Author: Hao Hu, Ben Thomson

Advisor: Dr. Donald Rosenfield

MIT SCM Research FestMay 24-25, 2011

e-Commerce Fulfillment Models for Luxury Brands in China

MIT SCM Research Fest 2

Agenda

May 24-25, 2011

−Polo Ralph Lauren−The Chinese Market Place−Luxury Consumer Segmentation−Research Question−Methodology−Case Studies −Managerial Insights−Questions

MIT SCM Research Fest 3

Ralph Lauren

−Established In 1967, With $4.9 Billion Dollars In Annual Sales

−Aggressively Targeting China For Expansion • 54 Physicals Store Fronts In China Since 2010• Catering To High End Chinese Consumers With Blue,

Black, Purple, And Collection Items• Launch e-Commerce To Better Service Existing

Customers And Reach New Ones

May 24-25, 2011

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Motivation / Background

May 24-25, 2011

Internet Penetration by Region (Dec 09)

2009 2010 2011 2012 2013 2014 2015

$29.1$48.8

$72.2

$94.6

$117.2

$138.4

$159.4

US $billions

China Online Retail Market Forecast

(Wigder, Sehgal, Evans, & Johnson, 2010)Internet Penetration > 28.9%

28.9% > Internet Penetration >25.6%

Internet Penetration < 25.6%

− 40% Of The Chinese Population Has Connected To The Internet Since 2000 (500 Million Users)

− $130MM In e-Commerce Sales Of Luxury Apparel With Double Digit Growth In Consumer Base (2010)

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Luxury Consumer Segmentation

May 24-25, 2011

• Growing Number Of Luxury Shoppers Reside In Emerging Tier 2 – 4 Cities • Increasing Numbers Of Consumers Are Purchasing Luxury Items, Formerly

The Domain Of The Very Wealthy

www.P1.Cn - China's New Young Affluent Luxury Consumers

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Question / Challenges

May 24-25, 2011

Which Supply Chain Model Will Work?

Given The New And Fast Growing Market

What Are The Most Common & Innovative e-Commerce Fulfillment Models For Luxury Brands In China?

18 Primary Markets

22 Secondary Markets

Given High Service Level Expectations

How Can PRL Provide A Luxury Shopping Experience Through e-Commerce Fulfillment?

How to Create a New Supply Chain Operation When Few e-Commerce Models Exist In Similar Markets and Operating Conditions

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Methodology− Luxury Fashion Companies Were

Interviewed Focusing On:

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•Strategy •Distribution•Fulfillment •Delivery•Customer Service •Information Technology

− Case Studies Were Created for Luxury Fashion Brands Based On Current Operations

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Case Studies

May 24-25, 2011

−Strategy

Segment Services By Customer And Region

−Service Level

In House Customer Service

−DistributionLocate Near Largest Customer Base In Shanghai

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Case Studies

May 24-25, 2011

−Fulfillment

Outsource To A Trusted 3PL

−Delivery

Outsource Regular Deliveries To FedEx And EMS

−Information Technology

Integrate Offline And Online Customer Databases

Interlink e-Commerce And Retail Inventory Systems

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Managerial Insights

May 24-25, 2011

−Customer Segmentation−Outsource Non-Core Functions• Pick, Pack And Ship

−Keep Critical Functions In-house• Inventory Management• Customer Service• Concierge Service For Luxury Role Models In Major Cities

−Important To Be Near Largest Customer Base For Fast Delivery Times

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Thank You!

&

Questions?

May 24-25, 2011 MIT SCM ResearchFest