There are some interesting points to mention:
- The executives at J.Crew felt the upgrade to the website was not optional: "It was mandatory... these upgrades provide the ability to operate separate websites for new concepts such as Made Well and Crew Cuts. This was not possible under our old system..."
- They recognize the impact of the system upgrade but are hopeful that its just temporary: "...we should have been more conservative in our plans regarding the length and extent of the disruption caused by these upgrades... we expect to have our direct systems and operations stabilized over the course of the third quarter..."
- There have been some positive areas that are doing well like direct business: "our direct business, which includes our catalog and online, achieved a 12% sales increase in the second quarter on top of a 19% increase last year despite the issues with our direct systems upgrade"
- They are planning to open 42 more stores this year {yey!}
- Madewell stores are doing well and there are plans to open 15 more Madewell stores in 2009; however the Madewell e-commerce site is delayed until early next year (because of the system upgrade)
- The system upgrade unexpectedly impacted how they handle inventories, which lead to an increase in compensating customers w/ free shipping and additional markdowns in stores: "... a 150-basis point decline in merchandise margin... deterioration resulted from unplanned customer accommodations related to the direct system initiatives in the form of free and upgraded shipping, increased markdown activity as a result of our inability to transfer store markdowns to the direct channel, and increased freight expenses as a result of transferring inventory between stores..."
- Sale customers are recognized by J.Crew {yey!}: "we know at the end of the day, there’s a big sale customer out there and there’s a big regular priced customer so we’re balancing that with maintaining integrity through this period..."
- J.Crew purposely tried to cut back on having sales through their website by reducing some marketing incentives: "We drive the business everyday through e-mails, marketing, special events, free shipping. We just dramatically pulled back... and the risk, of course, was obviously a little less sales but less pissed off customers..."
Alexis, thanks for the transcript.
ReplyDeleteThey state that their growth area is direct sales (internet/ catalog), yet they cut back on web sales. Don't see the logic in this. They are disadvantaging the hand that feeds them.
They must think that web customers are willing to pay more. Interesting food for thought.
Although I have stores closeby, I buy online for the convenience (dont want to 'drag' my toddler to the store). If the deals are better at b&m, I need to rethink my purchases online.
Mom-NYC: Great point about direct sales but cutting back on the web. I think the cut back on web sales is because of the issues related to the system upgrade. :)
ReplyDeleteAlexis, I have been noticing higher prices on the web over the last year. I actually emailed them about it before their website "upgrade". They stated that stores will lower prices to move inventory, etc, etc. But they said that individual stores have the option to offer special discounts.
ReplyDeleteBut recently, as we all know they were offering 30-40% off final sales for a LONG window (about 4 weeks) with nothing comparable online. Though I do understand that they cut back due to web problems. Still sucks for those of us who rely mainly on online purchases.
Alexis...btw..this blog is really great. You provide some great info on the company. I dont know how you manage.
ReplyDeleteI see why they would cut back on web/catalog promotions during the upgrade problems. As Mr. Drexler said, the company risked pissing more customers if they compounded the upgrade problems by continuing to market to web/catalog during the difficulties. I also thought that they downplayed the web difficulties, although maybe those of us who are concerned enough about our web problems to post here are not entirely representative of J.Crew's entire web/catalog customer base.
ReplyDeleteBut . . . completely aside from the upgrade problems (and the fact that my last two web orders were screwed up), I believe that J.Crew devalues its web/catalog customers, as many of its policies favor B&M customers to the disadvantage of web/catalog customers. (For example, lower prices at B&M and free Red Phone shipping at B&M even on catalog-only items.)
Mom-nyc, I've curtailed my on-line shopping for this very reason. It's not at all easy for me to shop at a B&M but I'm waiting for web/catalog to make an effort to woo me back. (I have yet to receive the catalog with the coupon, for example.)
Mom-NYC: Thanks for the nice words! :)
ReplyDeleteI think J.Crew cutting back on web sales was related to the recent system issues because they mentioned stopping certain marketing promotions in order to reduce more frustrated customers.
But now that you mention it, I completely agree with you that some prices for items \have been higher in stores than online (and I actually plan to have a future post on that very topic). Maybe J.Crew is trying to reduce online sales in the long run (or at least charge higher prices).
Hexicon: I do agree with you that there are lots of perks given to in-store customers (e.g. red phone access) that would be nice to extend to online-only customers. :)
ReplyDeleteThe website is down again! BOO!
ReplyDeleteWow, 42 new stores. To me that sounds like a lot. I wonder if J.Crew is considering crossing the border. Banana Republic would get kicked hard here if J.Crew came to Canada.
