Saturday, March 14, 2009

J.Crew Article: Lower-End Offerings

A big "thanks!" to Heather who shared with us a great article. Although the article discusses many of the issues brought up by J.Crew during their recent reporting fourth-quarter results (refer to here and here), they have an interesting focus on their "lower-end offerings".

J.Crew Beefs Up Lower-End Offerings
by Sarah Mahoney

Click
here for link
March 12, 2009


After posting a fourth-quarter loss, J.Crew says it will continue to expand its lower-end merchandise, both at its flagship J. Crew stores and the fledgling Madewell chain.


"Our bestsellers are things that are stylish and fashionable and under 80 or 90 bucks," Millard Drexler, J.Crew's chairman and CEO, said in conference on Wednesday, following its earnings release. "That's where the action is right now. There's been a sea change--customers are hesitant to spend and are shopping differently. The game or the hobby is to get anything for less."


J.Crew also says it's continuing its expansion of Madewell stores--a concept that specializes in younger, hipper and more affordable denims, knits, t-shirts, and scarves--and that it will also scale back price points in those stores. (Drexler purchased the 1930s-era Madewell brand before joining J.Crew several years ago.)


"We're really pleased with the positioning," he says. While few people have heard of these stores yet, "you go in and see mothers and daughters shopping there. I think the t-shirt selection may be the best in the U.S." Currently, there are 12 stores, with plans for an additional eight to open this year.


Drexler is also upbeat about the company's bridal business, and says it is looking for a bridal-salon location in New York City. (The company already sells wedding gowns, as well as bridesmaid and flower-girl outfits, online and in its catalogs.)


But overall, the company's results were grim--including a loss of $13.5 million for the fourth quarter of its fiscal year, compared to net income of $25 million in the same period a year ago. Sales fell 3% to $388 million, and comparable-store sales dropped 13%.


The company--which announced extensive cutbacks last month, including a 10% workforce reduction--says it also pared back marketing spending, reducing the number of catalog pages produced by 18% in the fourth quarter--a level it expects to maintain throughout the year ahead.


When asked about the economy, the near-term outlook "kinda sucks," Drexler candidly conceded. "We're as well-positioned as we can be for if and when things turn around. If our business was only as good as our buzz, we'd be having fun. We're very excited about the way our stores and catalogs look, and we're getting great feedback."


Thanks to the new First Family, J.Crew's designs have constantly been in the headlines, including the white bow tie it made for President Barack Obama, outfits worn by First Lady Michelle Obama in high-profile interviews from David Letterman to Vogue, and the green gloves she wore to the inauguration. (Those are said to have caused a stampede to the company's Web site that actually caused it to crash briefly.)


In a down economy, Drexler said, fashion becomes more important than ever. "Newness is selling, and the last thing we'd want to own right now is basics. Clothes that are like everyone else's are a commodity game. So our t-shirts may have a different shape, a different fabric, a different V. But they're clearly saying, 'I want value at any price.'"

I remember J.Crew promoting items at various price points (e.g. $50, $100, etc) during the holidays. However, I have not seen J.Crew pushing items under $100 as much as they have lately. Right now, they have links "Instant Gratification (under $100)" links for both Men (click here) and Women (click here). I personally think this is a smart marketing move on their part. Even though their items are not cheap, they are showing customers that they have some "affordable" items. ;)

What are your thoughts on the article? Do you agree or disagree with Drexler that the "game" for consumers is "to get anything for less"? Do you agree or disagree that "newness is selling" as oppose to basics?

36 comments:

  1. I LOVE the idea of bridal salon in manhattan!! I am not engaged (yet...my bf and I have been together for about 6 years...he's a procrastinator lol) but I would love to visit the salon as I plan to go to every bridal shop in the whole damn town (NYC)! I know they can order the dresses for free to try on in store, but they would have the beautiful 3-way mirrors and and huge fitting rooms and would have all of the collection on hand in many sizes. Plus the added bonus of the SA's being familiar with bridal gowns. I personally would enjoy it because sometimes it's a dress you never thought you would try on (or order to try on) and then you just fall in love! Like that wonderful hippie ruffle dress...I would try it on just for kicks :) I couldn't even imagine trying a WEDDING dress on the those mini freaking rockafellar store fitting rooms. Or worse, my teeny tiny airplane sized bathroom in my apartment (the mental image is enough to make me roll on the floor laughing). Even the collection store doesn't have the adequate space for wedding-dress-trying-on. Some of J Crew's dresses go up to 3000 bucks, the same as Amsale, Priscilla of Boston, and Vera Wang. Trust me, I have seen those show rooms and it just makes you want to own every dress in the place...they are incredible! J Crew would definitely improve their wedding sales with a salon because they have great and varied price points for all types of brides. There are also those folks who don't "online shop" and would never order a $3000 wedding dress from a website. Heck, I am a crazy online shopper, but could you imagine rolling up to your local B&M returning like five HUGE PUFFY white dresses???? hahaha...it makes me smile. I hope it just happens before it's my turn to shop for my wedding dress!! :)

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  2. whoa NOVEL...sorry...I love wedding dresses :)

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  3. J Crew has some wonderful basics that are unique and definitely draw me to the brand. I think Drexler is correct. People are looking for a deal. Just look at the interest BR and Gap got with their 30% off promo. The designs don't hold a candle to JCrew but the price was right.

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  4. Lindsay: That's one long comment.

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  5. Much of what J.Crew is offering isn't unique or special enough for me to buy at the price point they are selling. Under $100 doesn't sound like a lot, but for people who are watching how they spend their money, it really is!

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  6. I don't mind paying $48 for the Rosette Tee, however I do mind paying $8.50 for shipping for one item which doesn't weigh very much. I end up paying over $60 for it. I'd probably order more often except I'd gets costly with shipping & returns (if it doesn't fit).

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  7. I'd be "instantly gratified" if JC offered free shipping on orders of $100+.

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  8. Can we please stop with the free shiping complaints every friggin day people, they are not going to change so suck it up!

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  9. Mr. Drexler (Anon @ 5:21) - How nice of you to join us! J/K ;)

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  10. I agree with Anon 1:12 - I know it's like apples to oranges in a way, but some shoppers feel that if there are such bargains to be had all over, that JC should be offering comparable ones. If a casual JC shopper is not 'in the know' (like the JCA community), the may see the instant gratifications as a good deal, but from a point of watching and buying from them over the past year in particular, we know that there are deeper discounts to be had. Especially in light of inventory getting dumped at TJ Maxx! Ever since they took the % off sale at my B&M, the same merch has been sitting there for a while. I returned a catalog only item last month that is still there (and would've likely been gone in a day or two a year ago). The stuff is just not moving, nor is it priced to move.

    OT: For all of the JCA's that mentioned Gap, I was there the other day and the SA mentioned that as of April 1, their return policy is changing - going from 90 days to 30 days! Wonder if other retailers will follow.

    OOT: Anybody get the Free People catalog? I've never purchased from them but got one yesterday and ah.mah.gah - holy shredded jeans, Daisy Dukes, and studded tights! I was scandalized.

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  11. Maybe I just need to have some coffee, but frugality isn't anything new. There have always been people who shop for bargains. And, jcrew isn't designer or high end. As much as they may wish to be so, but the Collection and pricey handbags haven't overtaken the brand yet. It's always been *relatively* affordable, until recently. Remember when their jeans were $58? Now for $98+, you can get the same pair, but of lesser quality. *grumble*

    I have no problem shelling out full price for something well made that I know will get much use, but in the last few years, there have probably only been 4-5 jcrew items for which I have willingly paid full price... Most recently being the stretch vintage cord skirt--and I would happily pay full price for another. I want the label to succeed, but jcrew is not high end/designer and it doesn't seem in it's best interests, especially at this time, to think of itself thusly.

    ok, that was almost as long as Lindsay's post. ;)

    -Heather

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  12. silver_lining,

    I don't know what has happened to free people in the last 10 years. They used to have some cute + funky sweaters, but now it's all slutty bohemian crap. blagh.

    their tights and knee socks are still pretty cool, though. :)

    -Heather

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  13. anon 5:59: Mr. Drexler left the site was too negative.

