J.Crew tests its own Old Navy

Discussion
Jul 14, 2015

J.Crew is planning to open a new concept store for customers who like the company’s fashion style, but not its prices.

According to a press release issued last week, the first J. Crew Mercantile store will open later this month at The Shops at Park Lane in Dallas, TX. The store will feature "value-driven merchandise with classic J.Crew style for women, men and children." The merchandise sold in the store is designed exclusively for the concept and J.Crew Factory locations.

Mickey Drexler, chairman and CEO of J.Crew, is looking for an answer to the company’s struggles in recent years. In the first quarter, J.Crew brand sales were down five percent overall while comp revenues were off 10 percent on top of a three percent decrease during the same period a year earlier. Last month, the company announced executive changes as well as plans to reduce its employee ranks, primarily at the headquarters level, by 175 people.

CBS News financial contributor Mellody Hobson says Mr. Drexler is following a similar path to the one he traveled when he was CEO of Gap Inc. — opening Old Navy as a value price alternative to Gap stores.

J.Crew Mercantile

Source: factory.jcrew.com

Will J.Crew Mercantile drive incremental sales and profits for J.Crew Group? What effect, if any, will it have on the J.Crew brand?

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Braintrust
"The key difference from Mr. Drexler’s experience at Gap stores is that Old Navy represented an entirely different brand. Most customers didn’t recognize it as a division of the same company (at least initially) so there was less risk of cannibalization."
"I think this is something J.Crew had to do and was long overdue. I even think it will be a sweet spot for them. Leveraging the J.Crew brand at a more appealing price point. I also believe they had to include J.Crew in the name. It ensures that the chain takes off in a timely manner."

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7 Comments on "J.Crew tests its own Old Navy"


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Peter J. Charness
Guest
6 years 10 months ago

Well Old Navy isn’t named “The Gap’s Old Navy,” so when they went to a lower price point there was no brand reference. Calling it J. Crew Mercantile ties the two together in a manner that means one will impact the other. Hopefully the new line doesn’t detract from the J. Crew brand.

Incremental sales likely, profits remains to be seen and there’s a whole host of other competitors in that market space.

Dick Seesel
Guest
6 years 10 months ago

The key difference from Mr. Drexler’s experience at Gap stores is that Old Navy represented an entirely different brand. Most customers didn’t recognize it as a division of the same company (at least initially) so there was less risk of cannibalization. The company’s “good/better/best” approach to its three divisions worked for a long time until oversaturation and merchandise missteps caused it to stumble.

The use of the J. Crew name on a “value brand” is risky. It sends a signal that the core brand’s prices are too high (or its value perception is lacking) when most of its recent problems stem from bad product development. One concept store is unlikely to move the needle in one direction or the other, so the priority needs to be fixing J. Crew in the first place.

Bob Phibbs
Guest
6 years 10 months ago

From Macy’s to Gap Factory and now J.Crew, the race is to leverage what once were sterling brands to sell lower-quality, off-price merchandise.

They still haven’t solved what’s wrong with their mainline stores. Until that is fixed, I think these options are a distraction.

Cathy Hotka
Guest
6 years 10 months ago

J. Crew has already done this. J. Crew Factory offers great looking merchandise at prices well below the usual J. Crew list. It wouldn’t be Christmas at our house without some merch from J. Crew Factory.

Saks Off 5th and Nordstrom Rack have been successful, there’s no reason to think that Mercantile won’t be a hit.

Doug Fleener
Guest
6 years 10 months ago

I think this is something J.Crew had to do and was long overdue. I even think it will be a sweet spot for them. Leveraging the J.Crew brand at a more appealing price point.

I also believe they had to include J.Crew in the name. It ensures that the chain takes off in a timely manner.

Will it hurt J.Crew sales? Absolutely. But this is a chain that was struggling to find its place with today’s shopper. The key will be to ensure there is enough delineation between the two product lines.

As the father of two teenage daughters, I can tell you they would much rather shop where they get more fashion for the dollar. They quit shopping at J.Crew a long time ago.

As a matter of fact, I can see long-term that J.Crew Mercantile will be the bigger sales contributor.

Chuck Palmer
Guest
6 years 10 months ago

Mickey is good. He will make this work. The recent work of pushing J.Crew upscale without going too far has created an opportunity for Mercantile. If you think about it in an assortment planning way, they are creating more choice for their customers while appealing to some that may never approach J.Crew.

I think the naming and positioning is interesting. When Old Navy was birthed it did not leverage the Gap brand. Even now the website is the only place where you experience cross-pollination of Gap’s brands.

Perhaps in this case, in using the J.Crew brand halo for Merchantile, they are recognizing that customers understand the quality differences that come from one J.Crew vs. the other.

Gajendra Ratnavel
Guest
6 years 10 months ago

From an expansion perspective, yes this will certainly improve revenue, and profits as a result. I am not sure about the brand association here. The Gap/Old Navy relationship is not obvious to most shoppers. This works. Associating J.Crew to the store just makes it seem like a cheap J.Crew which may harm more than help.

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Braintrust
"The key difference from Mr. Drexler’s experience at Gap stores is that Old Navy represented an entirely different brand. Most customers didn’t recognize it as a division of the same company (at least initially) so there was less risk of cannibalization."
"I think this is something J.Crew had to do and was long overdue. I even think it will be a sweet spot for them. Leveraging the J.Crew brand at a more appealing price point. I also believe they had to include J.Crew in the name. It ensures that the chain takes off in a timely manner."

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