Origins in the 1960s
Ralph Lifshitz was born on October 14, 1939 in the Bronx to a middle class Jewish family. Somewhere along the way he had his surname legally changed to "Lauren." His father was an artist and housepainter; his mother was reportedly disappointed Ralph did not become a rabbi.
The Polo empire began in the late 1960s, when Lauren, then a clothing salesman, got sick of selling other people's neckties and decided to design and sell his own. Lauren had no experience in fashion design, but he had grown up in the New York fashion world, selling men's gloves, suits, and ties. In 1967, he went to his employer, Abe Rivetz, with a proposal to design a line of ties, but Rivetz told him, "The world is not ready for Ralph Lauren." Lauren decided that it was, and he convinced clothier Beau Brummel to manufacture his Polo line of neckwear. "I didn't know how to make a tie," Lauren confessed to Vogue in 1982. "I didn't know fabric, I didn't know measurements. What did I know? That I was a salesman. That I was honest. And that all I wanted was quality." Lauren's ties were wider and more colorful than other ties on the market and they soon found a niche, first in small menswear stores and later in the fashionable Bloomingdale's department store.
Within a year, Lauren decided to form his own company with help from his brother Jerry and $50,000 in backing from Norman Hilton, a Manhattan clothing manufacturer. The company, Polo Fashions, Inc. (which changed its name to Polo/Ralph Lauren Corporation in 1987), expanded the Polo menswear collection to include shirts, suits, and sportswear, as well as the trademark ties. The company designed, manufactured, and distributed the Polo collection, which met with the approval of both the department stores that featured the clothes and the fashion critics who praised their style. Fashion critic Bernadine Morris was quoted in Time as saying, "He's acquired a certain reputation for clothes that are, you know, with it. But not too with it. Not enough to shock the boys at the bank." In 1970, Lauren received the coveted Coty Award for menswear. In a rare move, Lauren then began designing clothes for women as well as for men. His first designs--men's dress shirts cut for women--met with great success in 1971, and soon sales topped $10 million.
The rapid growth of Polo Fashions, Inc. proved hard to manage for the young entrepreneur, who had succeeded in crafting a brand identity but not in managing his business. By 1972, according to Time, "Lauren suddenly discovered that his enterprise was almost bankrupt because of poor financial management and the costs of headlong expansion." "I almost blew my business," Lauren told Forbes. "I wasn't shipping on time and had problems delivering." "It was probably ... one of the darkest moments in my life," he remembered in New York. Scrambling to survive, Lauren invested $100,000 of his savings in the business and convinced Peter Strom to leave his job with Norman Hilton and become his partner. The arrangement gave Lauren 90 percent and Strom 10 percent ownership. Strom described their duties to the New York Times Magazine: "We divide the work this way: I do everything Ralph doesn't want to do; and I don't do anything he likes to do. He designs, he does advertising, public relations; I do the rest." The Lauren brothers and Strom soon made changes in the structure of the company that set the stage for more than two decades of unparalleled success.
During its first four years, Polo Fashions, Inc. had controlled each stage in the clothes making process, from design, to manufacture, to distribution. Their first step in reorganization was to concentrate on what they did best--design--and leave the rest to other companies. With this in mind, Polo Fashions, Inc. licensed the manufacture of Ralph Lauren brand womenswear to Stuart Kreisler, an experienced manufacturer who set out to build the reputation of the Lauren brand name. Under licensing agreements, the designer got a cut of wholesale revenues--usually between 5 and 8 percent for Polo, according to Forbes--and shared in advertising costs. Such agreements would be the basis for Polo's future business. Moreover, Strom insisted that those retailers who sold the company's clothes make a commitment to selling the entire line, which meant they had to carry the $350 Polo suit. "That eliminated two-thirds of our accounts," Strom told Vogue. "But those who stayed with us experienced our commitment to them, and it wasn't long before we felt their loyalty in return." With business once again secure, the company was able to turn its attention to crafting a brand image as distinctive as any in America.
