Tuesday, July 31, 2012

J.Crew Expanding in Hong Kong

Last year we heard about J.Crew's expansion plans to open in Hong Kong (refer to the "J.Crew Enters the Asian Fashion Market" and "J. Crew to Open Store in Hong Kong {oh yeah!}" posts).

"Thanks!" to Sabrina & Get Fresh who shared the following article from the Wall Street Journal (click here to read in its entirety) about J.Crew's overseas move:

J.Crew Plans to Expand in China, Hong Kong
By Jeffry Ng, Yun-Hee Kim, & Mariko Sanchanta
July 31, 2012

After withdrawing from Japan four years ago following a botched expansion, J.Crew Group Inc. now is wooing someone new in the region: the sophisticated Chinese consumer.

The U.S. clothing retailer, ...will dip its toe into Hong Kong and Beijing this autumn when it debuts its clothes at Lane Crawford—Asia's version of Barney's New York.

J.Crew is scouting stand-alone retail space in an upmarket Hong Kong mall, with plans to open next year and is looking at opening stores in mainland China, according to Chief Executive Mickey Drexler. The company, which is based in New York, also is looking at a possible return to Japan. Mr. Drexler was to fly to Tokyo on Tuesday for meetings and to scout out real estate.

J.Crew's move comes, however, when the once torrid China luxury market is starting to show signs of a slowdown.

It isn't clear whether the U.S. line will be well-received in China, where consumers favor luxury European brands and logos. The late entrance of U.S. retailers into China means they have to try harder to build brand recognition and loyalty.

"It is easy for a Chinese consumer to understand Gucci, 'It is expensive, so it must be good, and you must be someone if you have it.' How does a Chinese consumer understand the history and lifestyle that [a particular U.S. brand] represents?" said Franklin Yao, chief executive of consulting firm SmithStreetSolutions.

J.Crew this year started shipping online orders to more than a hundred countries as a way to test the markets. Hong Kong, Japan and Australia are now among J.Crew's top five international e-commerce markets.

Mr. Drexler, who ran Gap Inc. for much of the 1980s and '90s, said J.Crew is in no hurry to expand internationally and that he would wait to see its stores open in Hong Kong and London next year before considering his next steps. "We don't have a grand plan for opening X%," he said.

Building brand recognition in Asia, particularly in China, will be a challenge. J.Crew will have to compete with the dozens of midtier international clothing names already in the market. Pricing is an issue for new brands entering China, Mr. Yao said, especially with the advent of international shipping from e-commerce sites and the growth of Chinese travelers shopping abroad.

"You need a more sophisticated consumer, someone who can make the distinction between spending $150 for a pair of pants compared with $80," said Torsten Stocker, the head of the consumer group at consulting firm Monitor Group. "These consumers are emerging in China, but it's not as obvious as it is in markets like Hong Kong or Singapore."

To address the challenge, J.Crew recently hired a head of international marketing from handbag maker Coach Inc., one of the most successful U.S. fashion names in Asia. ...

Mr. Drexler said he believes customers in Asia will be attracted to J.Crew's unique, high-quality apparel. "We offer an alternative that's not being offered in the marketplace today," Mr. Drexler said.

Unlike other U.S. retailers seeking international exposure to mitigate slowing growth at home, J.Crew has been expanding steadily. It plans to open 42 stores in North America this year, bringing its store count to around 400. "We're not here because we are running out of places to go in America. We have so much organic growth there," Mr. Drexler said.

...It was Mr. Drexler's decision to pull its shops out of Japan, at the time J.Crew's only market outside North America. "Tokyo reflected the same issues we had in America but trying to do something in America and fixing Tokyo at the same time was impossible," he said.

What J.Crew won't repeat is expanding abroad with local partners, a strategy that was unsuccessful in Japan. "We like control.…We have the capital to do it, and I don't want to visit a store where I have to discuss with…my partner what I like or don't like about my store." "I don't consider this a huge risk at all and if, in fact, we didn't succeed in Hong Kong, life goes on. We'll figure out alternatives," Mr. Drexler said.
It will be interesting to see how J.Crew translates its brand to a consumer base who may not be that familiar with the company. The other thing is what kind of prices will J.Crew be charging. (As international JCAs already know with J.Crew's current international e-commerce site, the initial price points are much higher than the counterpart in dollars.)

I am also interested in seeing what types of marketing their new head of international marketing (formerly from Coach) will pursue. I am guessing the Hello World is just the start (refer to the "J.Crew Styled around the World" post for more).

Lastly, I did not know that Hong Kong, Japan and Australia were part of J.Crew's top 5 international e-commerce markets. I am guessing Canada fills one of the two other slots. Maybe the U.K. is the other one?

Are you excited about J.Crew's move to Hong Kong? Do you think J.Crew can build & translate its brand in the international retail market?

19 comments:

  1. I can't be the only one who gets a giggle out of J.Crew opening stores in the country that produces their shoddy clothing.

