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[7 comments]

J. Crew reportedly exploring budget concept

May 5, 2014

J. Crew Group is quietly developing a new format aimed at more budget-conscious shoppers after successfully turning around its core chain with more upscale designs and loftier prices.

According to The Wall Street Journal, the new concept will be called, "J. Crew Mercantile," a name the retailer trademarked in November. The concept will offer merchandise and prices that are similar to its J. Crew Factory outlet selection. Stores will be located in regional malls closer to city centers.

The Journal report states that a few leases have been signed and the retailer continues to scout locations. But a Women's Wear Daily follow-up article implies the company might not move forward. A J. Crew spokesperson told WWD, "It's too preliminary to discuss the subject."

J. Crew might be looking for fresh avenues for growth as it prepares for a possible initial public offering.The retailer's fourth-quarter profits fell 42.0 percent amid gross margin pressures, part of an overall holiday season that Suzanne Kapner, the Journal's retail reporter, said underscored "the difficulty apparel retailers have had in boosting sales without help from discounts."

For J. Crew, opening a lower-priced concept would be both coincidental and ironic.

Mickey Drexler, J. Crew's CEO, made a similar move when he was CEO of Gap Inc. with the launch of Old Navy in 1994. At the same time, Mr. Drexler has been an outspoken critic of the constant promotions at department stores and the quality levels at many of the fast-fashion chains.

"I resent the masses thing," said Mr. Drexler in a speech late January at the Parsons The New School for Design in Manhattan, according to WWD. "I find the world isn't that high-integrity. Maybe I grew up not being able to afford nice things, but it shouldn't be that way. I wanted nice clothes that aren't crazily priced."

Discussion Questions:

What are the pros and cons of J. Crew developing a lower-priced concept? How should such a chain be positioned?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you see more benefits or risks to J. Crew opening a lower-priced concept?

Comments:

How about Walmart opening a higher-priced concept? Preposterous. Why? Because we all know what Walmart stands for in the consumer mind.

What does J.Crew stand for in 2014?

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Bob Phibbs, President/CEO, The Retail Doctor

It is always a challenge when line extensions potentially denigrate an upscale flagship brand. If J.Crew wants to merchandise a lower priced concept, I suggest a non J.Crew name association. You can make it for the class or make it for the mass. However, it is difficult to do both.

I am often reminded that you can play football or baseball but not both at the same time on the same field. I recommend J.Crew proceed with caution here unless the sales and profitability options for the lower-priced J.Crew line extension exceeds those of the flagship brand.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

When the article mentioned Old Navy for Gap, it struck me that part of the success was the Old Navy name that built a new brand and position. Similarly, Loft does that for Ann Taylor, especially when you see the name alone without the Ann Taylor association. J.Crew Mercantile is too close to J.Crew for consumers to distinguish. I'm guessing they will come up with a different name if they go ahead with the concept.

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Joan Treistman, President, The Treistman Group LLC

Why do they want to go into business against the giants? With the sudden death of the middle class in the western hemisphere, the best opportunity for success is going higher where the competition is smaller in size and scope. This needs planning and execution which is something new in the 21st century, but that is where the opportunity for a company this size is.

Again, the question is where can they grow, not how do they survive. There is no waiting for tomorrow in the world economy of today. The practicality of down in the land of the giants will only be the start of a slow and agonizing continued decline.

When you need money you need to go where the money is first and then quickly figure out how to earn it. In the land of discounters, there isn't enough money to keep all of them healthy, so why in the world would anyone want in?

'gjarnoldjr'

I agree with the above comments about diluting the J.Crew name with a lower-priced concept. It will become increasingly difficult for the company - and shoppers - to navigate the nuances of three tiers of J.Crew pricing - the core brand, Mercantile and Factory. Instead, J.Crew needs to ensure the core brand continues to align with its loyalists, who tend to be an outspoken bunch and do a decent job of keeping the company in check when it falls prey to Lyons' and Drexler's high fashion aspirations.

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Kelly Tackett, Research Director, Planet Retail

It's like giving a discount without calling it a discount. J. Crew should position it as a store where the customer will find discount/sale prices, but don't make it TOO obvious (Penney's mistake). Let the customer "search" for the bargains and sale prices.

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Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

Positioning is all about the shopper's mind. Okay, that's the basics so lets get J.Crew back to the basics. Back to the basics is about serving the many types of shoppers - from the high-end to the normal. Mickey sees this and the lower priced option or what I would have called the Merchantile Exchange, show that.

The J.Crew umbrella brand will not be hurt by this move as long as customer service remains #1 on the list.

Good work Crew!

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

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