Sunday, September 13, 2009

Retailers {+ J.Crew} Learn from the Recession

The recession has changed the way retailers do business. The following Associated Press article takes a look at how some retailers (including J.Crew) have addressed their methods of operation. (Click here to read it in its entirety.)

Lessons of recession resonate with retailers.
Thin small. Cut prices. Emphasize Value.

By Anne D'Innocenzio

September 12, 2009


The "Great Recession" and Americans' retreat into thriftiness are teaching retailers a new lesson: how to survive when consumers are focused on "needs" rather than "wants."


For years, shoppers splurged on everything from $5 lattes to $200 jeans, and retailers responded by opening more stores and offering more choices. Now, beset by high unemployment and limited access to credit, shoppers are limiting most of their purchases only to essentials or the best deals.


Retailers' first response to the sudden and sharp pullback in spending last fall was to offer deep discounts and more coupons to keep merchandise moving. But to survive over the long haul, the watchword for stores and product makers is "small."
...

The changes are likely to last for years. Americans are also getting used to their newly adopted frugal habits of saving more and spending less.
"I don't think we are going to go back to business as usual," said Steve Sadove, chairman and CEO of Saks Inc., operator of Saks Fifth Avenue.

As companies woo buyers, shoppers are finding they're in control. And they're driving hard bargains.
...

Less is more

For retailers, the changes need not be devastating. In fact, those that survive will be leaner and more efficient.


"There's nothing like a good old-fashioned recession to make you run a better business," Millard Drexler, J.Crew Group chairman and CEO, said recently.


To stay in business, stores find they can't take big chances with what they put on the shelves and how much they stock of each item.


Merchants are now keeping less stock on hand and delivering goods into the store more frequently to keep stores looking fresh. Retailers hope that strategy will help cut down on discounting.

Apparel companies also are focusing on the most popular colors instead of oddball hues.


Power of lower prices

Manufacturers and retailers that held firm on pricing a year ago to try to protect their brands have felt the sting.
...

Price cuts are painful, so manufacturers and retailers maneuver to avoid them by identifying goods with strong demand. If they must cut prices, they cut costs, too, to maintain profit margins.


...
Stores are putting more stock in store-label products, which cost less for consumers and tend to be more profitable. This year, 37.5 percent of business is expected to be from store brands, according to a National Retail Federation survey. Two years ago, that figure was 26 percent. That could go to 50 percent in the next few years, says C. Britt Beemer, America's Research Group chairman.

Marketing value

Consumers' focus on value and saving money has shaped how products are marketed as well. Sellers are becoming more sympathetic to consumers' woes in their ad campaigns.


In the past, "retailers had a hard time acknowledging (in ads) when things were bad," says Ellen Davis, a spokesman at NRF. They feared it would make business worse.


Now, higher-priced products like Hefty's odor-blocking trash bags are advertised as money savers because the garbage won't get so smelly that it has to be changed before the bag is full.


Consumers aren't going to be "hyped" to buy merchandise anymore, says Konheim of Nicole Miller. They want to be convinced that they're getting more value.


Even though this article shares a lot of information that we already know, I thought it was still quite informative. In particular, I have found myself cutting back from shopping this year. Moreover, the value of an item matters more to me now.

J.Crew's current strategy is to focus on reducing their inventory levels while selling unique goods at full retail price. They are not offering those amazing deals and sales, like we saw last Winter. What's interesting about this is that their competitors are still offering amazing deals left and right. Despite this heavy competition, J.Crew is outperforming them (& investors expectations)- so they are doing something very right.

What are your thoughts on the article? Do you disagree or agree with any of the points made? Do you find your shopping totals has been reduced or stayed the same level since last year? :)

16 comments:

  1. I'd have to agree with the article -- or at least your summation -- J.Crew seems to be doing a lot of things very right as of late -- reducing inventory, adjusting price points, adding more "collection" pieces (like that one of a kind necklace), and keeping the new merchandise flowing. I was really surprised to hear about the new rollout for September 15th, but I hope this is just a taste of what's to come. Keeping the inventory moving is such a great idea, and as for me ("joe consumer") I LOVE the idea! I was just thinking the other day that I didn't want to go back to the B&M because I knew it would just be the same old stuff I'd seen the last time I was there. If they keep the new goods rolling in there will be a lot more traffic to the stores. I applaud J.Crew for not falling into the "just make crap and discount the hell out of it" trap (I'm looking at you, Banana Republic). Here's hoping J.Crew keeps movin' on up!

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  2. anyone who reads my blog knows I spent a WHOLE lot more last year during the holiday blowouts : ), but time will tell (It's only September!)

    I agree that the low inventory means I'm getting the things I really love at full price from JCrew. and agree with RatsOnParade, I like the quick turnaround - not F21 extreme but there's always something fresh = waaay better than seeing things languish in final sale forever.

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  3. OT: Just got a copy of the new Sept 15th (Oct 09) catalog this evening + posted it on my blog: www.ilovejcrew.com I'm LOVING the mohair retro-stripe cardigan (item 18661E) on page 15. Can't wait for the new rollout! :)

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  4. If MD cashed out on so many of his shares recently he must know something that we don't.

