(9 of 12)
Lauren hired Strom in 1972, in the midst of near fatal financial growing pains. Even though Polo's revenues were galloping ahead at the time, Lauren suddenly discovered that his enterprise was almost bankrupt because of poor financial management and the costs of headlong expansion. To save the company, Lauren pumped his entire $100,000 savings into the firm and offered Strom a share of the business to come aboard from a management job with Norman Hilton, Lauren's early patron and manufacturer.
The new partnership made a crucial change in the corporation's structure that enabled it to grow in a healthier manner. From direct manufacturing, Lauren and Strom switched almost entirely to licensing deals in which the manufacturer finances production, shipping and part of promotional costs. Thus they escaped the necessity of investment in the capital-intensive garment- making process, along with many of the subsequent losses caused by any product flops. Since the manufacturer assumes more of the risks under licensing arrangements, Lauren gets a smaller share of any resulting profits. But the licensing arrangements give him greater freedom to concentrate on design and marketing.
Nowadays the company's licensees bring to Polo/Ralph Lauren an expertise in making a particular generic item, to which Lauren adds his design, packaging and promotional ideas. His 38 manufacturers produce virtually everything but Lauren's top-of-the-line Polo menswear. The largest licensee is Cosmair, for fragrances, followed by Bidermann Industries, for womenswear. Lauren retains a final say, which he zealously exercises, over the end products. Recalls Clothing Executive George Ackerman, whose company, Warnaco, makes some of Lauren's moderately priced Chaps menswear: "A few years ago we did a safari jacket with copper snaps. Ralph loved the jacket but hated the snaps. Too brown, he said. He wanted black metal snaps. Our manufacturer in Korea, who couldn't make them that color, didn't understand what was so important about changing the snaps. We told him that this is Ralph Lauren and this is what it's going to be. So we had to send a man to Japan to pick up the buttons and take them to Korea. All that for a couple of thousand jackets that retailed at about $100."
While licensees fabricate most of Lauren's products, the designer manufactures his pricey Polo line of menswear (annual sales: $420 million) at his own factory, a rehabilitated brick mill in Lawrence, Mass., that he bought in 1978. Reason: tailored menswear is the type of clothing Lauren knows best. By making those garments himself he can collect a larger profit margin and keep an even closer watch on quality. At the Polo plant, some 225 workers turn out 350 jackets and suits a day. Lauren's best Italian-wool suits ($1,200) are handmade by 25 highly skilled tailors, usually immigrants from Italy, Turkey or West Germany.