J.Crew – Retailing the Right Way

J.Crew - Retailing the Right Way

Over the past decade, J.Crew has implemented new marketing strategies, redefined their classic aesthetic and expanded its product line. With a successful runway debut during New York Fashion Week in 2011, it seems that there is nothing J.Crew can’t do.

J.Crew launched in 1983 as a catalogue-only company. In 1989, the company opened a flagship store in New York at South Street Seaport after the launch of J.Crew Factory in 1988. In 1996, J.Crew started its website and a year later, the company was sold to the Texas Pacific Group.

In 2003, Millard “Mickey” Drexler joined J.Crew as Chairman and CEO, with the goal to push J.Crew’s service, quality and innovation to the next level.

The company went public again in 2006 and introduced new lines like crewcuts for children and the limited edition J.Crew Collection. J.Crew also began partnering with iconic brands such as Jack Purcell, Timex, Thomas Mason and Red Wing.

In 2011, J.Crew expanded to Canada with the opening of its first Canadian store in Toronto, followed by Vancouver and Edmonton. J.Crew continued expanding its international efforts earlier in 2012 with an e-commerce site reaching over 100 countries, and are currently scouting overseas for brick-and-mortar locations.

Last year, the company was again acquired by TPG Capital and Leonard Green & Partners. Today, business includes retail and outlet stores nationwide and an ever-growing online and catalogue business.

J.Crew offers stylish basics, including women’s and men’s apparel, business attire, weekend clothes, swimwear, loungewear, outerwear, wedding and special occasion attire, shoes, bags, belts and jewelry. J.Crew’s goal is to carry a wide variety of clothes for its customers. As J.Crew’s President and Creative Director, Jenna Lyons, says, “You look at the individual pieces that we design and the team makes… they’re not crazy runway pieces, but what makes them interesting and what makes us interesting is when you put them together.”

The launch of J.Crew Factory allowed J.Crew to specifically target a separate market with lower prices but still provide the quality aesthetic that J.Crew prides itself in. The Factory clothing derives from great style and favorites from past J.Crew collections, but not last season’s “leftovers.” To keep prices competitive, they sometimes slightly change the designs, fabrics and washes, but always maintain the quality and integrity that customers expect from J.Crew.

For example, CEO Mickey Drexler often travels to Italy to check on one of his favorite suppliers of J.Crew: The Albini Mill. This textile factory has yarn spun from fine Egyptian cotton, which is dyed, woven, checked, cleaned, and checked again. This yields, what Drexler says, is “one of the finest shirt fabrics in the world.”

Aside from quality products, J.Crew also prides itself in exceptional customer service. Select J.Crew stores have personal shopper days, where stylists come into J.Crew stores to assist customers with shopping appointments. For example, at the Arden Fair Mall in Sacramento, California, the store also provides complimentary cookies for customers on in-store personal stylist days. J.Crew also offers personal styling online or via phone along with free shipping on purchases made with phone or online appointments. All J.Crew Stylists keep track of client details from size information, favorite silhouettes, prints and colors.

ImageJenna Lyons, J.Crew’s President and Creative Director, has taken on the role of being “the face of J.Crew,” which has helped J.Crew develop a customer profile. Jenna Lyons is relatable to the customer, loyal to the brand, and gives the company an identity and direction for the future.

As Mickey Drexler stated, J.Crew’s customer is “someone who needs something fun and creative [to wear], and they don’t have to take a mortgage out to buy expensive things.”  Their target customer is a young professional, age 25 to 34, who is in the career-building stage; they can’t go to work too casually dressed and have the mantra to “dress for success.” The customer has a polished style and looks for basics to wear during the week, but also wants unique, fun pieces to add personality to their wardrobe or wear on the weekends.

J.Crew has expanded its company with several line extensions, including crewcuts for kids, J.Crew Collection to feature exclusive and limited-edition pieces, J.Crew Weddings & Parties, J.Crew Baby and Madewell. J.Crew continues to expand its retail enterprise with a series of new specialty lines for men, women and kids, as well as the addition of dedicated shoe and handbag salons in existing stores (J.Crew).

The company has been branching out in various directions. Since 2006, it has opened more than 30 Madewell stores and also opened its first menswear-only boutique in 2008, allowing the company to specifically focus and expand its market to males. This followed by the opening of The Ludlow Shop, a store specifically directed toward their Ludlow suit, in 2012.