1980s: The Decade of Polo
Beginning in the mid 1970s, Polo Fashions, Inc. entered a period of phenomenal growth that carried it through the late 1980s. From being a designer and licenser of limited lines of men's and women's clothing, the company expanded its products to include fragrances, eyewear, shoes, accessories, housewares, and a range of other products. Yet even as the number of products bearing the brand names "Polo" or "Ralph Lauren" expanded, the image of the company became more secure and more singular. Soon, people were speaking of the "Laurenification of America," crediting Ralph Lauren with creating a unique American aesthetic, and calling the 1980s the "decade of Ralph Lauren." The company's success in this period can be credited to the design skills of Ralph Lauren and to the astute image-making and marketing skills of Lauren and his principal partner, Peter Strom.
Fashion critics and journalists used words like integrity, elegance, tradition, sophistication, WASPy, mannered, pseudo-English, and sporty to describe Lauren's many designs. Yet no single word could encompass the many themes--from the famous English Polo Club designs to the distinctly American western designs--with which Lauren experimented. Some critics complained that Lauren was a relentless borrower, possessed of no unique vision. Lauren himself stated in New York that he was interested in "style but not flamboyance, but sophistication, class, and an aristocratic demeanor that you can see in people like Cary Grant and Fred Astaire." And, as Lauren pointed out, "The things I do are not about novelty. They're things I love and can't get away from. There are some things in life that, no matter what the times are, keep getting better and better. That's really my philosophy."
Polo excelled at getting Lauren's distinctive design image across to consumers. From its very first advertisements in New York City newspapers in 1974, the company attempted to portray its products as part of a complete lifestyle. Polo pioneered the multi-page lifestyle advertisement in major magazines. These ads presented a world lifted out of time, where wealthy, attractive people relaxed in Polo products during a weekend at their country estate or on safari in Africa. Vogue described the ads as a kind of "home movie," with a cast of "faintly sorrowful but wildly attractive people. The women are always between childhood and thirty; the men are sometimes old." Polo lavished huge amounts of money on these ads, as much as $15 and $20 million a year, though its licensees shared some of the cost by returning 2 to 3 percent of sales into the advertising budget. An ad director for a major fashion magazine told Time: Polo "has some of the best advertising in the business because it sets a mood, it evokes a lifestyle."
Lauren's intuitive design sense and the company's ability to create an idealized image for its products provided the base for the company to expand the variety of products it marketed and attain greater control over retailing. From its first product lines--Polo by Ralph Lauren menswear and Ralph Lauren womenswear--the company introduced a variety of products: Polo by Ralph Lauren cologne and boys' clothing in 1978; a girlswear line in 1981; luggage and eyeglasses in 1982; home furnishings in 1983. Later brand extensions included shoes, furs, and underwear. The company introduced its collection of apparel for newborns, infants, and toddlers in 1994. These new product lines were accompanied by continual updating of the older brand names.
Although Polo retained control over the design and advertising of its products, the success or failure of Polo product expansion often depended upon its licensees, as Polo's experience with fragrances and its home collection indicated. Polo's fragrances became a major income producer only when it found a licensee who was willing to help develop and promote the products. Although Polo had marketed its fragrances--Polo by Ralph Lauren for men and Lauren for women--since 1978, they were not major sellers until the mid-1980s, when the company licensed fragrance production to Cosmair, Inc. In 1990, Cosmair introduced Polo Crest for men and Safari for women, made to accompany a new line of clothing also bearing the Safari name. Cosmetic Insiders' Report called Safari the "Fragrance of the Year" after it recorded sales as high as $11,000 a day at Bloomingdale's flagship stores. Cosmair hoped to sell between $25 and $30 million wholesale by the end of the fragrance's first year. Two years later Polo and Cosmair launched Safari for Men, which they promoted in an uncharacteristic television commercial in which Ralph Lauren rode a horse bareback on a beach. According to Women's Wear Daily, Cosmair hoped to sell $28 million in wholesale at the end of six months, and to top $50 million by the end of two years.
