Gene Detroyer

J. Crew to Put Outlet Savings Online

August 31, 2010

FROM RETAILWIRE:
J. Crew Group plans to put its factory outlet sales online in September in a bid to make its deals more accessible for cash-strapped consumers. How do you weigh the cannibalization risks for Crew versus the opportunity to reach more value-conscious consumers?      [more...]

"Crew is finding 'superior, superior returns in factory and online.'"

Of course. For factory, rent is less, labor is less, store build out is almost non-existent, inventory has less value. Depending on the pricing, factory will beat main line every time. The problem is that factory stores generally can't operate in normal retail destinations. Therefore locations are limited and out of the way.

For online, the same situation exists except it is available to anyone, anywhere and will generate higher turns. Overhead is substantially lower; so low that brick and mortar can not compete as a retail business model.

With regard to cannibalization, does it matter? To be ridiculous, if every sale were moved from main line to factory and online, J.Crew would be considerably more profitable. The reality is that J.Crew will expand its revenue base considerably without investing in expensive new stores. And every sale to that expanded base will be more profitable than the sale to their current base.