J.Crew went through a rough patch in the 1990s and lost a lot of its market share in the fashion retail industry when popular preppy classics were replaced by grunge styles and Abercrombie and Fitch became a fashion phenomenon to the youth market. J.Crew needed to find a new niche to develop its retail market once again, and after some struggle, found its place in the fashion industry. To remain competitive, J.Crew began delving into collaborations with high-end designers for their store. For example, in Spring 2012, Joseph Altuzarra created a seven-piece collection for J.Crew, including dresses, long-sleeve tops and espadrilles.

J.Crew went global in August 2011 with the opening of its first Canadian store, located in Toronto, which was followed quickly by store openings in both Vancouver and Edmonton. J.Crew also rolled its e-commerce site to over 100 countries in early 2012. J.Crew plans to expand to Europe and Asia, and started shipping online orders to 107 countries in March 2012 as a way of testing the market. J.Crew executives have been scouting out retail space and negotiating rents in Asia and Europe. Drexler plans to launch stores in Hong Kong and will take at least a year to open once the company finds a location. J.Crew recently announced the opening of its first standalone UK store to be located on London’s Regent Street, on the site of the former Burberry flagship, and open late this year.

This international expansion does not mean that J.Crew sees the U.S. market as too saturated, without room for J.Crew to continually grow. The Wall Street Journal reported that in March 2012, J.Crew had 225 full-line stores, but CEO Mickey Drexler believes J.Crew could easily have 300 U.S. stores. In the article, Drexler stated, “We’re not finished in America at all.”

Drexler says tapping into foreign markets, both online and through retail, will help spur growth. J.Crew’s sales have increased each year since 2004, but the company still remains a relatively small player in terms of store count and revenue. In 2011, the retailer posted nearly $1.9 billion in revenue on a base of 266 retail stores and 96 outlets.

The year 2008 brought retailers to a point of condensation, worry and financial relapse; however, in spite of the economic downturn, J.Crew found the ultimate endorsement in the free world to increase revenue. Starting with Michelle Obama simply wearing J.Crew during an interview with Jimmy Kimmel, the world immediately caught on to the Obamas’ connection with the brand. J.Crew jumped on this opportunity, so that during the inauguration festivities, President Obama and his family mixed haute couture with clothes and accessories the retailer made exclusively for them. This resulted in the company’s shares jumping 10.6 percent.

The company’s web traffic soared so much on J.Crew the day of and after the Obama-J.Crew appearance, that the site was temporarily unavailable at times. The next day, the whole women’s section of the site had crashed, which eventually lead to the entire site shutting down. J.Crew did not predict such a high amount of positive response from the political product placement and sequentially was not prepared to handle the unsurmountable amount of traffic driven to its site.

Reflecting on the entire event, J.Crew’s Creative Director Jenna Lyons said, “It was an incredible honor to be part of history. We are grateful, let me say. We needed it, and we’re thrilled to have it. It’s an incredible validation to have the First Family like what you’re doing.”

With healthy sales, (and the Obama family continually wearing the brands’ clothes), J.Crew is benefiting from its positioning as a brand that combines, “style, fabrics and flattering imagery, and the need for appropriate office clothes,” said Marshal Cohen, chief industry analyst for the NPD Group, a market research firm.

At J.Crew, which has five Madison stores, store sales rose 26 percent, to $354 million, for the three months ending April 28 in 2012. Last year, store sales dropped 3 percent in the same period. Direct sales rose 19 percent in the period this year, up from a 5 percent rise in the first quarter of 2011. Riding strong sales momentum, J.Crew Group Inc. stated that net income rose 54 percent to $33.2 million in the third quarter ended October 29, 2012, compared to $21.6 million in the same period last year. In the third quarter, J.Crew’s adjusted earnings before interest, taxes, depreciation and amortization rose 18 percent to $98.9 million from $83.8 million in the year-ago quarter. Revenues increased 16 percent to $555.8 million, from $480 million, with comparable sales rising 10 percent. Store sales rose 17 percent to $391.7 million, while direct sales jumped 13 percent. Gross margin increased 47.3 percent from 42.1 percent in the third quarter last year. J.Crew posted 1.8 billion sales last year. The Company was pleased the performance was pretty balanced between the stores and the direct business. Accessories and men’s were standout categories.

The reason for such increase in profits drives from the fact that J.Crew knows what their company stands for and what it wants to provide its customers. J.Crew prides itself in having quality products at an affordable price. The sort of ‘celeb factor’ of Jenna Lyons is a large part of what’s driving their rise in credibility. The company has so far worked their Lyons-perfected style by combining opposites: sequins with chambray and ski sweaters with stilettos.