    I suppose the holidays will be the real litmus test.

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  5. Just a heads-up for Mickey D - "Less is more" does not apply to customer service. One thing the article did not mention is superior customer service, a la Nordstrom. I am sure many of us JCA's would increase purchase if the discount rules are clearer and return policies relaxed.

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  6. I like the quick turnaround of the inventory too, however the quality of some of their items is declining and their customer service attitude "that the way it is" when it comes to their policies is not going to win customers. I am not going to go into great detail about my issue with CS incorrectly charging Canadian customers duty and taxes, but the attitude of support services take it or leave it comment made me wonder why I even bother shopping at JC.

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  7. I think only time will tell when it comes to J.Crew's current strategy. I was at the mall yesterday and J.Crew had the least amount of shoppers out of all the stores I visited. Seeing that just makes me wonder how they are still claiming to be doing so well...

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  8. Rats on Parade - THANKS. I am actually really excited about a few pieces in the catalog. Appears to be my favorite roll-out in a while. THe spy trench and sequin bow cami are just a few lovely pieces. DO NOT like the patent Campo.

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  9. RatsOnParade, thanks so much for sharing the October catalog!

    Truth be told, I've been totally bored with JC for several months now, and losing patience with items that are IRL not meeting expectations based on the catalog/website. I've also lost interest in stalking items/popbacks/etc knowing that they usually replenish stock after a "sale" has ended (not to mention receiving used items - I got a textured hemp skirt in the summer with a very obvious stain on the front and no tag - yuck!).

    Finally, I've found fit/sizing to be problematic more frequently along with my long-standing problem with their declining quality (being masqueraded as avant-garde with raw edges, exposed seams, etc.). I'd rather spend my time looking for older items on eBay than bother with their current offerings and all of their execution problems (thanks to all of the JCA's and their blogs!).

    Apologies for the crabbiness! I apparently just got the memo that the JC I knew and loved is no more - now where do I go from here? ;)

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  10. rats,

    Thanks! I am looking forward to seeing the cashmere boatneck popover in person.

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  11. RatsOnParade - thanks so much for posting the catalog! I can't wait to see some of those items IRL. I hope my b&m gets a good roll out this week.

    As for the article, my ps told me a while back that JC was sending new merch each week to keep the store fresh, especially for those who like to come in every week. I think that's a great idea! No sales? I think that's a bad idea, although it does seem to be working for them. I limit my JC shopping to sale or one/two full price items that I love. I am spending elsewhere (ATL the most) b/c the deals are so good.

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  12. went to the ATL shoppers day yesterday. store was BUSY, BUSY, and offered 30% off your purchases from 1-5. Plus they had a dj spinning music, drinks, desserts, and all kinds of new fall clothes out! What a way to get shoppers in, Ann Taylor Loft:)

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  13. Personally, I have found myself ordering less items overall, but purchasing more full-priced items over sale items. I guess I just want to get the things I'm really interested in rather than something I am merely luke warm about. i.e. I got the boyfriend blazer and the eden blazer FP...and that' probably all I will get for awhile. But I'm really happy with my purchases and I don't feel as tempted to scrounge around the final sale section looking for things I don't even really want!

    As for the Customer Service issue, JC needs to focus on that. The SAs on the phone are often very inconsistent with the company policies and are often not as informed about the product as I'd like. In contrast, I have found that the SAs in-store are just the opposite: they are friendly, helpful, and willing to make it worth your while to shop there.

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  14. Interesting comment about store brands--I wonder if that is intended to apply more to things like laundry detergent or if that includes mid-range retail. One of the reasons I stopped shopping at Nordstrom and switched to J.Crew about 4/5 years ago was Nordstrom's decision to de-emphasize its in-house lines (like Classiques Entier) in favor of label-conscious names like Burberry, Juicy, Coach, etc. I'm not into paying for someone else's initials on my clothing, and the Nordstrom house labels used to offer an incredible selection of high-quality merchandise that was a great alternative to so-called designer clothing and accessories. Unfortunately I don't see my local Nordstrom going back in that direction.

    As other posters have pointed out, in these times some good old-fashioned customer service would be nice to see too. It surprises me in this economy that stores aren't doing more to make customers feel welcome.

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  15. silver lining,

    I am on the same page as you with JCrew now. Really bored and loosing interest after I used to CRAZY for the brand for many years and a daily stalker of their website. Now, I look at it a couple of times a week at most when I used to look 3 times a day!

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  16. I used to be nuts about banana republic but I switched over to j.crew's much "younger" style. The one thing j.crew lacks are the better shipping/return policies of the other retailers. I don't mind paying more for quality (vs. quantity resulting in something I end up wearing once) but I agree with some of the other posters about the inconsistency in the sizing and quality IRL. Overall, I still love J.Crew and will continue to shop from them but I do wish they would work on consistency of the policies with the SAs and get rid of the stupid FS no-return policy. :)

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And now back to J.Crew! :)