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  14. Judging from the "buzz" created by the Gap F&F deal this week, and the number of JCAs who took advantage of it in some way, Mr. Drexler is correct that JC will not win the battle for basics. It is their special pieces that differentiate the brand and create the type of loyalty that we all have. Isn't the challenge for JC to bring VALUE back to their special pieces via quality, good service etc.? It's not necessarily the price points per se; customers need to feel GOOD about their purchase decisions! there are plenty of gorgeous shoes out there worth $200 (Cole Haan Air comes to mind), but they are not J. Crew's current ill-fitting plastic shoes, no matter how pretty they are.

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  15. I think there should be a restructuring of the shipping prices.. of sorts... especially for regular customers. I place orders at least 5 times a month. It would be nice if they would just give free shipping to people who spend a certain amount in a period of time. Like a type of spending "rewards of sorts". If they did, I WOULD order more, guaranteed. I would rather have that than the other rewards and it would be beneficial to both parties! I dont want to pay $8.50 shipping for a single tiny item, so I dont bother. I will wait for a free ship code & by that time may change my mind.
    I agree with the comment on shoes. I love them, beautiful styles and colors... but they are my least comfortable shoes!

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  16. I think marketing towards items selling under $100 at full pop is much better than selling items on sale with smaller margins. First and foremost J.Crew is a company wanting to turn a profit.

    Interesting how brides seem to be recession proof.

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  17. I'm not sure I agree with Mr. Drexler that basics need a new spin every season. I like the tee shirt variations they come out with, and I don't mind having some cardigans, tops etc. with a twist but it's so hard right now for me to find a simple, season-transitional cardigan/sweater at J.Crew that doesn't have chiffon, ruffles, or some kind of extra adornment on it.

    Right now I'd like to invest in some pieces that will last me more than just this year. I'm having a hard time locating those items at J.Crew.

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  18. I just wanted to say, even though this is totally OT. I was very upset that they took the multiview away from some of the sale section items! It makes it really hard for me to make that final decision to buy. Esp because it is final sale.

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  19. I took advantage of the 30% sale at Old Navy (needed some cheap swim shorts and flip flops) but I have not really jumped at JC's free shipping for x-amount. If I spend $150 and get free shipping that saves me about 10% because s/h is about $15. That's not enough to offset their relatively expensive tshirts and shorts. Old Navy's swim trunks are $20 msrp. JC's about $55? For swim trunks?? And tshirts are about half price at Banana Republic if you buy three not counting the coupon. JC's are about $17-$37 for one.

    Of course it's all supply and demand, and I'm not complaining. Not to boast but I'm affluent (hence the anonymous post) and could purchase any great JC item at full retail, but that's not the point. $37 for a heavily marketed tee shirt in a beautiful catalog just doesn't make sense (financial and otherwise) to me.I don't care if they consider it a good buy under $100.

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  20. An easy way to provide free shipping to frequent buyers would be to follow Banana Republic's model of always giving free shipping to their Luxe card holders (maybe there is a minimum purchase associated with it though? I haven't been ordering from BR much lately as line has been fug.)I imagine we all have JC credit cards...maybe they could introduce a Luxe/Platinum version.

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  21. Haha, Lindsay - liked your image of wading through the mall with five big white fluffy dresses in one's arms, trying to locate the J.Crew by peeking through tulle and lace...

    I usually buy tees elsewhere, bec. I think J.Crew's prices are too high and almost every one can make a good, quality, cotton tee for around $15. I wish J.Crew would focus on quality again - I have some dream sweaters from fall/winter 2007 that are absolute garbage - pilled to the point they look like a giant fuzzball. Cashmere, too.

    I go to J.Crew for unique items like some of their recent jackets - Astrid, Bella, Cheshire (hello, alphabet!), not so much for basics.

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  24. Just went to GAP and BR with my coupon. Got TONS of good stuff. I have had a long long love affair with J. Crew, but considering the high prices and bad quality lately, I am definitely done for awhile. In fact, because I got such good deals today, I am going to make a trip to J. Crew tomorrow in order to return the stuff I spent way too much $$ for.