A couple years ago, J.Crew went through a rebranding process, when they decided to focus on quality in their garments. This included Jenna Lyons and Mickey Drexler introducing a more expensive Italian cashmere for their garments, causing prices to rise at J.Crew.

“We had to raise the price a little bit because we were offering a much different product than we’d offered before. We did that and we explained to the customer that this is a different level of quality and that’s why were charging more,” Lyons stated, “plenty of go-to items like J.Crew chinos and tees have been consistently affordable, retaining the same price point, sometimes almost as far back as 10 years. It’s taken a lot for us to be able to do that but it’s important to us because we don’t want to alienate somebody. For us, this is about keeping our core in terms of what we do and then layering and putting the icing on the right places.”

 J.Crew uses little advertising and relies on 13 catalog editions published annually. This requires 120 shooting days a year and involves models, photographers, set designers, clothing stylists, make up artists and manicurists. “Catalogue is a revenue driver for [J.Crew], so we have to consider it not only as a piece of art,” Libby Wadle, Selection and Distribution Supervisor of J.Crew Merchandise said, “but also we have to do the math around the volume that each page produces.”

The company’s stepped-up effort will expand its presence in publications including Vanity Fair, Vogue, Fast Company and the Sunday New York Times Magazine, as well as in social media and online; however, there will still be no television commercials.

The specialty retailer said its advertising budget doubled this year over last, which according to Kantar figures, was $6.7 million in 2011.

 Store layout is also another extremely important component to J.Crew. Mickey Drexler likes merchandise to be mixed together. Shoes, jewelry and nail polish are located next to clothing to highlight the variety of products; this includes some hanging products mixed with folded ones. The goal of the store layout is to make sure everything in conveniently reachable for customers with an easily accessible location. J.Crew doesn’t want to overload an area with merchandise, or have an area look overwhelming to the customer. For example, J.Crew avoids having a lot of polka-dotted items in one area, but instead prefers to spread pieces throughout the store. To ensure lay-out perfection, Drexler frequently visits the Garden State Plaza Shopping Mall in New Jersey because it is the first store in the country to receive the latest merchandise. New shipments arrive every month, and employees work to perfect displays to show Drexler, which will be copied throughout the country, after they earn his approval.

J.Crew has a wide variety of stores to adhere to its customer’s needs. This includes retail stores, retail outlets, flagship stores, and an e-commerce site.

J.Crew has become a bona fide influencer in the fashion industry, redefining retail as a legitimate product for the runway, and something that can appeal to high-end shoppers.

J.Crew has two competitor markets, that in the high-end market and low-price market. Both competitors have very different messages than what J.Crew works to convey. Typically, high-end designers rely on higher prices to establish quality within their line. On the lower end of pricing, typically competitors focus more on prices than quality. What makes J.Crew unique is that their marketing message takes the best from both of these competing markets and combines the two in its favor: quality product at an affordable price.

J.Crew integrates social media and online marketing into their retail marketing strategy and merchandise presentations daily. They have a website, including sections for women, men, kids, bags, jewelry, shoes, wedding, sale and J.Crew factory. The site is interactive, including a “Jenna’s Picks” section from Creative Director Jenna Lyons. The site also lets viewers see the look book for the current J.Crew collection. J.Crew has a Tumblr, Pinterest, Facebook and Twitter account which posts behind the scene images, sneak previews, product spotlights, lifestyle posts, magazine reviews, beauty notes, news updates, quality-information, sales updates, event recaps, and editorial updates. J.Crew also has a YouTube and Instagram account to post videos and photos. The next step to expand their online platforms would be to build an interactive application for smartphones that could also serve as another platform for its e-commerce site.

J.Crew has a strong internal design team that can leverage market data, ensure quality, design better fabrics and produce and introduce new items every month. Another strength is the loyalty and insight J.Crew employees bring to the company. For example, Jenna Lyons has worked with J.Crew for over 20 years and Mickey Drexler likes to be involved on every level possible with the J.Crew franchise. As Anna Wintour commented, “You can walk the floor with Mickey Drexler at J.Crew, and he knows every single piece of clothing on the floor. You see a lot of CEOs that are terribly talented and brilliant at what they do, but they are definitely removed. There is nothing removed about Mickey Drexler.”

If there’s anything that the fashion industry can generally agree on, it’s that Anna Wintour is never wrong. J.Crew must be doing something right, because Wintour recently stated in CNBC’s segment ‘J.Crew and The Man Who Dressed America’ that, “J.Crew is a force to be reckoned with, and anyone who will tell you anything different is insane.”

*Photo courtesy of art8ambyHarper’s Bazaar and ShopBriarWood

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