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Jeremy Smith - Issue #2

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This is the J.Crew issue. Originally this was going to be a short post on Linkedin, then it got big a
 

Jeremy Smith

June 9 · Issue #2 · View online
Retail Futurism

This is the J.Crew issue. Originally this was going to be a short post on Linkedin, then it got big and wooly, and deep.

The Links.
J.Crew plans to lower its prices to revive itself, CEO Mickey Drexler says — Quartz
What Happened to J. Crew? - The New York Times
Why J. Crew’s Vision of Preppy America Failed - The New Yorker
Mickey Drexler and the death of a supply-driven world — Loose Threads
J.C. Penney, Gymboree and J. Crew at risk -- and it’s not all Amazon’s fault - MarketWatch
The commentary
J.Crew’s current situation has 3 major components:
1) Not choosing a direction in the market place. The middle is a killing-zone, and playing there is very dangerous.
2) Failure to keep up with the impact of ecommerce on retail.
3) Not taking a strong brand position.
J.Crew’s signature east-coast-prep vibe isn’t to blame for their decline. There are other players in the space who are doing well with that aesthetic.
However, those players hold a higher retail price range than J.Crew, off nearly the same COGS. They also protect that pricing by staying in their lane, and not attempting to be fashion-driven, reducing the chances of discounting risky SKUs.
Matching their pricing to their up-market vibe while doubling down on core styles would have pushed their margins up while reducing brand damage from heavy discounting and excessive promo days per year.
That strategy can be hard to sell internally as it can lead to a revenue hit, as the brand perception is reset in the marketplace.
On the ecommerce front, with ecom growing 15% YoY, those dollars are coming from somewhere, and that somewhere is retail storefronts. J.Crew is holding a lot of square feet over many doors, and failed to address the industry trends by preemptively closing weak locations.
The lack of a strong brand identity/position is another key to succeeding in the future landscape of retail. Premium basics are being tied up by the digital native vertical brands, which means that the broad head-to-toe vertical retailers of the past are going to have fight much harder.
Honestly, if you’re a guy looking for a gingham shirt between $75 and $150, you’ve got a lot of choices in the market, including Proper Cloth, Trumaker, and other players offering MTM at OTR pricing. Unless a brand can provide a very compelling aspirational story, these new players will continue to erode traditional catalog-style business.
There is a brief opportunity as we go through this sea change in retail for traditional retailers to get a foothold online by embracing their brand position, existing customers, and doing everything possible to drive on-site (rather than channel) sales. 
This opportunity will close off quickly as more DNVB brands rise up per category with different value propositions.
Examples:
  • Proper Cloth - Seasonal and running styles all made just for you.
  • Taylor Stitch - crowd-sourced fabric choices, pre-funding their production with their audience.
  • Mizzen and Main - synthetic dress shirts that wear like the real thing.
  • Outlier - Textile focused advanced menswear 
For J.Crew and other legacy retailers, the counter-move against the DNVB entrants is to focus on getting their ecommerce channel right. There’s a lot that can be done with the massive house file that J.Crew is sitting on in terms of both generating revenue from existing customers, and reactivating old customers.
The next move is to start to think and act like a DNVB. They have the verticality, and they have the customer base, they just need get out of from under the “innovators dilemma”.
Thoughts? 
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