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  25. j crew guy in canada: My best friend works for theknot.com and actually wedding gowns and weddings in general are fairly recession proof. They say the new trends are "budget savvy" weddings and brides are shopping more online to find some great deals for the things they love and must have (basically just like the point of this blog lol). But overall, the LAST place a woman is shown to budge is her wedding dress. Yes, she may opt for the $1000 dress as opposed to the $3000 dress (or hit one of those fab sample sales) but most would rather give up starbucks coffee or *gasp* shopping at J Crew to have the dress of their dreams on their big day. :) I know I would!

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  26. Drexler can think whatever he likes and try all things under the sun but there are too many shopping options out there to put up with shoddy declining quality at a high price. I refuse to complain and moan when I can simply shop elsewhere.

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  27. OT - for JCAs who look for Penelope mary janes

    Today J.Crew online restocks Penelope mary janes in sizes 6,7,8,9,10. There are only two colors available, but hope this helps!

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  28. Maybe JC heard the chatter about basics, because they just lowered the price of all men's tees (crew-neck and v-neck.) Just bought 2 last week, so I'm not taking advantage; but, I think it's interesting.

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  29. Don't know if someone's already mentioned this, but the Jayne dress in tea rose is shown in a layout about spring suits in the April issue of Esquire. Of course the girl in th dress is not the subject, but she's shown in two shots wearing the dress (alongside the guy whose suit is the subject).

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  30. J.Crew style is what keeps me shopping the brand. I agree with Drexler's comment that newness sells and they seem to be able to reinvent each season. Just when you think you have it all...

    I don't believe they have exceptional value for the money but it is decent IMO. Most of the items will last several seasons and wear well. Yes, there have been quality and sizing missteps but overall I find myself reaching for the J.Crew items in my closet over and over again. Some of the items I purchased last fall have become winter favorites worn many, many times already. I can only say that about Gap favorite tees, anything else there starts to look poor after a few wearings. Fine if you don't mind replenishing frequently. Personally, I prefer to purchase selectively and with the intention of keeping the item around forever. I have yet to have an item for sale/trade on the weekly exchange so I think I'm doing pretty good.

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  31. JC still has basic tanks (i.e. perfect and favorite tanks), tee(perfect fit) and cardigans (jackie cardigans, unadorned merino cardigans) etc. Yeah there's not really a great promo right now, but the stuff is available if you want it...not sure why people are saying they don't have basics anymore. Plus there are the simple chinos/shorts/capris they have every season.

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  32. The women's shoes are crazy-priced at J.Crew, considering the materials used. Check out these men's shoes:
    80334, leather upper, lining and sole - $140
    79376, leather upper, lining and rubber sole - $168.

    Compare with the women's leather or fabric upper, man-made lining and sole for around $200. Sure, some of them are pretty cute, but they are not good quality and extremely over-priced. No wonder they end up at TJM.

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  33. Anon @ 6:37 - I agree, JC definitely has some great basics. For the earlier poster looking for a basic cardigan, try the Jackie, Library Shawl, merino Michelle, merino crewneck, summerweight v-neck or short-sleeve cotton cardi, to name a few. Very basic, no embellishment sweaters.

    JC basics are what keep me coming back because they are usually done a bit nicer at JC.

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  34. i love the quote about moving madewell stuff to lower price points! i love madewell's style (especially now that I'm a sahm that needs more casual than work clothes), but i can't bring myself to pay $100 for a rumply tunic that looks cute but will end up with food from my kiddo on it and might go out of style in a year or two. same with t-shirts. $38 for a cute but maybe too trendy graphic tee is too much for me right now. so if it goes less...whew...i'm going to be in there more :)

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  35. naomi,

    oooh! I see them online... Tempting. I won't buy them, though, because I bought the metallic crackle maryjanes in parsley last week to "console" myself that the penelope was gone... I really wanted the peep toe ones in golden moss, but the metallic maryjanes in silver/yellow/olive would have been a very close second. oh well.

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  36. anon 6:31 Most of my J Crew stuff from last fall (Tees, jeans, sweaters) are falling apart, they will not last another season. Some people just want the J Crew label.

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