Author: Hao Hu, Ben Thomson Advisor: Dr. Donald Rosenfield MIT SCM Research Fest May 24-25, 2011 e-Commerce Fulfillment Models for Luxury Brands in China

Agenda May 24-25, 2011MIT SCM Research Fest2 Polo Ralph Lauren The Chinese Market Place Luxury Consumer Segmentation Research Question Methodology Case Studies Managerial Insights Questions

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, 2011MIT SCM Research Fest3

Motivation / Background May 24-25, 2011MIT SCM Research Fest4 Internet Penetration by Region (Dec 09)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)

Luxury Consumer Segmentation May 24-25, 2011MIT SCM Research Fest5 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 - China's New Young Affluent Luxury Consumers

Question / Challenges May 24-25, 2011MIT SCM Research Fest6 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

May 24-25, 2011MIT SCM Research Fest7 Methodology Luxury Fashion Companies Were Interviewed Focusing On: May 24-25, Strategy Distribution Fulfillment Delivery Customer Service Information Technology Case Studies Were Created for Luxury Fashion Brands Based On Current Operations

Case Studies May 24-25, 2011MIT SCM Research Fest8 Strategy Segment Services By Customer And Region Service Level In House Customer Service Distribution Locate Near Largest Customer Base In Shanghai

Case Studies May 24-25, 2011MIT SCM Research Fest9 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

Managerial Insights May 24-25, 2011MIT SCM Research Fest10 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

Thank You! & Questions? May 24-25, 2011MIT SCM ResearchFest11