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  2. That is sort of funny...but I disagree that all of their clothing is shoddy. I was going to say that I guess I don't really care one way or the other if they open there. Will the brand translate? Doubtful.

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    1. I had the hem of a top completely fall out during its first wash a few days ago.

      J.Crew is on my sh*t list at the moment.

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  3. Just a thought: I buy J. Crew because of the look- they have the best styles, cuts, and colors. Their quality is not the best, which is disappointing considering the prices. For example, dress shirts I've bought from Lands' End have much better quality and lower prices. The downfall is that they don't have the latest colors, prints, styles, etc.

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  4. As much as I love J. Crew, not sure if they are going to do well in Hong Kong. It is not a very well-known brand over there and they are mostly indulged in more well-known European brands. Sephora opened there a few years back. Full of cosmetic brands which are unfamiliar forced Sephora to close and back out.

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  5. Hong Kong could prove risky for our DL. The fashion forward folks that are fortunate enough to have money in China are accustomed to getting the best that their money can buy and from a quality point of view, that would not be J Crew, even though that possibility never seems to register with the Man. They also know(and possibly own) where the factories are that produce those clothes-why would they want to spend on something made in the same factory as Walmart clothing when they have the option of buying something of better quality with a European pedigree? Just another chapter in "The Emperor's New Clothes".

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    1. Agree, Hong Kong ladies take fashion - and status items - very seriously.

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  6. Thank you for sharing. It will be interesting to see if J crew does well in Hong Kong. N yea, Coach is doing very well in Hong Kong and even here in Singapore. But I think that's because Coach brands itself as a high end luxury prices here and in Hong Kong, like Gucci or LV. That's what make people buy. I for once don't support the extorted prices and that's why I buy from eBay or direct from the states.

    Anyway, consumers are smart. If J Crew were to open a branch here in Singapore, I would love to drop by and try things out. But I will still look for cheaper sources to get my JC haul. ;)

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    1. Sorry, I mean high end luxury brand...

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  7. My comment may be completely self serving but... As much as I love the brand and am happy that their expansions are proof of a thriving business, it irks me to no end at the thought of items languishing in a store in another country while I'm desperately seeking them only to get the disappointing "WWFFY" email about searching stores nationwide but unable to locate.

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  8. Not an expert but I am quite familiar with the HK market having lived there for 5 years on an overseas assignment. Market is small but very lucrative. Shopping is the #1 pastime & preference is towards signature brands. Sensibilities are more European, that's why American brands did not do too well, at least when I was there. The strategy of an initial tie-up with prestigious Lane Crawford is very wise because JC must position itself as high-end, not a mall retailer as it is here. With the Chinese economy cooling a little, I can see how people there will find a $500 JC skirt affordable compared to a $1,000 Prada for example, assuming it can step up to quality issues. Shoppers are also a step ahead fashion-wise so JC's preppy basic items will probably not fly as much as their trendier pieces.

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  9. If the HK market is in the top 5 for online shopping, I am certain they will do better than fine. Obviously they've done their homework before setting up shop there.

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  10. I currently live in Hong Kong but I am from Fairfield County, CT. My mom buys my JCrew for me while I am away and I pick it up twice per year :) I agree with Marie - shopping is a huge thing to do and there are a ton of high end stores. The styles here are also more conservative - very few women wear loud colors or prints to work and sandals are unheard of in the office. I wonder if only some JCrew styles will be sold here. For example, the Gap here doesn't stock the same merchandise as the US. Sometimes I am lucky and find one-off pieces of JCrew at local "warehouse" stores at rock bottom prices ($25 USD for a jacket) but I will be happy to have a store in HK!

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  11. I am familiar with Taiwan, not Hong Kong, but I can't really see J.Crew's style being very popular in the Asian market. My only hope for this expansion is that maybe J.Crew will finally go back to making clothes that will fit a true X-Small!

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    1. I think expats and Hong Kongers who're returning from studying abroad for a few years will really appreciate it. My family is from Hong Kong and practically everyone I know who lives there are either westerners of Chinese descent or people who have gone to school in the US, Canada, UK or Australia. They always lament on how they miss certain brands/companies that aren't in Hong Kong, and J.Crew is one of them (and Subway for food - LOL). I'm not sure if local-locals are all that into prep though. They're more kawaii.

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  12. I apologize if this has been mentioned previously, I just returned from vacation so I am quite out of the loop.

    J.Crew is opening a Factory store in Vaughan Mills in Ontario Canada this fall.

    Expanding to Hong Kong, China and a Factory store near Toronto yet still no J.Crew in Calgary.

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    1. wow, that's good to know a factory store will be at Vaughan Mills. I go to Toronto often enough to visit family and would love a factory store there. Thanks for the heads up!

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  13. I wish J Crew would put more effort into quality and decent sewing for crying-out-loud before expanding overseas. They seem so blind to our quality concerns because quality has continued to decline.

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