ReplyDeleteI think J.Crew will always do a good deal of business with catalog and on line sales. On line sales should be more cost effective. The catalog while expensive seems to be their 'thing' and people view them like magazines and use them to really get ideas for wardrobes. I've always wondered how much of the catalogs cost is factored into each item. (Percentage or dollar amount)
As I mentioned last week, I did get a very nice phone call from two J.Crew marketing executives last week in response to a detailed letter I sent them about my perceptions of their polcies re web/catalog customers.
ReplyDeleteThey didn't come right out and say that the web customer is willing to pay more. Instead, their point was that individual store managers are given a lot of authority to set prices in their store, e.g., a manager in Florida could mark down slow-selling sweaters even though they might be full price up north and in the catalog. They also pointed out that stores need to clear inventory to make room for new items, but web/catalog does not have the same need. To them, thase make great sense as business policies.
To me as a web/catalog customer, these policies make less sense. I was furious to find that B&M had marked a dress down to $37 yet the web/catalog was still offering it for $180. I felt deceived and ripped off. So, that's the risk they take.
I listened to the entire conference call online, and I felt satisfied about the amount of attention being paid to this upgrade issue. I was interested by the point made (by Mickey or the CFO? I can't recall) about J.Crew's intentional response after about two weeks (TWO WEEKS!) to attempt to slow down traffic and buying (by reducing email advertising and other unnamed means) in an attempt to reduce the number of "pissed off customers". Wow - two weeks to respond to a total crisis! As a Crisis Intervention Specialist, I have to wonder whom they were consulting and what took them so long to come up with that plan.
ReplyDeleteI hope they are drawing up a Lessons Learned report about this mess, and I hope they learn from it and use their newfound knowledge to our (and their) benefit.
jcrewmama
Alexis: Thanks for posting the transcript!
ReplyDeleteI also prefer to purchase online because it is just simply easier than shopping with 4 boys. If I am able to leave them at home with hubby, it usually ends up being only once a month...which we all KNOW is not enough! I really wish they would give more incentives to web customers!
Hexicon, totally agree with your point that JCrew devalues web/catalog customers.
ReplyDeleteI just would like some parity in what they offer us vis-a-vis what they offer to store shoppers. Even this 15% coupon they offered with the new catalog is lower than what they offered to store shoppers for a session with PS (or the 20% discount as an apology for web problems!).
Anyway, time to turn in...
ffm -- I didn't realize you have 4 boys. I think I read that long ago, but it just connected right now. In many ways I think boys are 'easier' than girls, but God bless you!
ReplyDeleteSorry to side track, but I got a Container Store Elfa sales catalog yesterday, and it was funny finding lots of J Crew and Anthropologie items on the hangers!
ReplyDeleteFor instance, check out this picture:
http://www.containerstore.com/browse/Product.jhtml?CATID=68559&PRODID=10023302
It has the aqua frances blouse, and the blue short jacket that's feature in the summer. Another yellow scheme one has the kimono dots pants.
I think it's definitely a shame to customers who don't have a nearby b&m that they can't get the deals that others enjoy. Before I found this blog, I would purchase online, content in the knowledge that I was paying the same price as someone somewhere else. As the wonky policies have shown, this is not always the case. I think once you know that part, it makes it harder to swallow the online prices.
ReplyDeleteI am forced to shop on-line since J-Crew stopped carrying Tall in the stores. So sadly, I never get to take advantage of store sales on jeans, pants, jackets, dress shirts etc...
ReplyDeleteIncidentally, when I asked a sales person why they stopped carrying Tall she told me that J-Crew is trying to create a new image for their stores and that the longer lengths just don't fit that image. I thought that strange considering all their catalog models require a Tall and let’s face it, we all want to look as good as they do in their clothes.
I did a post about the launch of Madewell1937.com that includes a scan of the September People Stylewatch. I guess they expected it to be finished by now because there's a big headline that says ONLINE NOW! The stuff in the magazine is very meh and way too expensive.
ReplyDelete40 is the New Black
Anonymous at 7:12AM, I think your sales person was mistaken . . . they stopped carrying tall in the stores back when I used to work there. It was simply because (much like petites) it's expensive to carry such a large assortment of sizes in stores and we weren't selling enough of them to justify keeping them in stock. It was just plain economics, nothing personal. Jenna is like 6' tall, so they certainly don't cater to the short girls! (And you can go into any j.crew and order your full priced tall items with free shipping.)
ReplyDeleteIt was a great company to work for! I quit to have kids. I love this blog and it makes me miss being an insider! Alexis--you should work there part time for the discount, you'd be in heaven!
Anonymous at 2:54 PM: If JCrew ever asked me to work for them (even part time), I would leave my (boring) dissertation behind. ;)
ReplyDeleteHow much IS the employee discount?
ReplyDelete