Not all licensing arrangements worked so well. In 1983, Polo began to promote the introduction of its "Home Collection," a line of products that Lauren had designed for the home. House & Garden called the collection, which numbered more than 2,500 items and included everything from sheets to furniture to flatware, "the most complete of its kind conceived by a fashion designer." But the collection soon ran into serious trouble as the licensee, the J.P. Stevens Company, experienced difficulties getting the products to retail outlets on time. J.P. Stevens also had trouble maintaining quality control, having themselves licensed elements of the line to other companies. In addition, Stevens demanded that stores that wanted to show the collection construct $250,000 free-standing, wood-paneled boutiques to display the items--and stores balked at the price tag. Polo/Ralph Lauren Vice-Chairman Peter Strom told Time that the introduction was "A disaster! Disaster!" It took several years for Polo to get the collection back on track.
Over the years, Polo used a number of techniques to exert control over the way its merchandise was distributed and sold. Early on, the company insisted that retailers offer the entire product line instead of simply selecting items it wanted to carry, arguing that the lines had to stand as a coherent whole. Beginning in 1971, the company began to offer franchises as well, and it has franchised more than 100 Polo/Ralph Lauren stores worldwide since that time. Instead of charging a franchise fee, the company made money as the wholesaler for the clothing. These franchises allowed an entire store to concentrate on the Polo image. In 1982, Polo opened the first of its 50 outlet stores in Lawrence, Kansas. The outlet stores allowed the company to control the distribution of irregulars and items that had not sold by the end of each season, thereby preventing the company's products from appearing in discount stores. These outlet stores were placed at a significant distance from the full-price retailers to ensure that they did not steal business. Such expansion occurred not only in America but around the world, as Polo opened shops in London, Paris, and Tokyo.
The flagship of the Polo/Ralph Lauren retail enterprise was the refurbished Rhinelander mansion on Madison Avenue in New York City. Opened in 1986, the 20,000-square-foot mansion featured mahogany woodwork, hand-carved balustrades lining marble staircases, and sumptuous carpeting. "While men who look like lawyers search for your size shirt and ladies who belong at deb parties suggest complementary bags and shoes, you experience the ultimate in lifestyle advertising," wrote Lenore Skenazy in Advertising Age. Naomi Leff, who designed the interior of the Polo palace, called it "a marker in retailing history. It tells manufacturers that if they're willing to put out, they'll be able to make their own statement, which is not being made in the department stores."
Establishing brand-focused retail outlets made perfect sense for Polo/Ralph Lauren, for it allowed the company to increase profits by eliminating the middleman as well as to control the environment in which the products appeared. In fact, other designers have since followed Polo/Ralph Lauren's lead, including Calvin Klein, Liz Claiborne, Adrienne Vittadini, and Anne Klein. But the move caused tension between the designer and his traditional retailers, the large department stores. A Forbes feature on Lauren's strategy claimed that "a lot of people in business think it is in bad taste to compete with your own customers. Lauren clearly does not agree. And such is his pull at the cash register that he may get away with this piece of business heresy."
Public in 1997
The Polo/Ralph Lauren Corporation rode its expertly crafted brand image and astute retailing strategies to remarkable heights in the 1980s, as sustained economic growth and America's fascination with Lauren's image fueled an unparalleled expansion in products bearing the Ralph Lauren name. But retail expansion slowed dramatically with the economic downturn in the early 1990s, and some stores that once thrived on the sales of Ralph Lauren's high-priced products complained that the company was unable to adjust to changes in the market. Robert Parola, writing in the Daily News Record in 1990, noted that many clothing manufacturers had lifted their designs from Ralph Lauren and begun selling them for less. Polo/Ralph Lauren was hardly a company to be counted out in the 1990s, however. Successful fragrance introductions and the development of the popular Polo Sport active-sportswear and Double RL jeanswear lines promised to keep money rolling into the company coffers. The 1994 sale of 28 percent of the company to a Goldman Sachs & Co. investment fund for $135 million prompted speculation about the future of the company. Wall Street Journal reporter Teri Agins remarked that "the company is at a crossroads as it embarks on a strategy to improve its retail operations and lure a younger generation" to its products. In the short term, industry observers expected the company to use the cash influx to expand its retail stores. But observers also wondered whether this sale, the first in the company's history, indicated that the company would eventually go public or that Ralph Lauren was beginning to look toward life after designing.
