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How J.Crew Can Weather the Rough Seas

Jul 21, 2017
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SMITH BRAIN TRUST – J.Crew is battling some choppy seas.

It's had 10 consecutive quarterly sales declines, two straight years of losses, and now the iconic, classic clothier is swimming in more than $2 billion in debt.

Its longtime style maven and creative director Jenna Lyons is out, after 26 years of helping to define American preppy chic, as is the company's once-celebrated chief executive Mickey Drexler. It's paddling against unprecedented challenges from fast-fashion retailers and e-commerce competitors.

And now as J.Crew looks to right its course, it's facing another crisis: an identity crisis. 

"People are confused now about who is the target consumer for J.Crew," says Yajin Wang, assistant professor of marketing at the University of Maryland's Robert H. Smith School of Business.

J.Crew's fashions used to be aimed at young professionals in search of "less-boring office attire" and natty weekend apparel, says Wang.

"But it started to reach out to younger, teenage consumers, and older consumers started to wear J.Crew as well, and that started to dilute the brand image," she says. Gradually, the products began to span an ever-widening range of price points as well.

Take any kind of "Branding 101" or marketing strategy course, Wang says, and it will tell you that in retail, a consumer target that's too broad is like having no target at all.

"You have to find your niche, your point of differentiation," Wang says.

The American stylebook

"J.Crew for a long time was an iconic brand, an aspirational brand," says Jie Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at the Smith School.

It debuted in 1983 with the mailing of its first catalog, surged to prominence in the 1990s and stayed there.

"J.Crew was really writing the American stylebook," says Zhang. "They were saying essentially: ‘If you are an upper- or middle-income white-collar professional, this is what you should wear.' "

"Consumers don't shop that way anymore," Zhang adds. They shop around, are less brand loyal, and prefer to pick and choose looks across a tableau of labels. 

"This idea of one brand, one fashion retailer that will tell you what you should wear, that idea is gone," she says. That's been hard for J.Crew and total-look peers like it: Banana Republic, Tommy Hilfiger, Ann Taylor.

There were other problems as well. "Over the years it became overpriced and had under-delivered on style," Zhang says. "And that's a huge problem."

Online, J.Crew's prices and their bored-looking (or drunk-looking) catalog models were ruthlessly mocked.

‘Tsunami for the fashion industry'

With Lyons at the creative helm, J.Crew began churning out more fashion-forward pieces in recent years, tuxedo pants with leather trim, sequined skirts and boldly beaded blouses. But younger consumers were increasingly lured to cheaper, fast-fashion rivals for on-trend pieces and, eventually, were also turning to them for J.Crew-ish retro preppy looks.

"Fast fashion has created a tsunami for the fashion industry," says Zhang.

J.Crew, like many of its peers, began building more and more factory outlet stores, seeking to appeal to the price-conscious shopper, with faster, cheaper versions of its mainstay fashions, with limited success.

J.Crew can't reasonably compete, Zhang and Wang both say, with the likes H&M and Zara, whose turnaround from design concept to production to sales floor is just seven days.

Online sales posed another challenge, and J.Crew didn't keep up. 

Leaving the CEO post, Drexler, who will stay on as chairman, acknowledged his own failures, including sluggish adaptation to e-commerce. To his point: J.Crew remains slow to realize that shoppers don't like paying for shipping.

Value of the sub-brand

J.Crew is regrouping now under new CEO James Brett, formerly president of the West Elm home furnishing chain. It's facing the need to restructure its large debt load and a need to redefine its place in fashion.

Zhang and Wang say J.Crew should begin by reinventing its clothing lines and defining sub-brands that offer homes for different types of customers – touting J.Crew Collection as the hub for fashion-forward elite clientele, the original J.Crew for its core aspirational shopper, and Factory J.Crew for its price-conscious and teenage fans.

Wang says each line needs its own distinct clothing designs and labels, "fully establishing" three unique sub-brands.

Zhang recommends that J.Crew focus its core brand on its original target consumer – the more-established, affluent professional who can afford premium, slower-fashion pricing.

With the rise of coworking spaces and the growing influence of a startup culture that shuns the buttoned-up business attire of old, Zhang says, there's demand for well-made work essentials with a casual sensibility. That's a niche that J.Crew is well positioned to fill, she says.

"Even though office wear is becoming more casual, people want to get that vibe right, that nuance in fashion," Zhang says.

J.Crew Collection, which is sold online and in limited quantities in the mainline stores, boasts couture-quality fashions and couture-type prices. It appeals to a more well-heeled customer, but J.Crew does little to set it apart from its everyday fashions. And that's a marketing goof.

Dresses from J.Crew Collection often carry price tags of $350 or more; skirts can sell for $700; blouses for $500.

"The people spending $600 on a dress don't want to be thinking that the teenagers are wearing the same brand, but spending $10 on a Tshirt," Wang says. "There has to be a way to differentiate."

Going big on outlet-mall locations and constant sales promotions, Wang says, "was great to get consumers in to buy your stuff in the short term." But in the long run, chintzier fabrics, lower price points and less-quality construction threatened to alienate those who prize the brand's more-luxury ethos.

Coach leather goods took a similar route, expanding its customer base with factory outlet stores and less-expensive handbag options, but ultimately diluting its brand appeal. Wang says she uses Coach as a case study for her students. It's a cautionary tale for J.Crew.

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.