e-Commerce fulfillment strategy for luxury brands in South Korea
Author(s)Vanderbilt, Mark F. (Mark Franklin); Yunes, Daniel G
Massachusetts Institute of Technology. Engineering Systems Division.
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Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2012.Cataloged from PDF version of thesis.Includes bibliographical references (p. 81-84).Introduction and motivation: From a traditional paradigm, the term "luxury e-commerce" is an oxymoron. The high-volume, hands-off approach of online sales is a direct contradiction to that of the high touch, human relationship-based luxury retail industry. It is for this reason that, until recently, many luxury brands have avoided e-retail - the belief is that it cheapens their image (Okonkwo, 2010). However, the successful experiences of certain companies in specific regions are gradually giving many luxury retailers a reason to reconsider e-commerce. For example, the luxury retailer Ralph Lauren has experienced huge success in e-commerce (see Figure 1), and is on a mission to proliferate their multi-channel sales model across the globe. South Korea is one of the most recent locations in which Ralph Lauren has chosen to roll out an e-retail initiative. Explosive economic growth across Asia has rapidly expanded the market for luxury goods and services. In South Korea, this growth has been particularly strong and consistent, as has South Korean consumers' appetite for luxury. This strong market growth, confluent with the reputation as the world's most wired country, makes South Korea an attractive target for e-commerce implementation. The Ralph Lauren team came to us with a rather broad request: to help them investigate the potential challenges of their e-retail initiative in South Korea. Through our research, we found several interesting and pertinent optimization models that could be modified to plan for Ralph Lauren's e-retail operation in South Korea, but as we delved into these models we realized that they didn't address Ralph Lauren's paramount mission in Korea, which is to "elevate the brand". We took a step back and zeroed in on our focus question: how could Ralph Lauren elevate its brand while simultaneously launching an e-commerce initiative in South Korea? We believe the insights gained from our study will help Ralph Lauren utilize "systems-thinking" to make strategic and operational decisions in South Korea that can elevate their brand image. These insights might also apply to other luxury retailers considering an e-commerce initiative in South Korea or other countries. This thesis presents several thought models that incorporate factors like inventory policy, brand strength, mediation, customization and online sales mix - which may make this research of interest to sales, marketing, operations and supply chain professionals.
DepartmentMassachusetts Institute of Technology. Engineering Systems Division.
Massachusetts Institute of Technology
Engineering Systems Division.