The company did, in fact, go public on the New York Stock Exchange, on June 13, 1997. Founder and Chairman Ralph Lauren sold nearly 18 million of his own shares for $465.4 million. He retained 90 percent of voting rights, however, through his ownership of all outstanding class B stock.
Although the shares were trading at a premium, some analysts felt the stock had good growth potential due to relatively unexploited world markets and an underdeveloped women's line; two years earlier, Polo had regained the rights to it from its licensee, Biderman USA.
Polo had then brought out a moderately priced women's collection in collaboration with licensee Jones Apparel Group in the fall of 1996. (The more expensive Ralph line was then renamed "RL.") Within a couple of years, however, Polo would cancel the contract due to low sales volume, and Jones would take its case to court.
Polo rolled out a plethora of other brand extensions in the late 1990s, including shoes from Reebok and Rockport and a line of Polo-brand jeans. There was also more shifting of licensees: Corneliani S.p.A. of Italy won the right to produce RL's Blue Label clothing line for men. In 2001, WestPoint Stevens, which already made RL sheets and towels, took over the bedding license from Pillowtex Corp. The total number of licensees was soon approaching 300.
RL ended 1998 with announcements of 250 job cuts and nine store closings. At the same time, it was opening a flagship store in Chicago. An RL-branded restaurant opened next door a few months later. The company had about 200 outlets, half of them operated by licensees.
New Frontiers for the New Millennium
In March 1999, RL paid $80 million (C $80 million) for Club Monaco Inc., a chain of trendy clothing stores based in Toronto. It had 56 stores in Canada and 13 in the United States. Club Monaco attracted the younger, hipper clientele that Ralph Lauren had been unable to lure away from the likes of Tommy Hilfiger.
In 2000 the company formed a multimedia marketing joint venture with NBC and affiliates NBCi, CNBC, and ValueVision (operator of the Home Shopping Network). RL's first television advertising debuted soon after.
RL bought European licensee Poloco SA in 2000 for $230 million; Italian licensee PRL Fashions of Europe and a Belgian store were acquired in 2001. RL was able to quadruple European sales between 1999 and 2002, noted Crain's New York Business, but expansion was expensive. In Europe, clothing was typically sold in specialty shops, not giant department stores, such as the Big Three in the United States that made up more than a half of RL's wholesale revenues. RL moved its European operations from Paris to Geneva in 2003.
In February 2003, RL paid ¥5.6 billion ($47.6 million) for a 50 percent interest in the master license of the Polo Ralph Lauren men's, women's, and jeans business in Japan. Stores also were acquired from licensees in Germany and Argentina.
One employee at a San Francisco store sued RL for allegedly forcing its employees to buy its own pricey clothes to wear at work, and to update their wardrobes every season. Polo denied having such a uniform requirement, reported the San Francisco Chronicle. Ironically, a general return to dressier work clothes, a result of a tighter job market, was one good sign for the company entering 2004. RL assumed responsibility for its Lauren line for women from its former licensee, Jones Apparel Group.
Principal Subsidiaries: Acqui Polo, C.V. (Netherlands); Fashions Outlet of America, Inc.; PRL USA Holdings, Inc.; PRL International, Inc.; Ralph Lauren Media, LLC (50%).
Principal Operating Units: Polo Brands; Collection Brands.
Principal Competitors: Banana Republic; Liz Claiborne Inc.; Nautica Enterprises Inc.; Tommy Hilfiger Corporation.
