We went to J. Crew and saw why the brand is in trouble

caption
J. Crew’s store was a mess and most of the clothes were on sale. In what way could that convince consumers to pay a premium?
source
Mallory Schlossberg/Business Insider

Once a great retail success story, J. Crew has been struggling in recent years.

J. Crew’s sales slid 8% in the most recent quarter, with the company blaming a “challenging retail environment.”

It’s true – it’s rough out there for most retailers – but a walk around the store shows why the company may be having a hard time getting consumers to pay a premium for its clothing.


Here’s what you would have been greeted with if you walked into the company’s New York City Flatiron store at the end of May.

source
Mallory Schlossberg/Business Insider

Promotions are common, especially around Memorial Day, but this eerily reminds us of J. Crew’s neighbor, Banana Republic.


Because, just like the ailing Banana Republic, J. Crew doesn’t let you forget that you can get an extra percentage off of your purchase.

source
Mallory Schlossberg/Business Insider

J. Crew has been working to bring customers back into stores.

source
Mallory Schlossberg/Business Insider

Though style is subjective, J. Crew has faced criticism that its styles have been too trendy to attract customers who got hooked on basics.

source
Mallory Schlossberg/Business Insider

Source: Business Insider


It looks like the company is trying to display more classics, like this T-shirt.

source
Mallory Schlossberg/Business Insider

In September, the company said that it would be going back to basics. A selection of simple apparel with bright colors is evidence of that …

source
Mallory Schlossberg/Business Insider

Source: Business Insider


… as is a wall full of gingham.

source
Mallory Schlossberg/Business Insider

The company is selling some on-trend apparel, too, like this off-the-shoulder top.

source
Mallory Schlossberg/Business Insider

But a few blocks down, customers can get off-the-shoulder tops at other stores for much less, like H&M and Zara.


The store also shows off its bridal business, which has sold unusual bridal trends, such as wedding pants.

source
Mallory Schlossberg/Business Insider

“Nothing can change the simplicity and timelessness of a perfect blazer — it is at once familiar and made fresh by changing the context,” creative director Jenna Lyons said in an email interview with Vogue last year.

source
Mallory Schlossberg/Business Insider

Source: Vogue


But no matter if consumers like the apparel or not, they’ve been conditioned to not pay full price.

source
Mallory Schlossberg/Business Insider

Betty Chen, Mizuho Securities’ managing director, told Business Insider:

It starts to train the customer to expect 30% off or 40% off going forward, and the only way to untrain her is to have a big fashion hit that they happen to buy very little of, and train her to start [shopping] more like [the store was] a fast-fashion retailer.


The company’s wear-to-work section has been a bright spot.

source
Mallory Schlossberg/Business Insider

In fact, this is one of the reasons why – full disclosure – I occasionally shop at J. Crew. It sells dresses in my size that actually fit me. But I’ve got to admit: I’ve never paid full price for a dress there.


But it raises the question: Would these ensembles stand out to consumers who already might have been hesitant to walk into the stores?

source
Mallory Schlossberg/Business Insider

Here’s the sale section.

source
Mallory Schlossberg/Business Insider

The clearance section tells the story that every other clearance section tells: excess inventory and unwanted, misfit apparel. But the excess of sweaters is not entirely J. Crew’s fault: Pretty much every other traditional apparel retailer has blamed slipping sales on unseasonable weather this past fall and winter.

source
Mallory Schlossberg/Business Insider

Though sales are often necessary for a retailer, it can be hard to get customers to pay full price when they come to expect discounts. That could be especially harmful for a brand like J. Crew, which is trying to restore its image.

source
Mallory Schlossberg/Business Insider

Neil Saunders, CEO of consulting firm Conlumino, wrote in a note to clients in the last quarter:

That people are unwilling to pay full price means that discounting at mainstream stores and via the mainstream website is also very frequent. While this is a necessary evil to clear down inventory, J. Crew is building a reputation as a retailer from which customers should never buy at full price – something that is hampering its ability to rebuild its brand and price integrity.


There’s a second sale section, too.

source
Mallory Schlossberg/Business Insider

Even brightly colored summer garb is discounted.

source
Mallory Schlossberg/Business Insider

But once the company clears excess inventory this summer, there’s good news: The first line for J. Crew from hailed designer Somsack Sikhounmuong – formerly of successful sister line Madewell – will debut this fall.


Some of this store is in disarray, detracting from any level of luxury. But there appeared — on the surface, or on the first level — to be an onslaught of customer service.

source
Mallory Schlossberg/Business Insider

And while the Flatiron store is not wholly representative of the company’s entire business, it’s pretty telling if a major store in a major city is lacking such attention to detail. Why pay a premium in a place characterized by disarray?

source
Mallory Schlossberg/Business Insider

Fortunately, J. Crew is making some steps in the right direction.

source
Mallory Schlossberg/Business Insider

CEO Mickey Drexler encouraged shoppers to email him to tell him exactly what they want.

“Our job is to give them what they expect,” Drexler said on an earnings call in August.

He pointed to the company’s relatively new CFO, Michael J. Nicholson, who had a “stellar history of controlling expenses at Ann Inc.,” where he previously worked.

“If he can bring over similar measures at J. Crew, that would be instrumental,” he said.

That – coupled with fashion, and quality, that customers want and are willing to pay a premium for – could potentially help solve some of J. Crew’s problems. Ideally for J. Crew, Sikhounmuong’s designs will be a major boon.