J. Crew Is in Danger of Becoming the Next Gap

Not long ago, J. Crew was the most coveted specialty retailer.

Everyone from Kate Middleton to Michelle Obama was spotted wearing the brand.

But lately, J. Crew has been grappling with plummeting sales. The company recently laid off 10% of its corporate staff.

Now, the brand might be headed in the ill-fated direction of Gap, a brand formerly run by J. Crew CEO Mickey Drexler, writes Robin Lewis, CEO and editorial director of The Robin Report.

“Drexler was at the Gap’s helm, lifting it up out of its initial ditch to become one of the most revered and powerful apparel brands in the world,” he writes.

Now, Gap is in the process of shuttering 175 stores amid declining sales.

Here’s why, according to Lewis, J. Crew has lost its way with customers.

1. Prices are getting lower.

As it increases discounts for some items, the brand could struggle to get people to pay full-price for others.

Because consumers are increasingly expecting discounts for apparel, J. Crew is stuck.

“Discounting is now a weapon of necessity, not choice. It can only end if the entire industry agrees to some kind of China-like manipulated marketplace, which of course, will not happen,” Lewis wrote.

2. J. Crew Mercantile is basically the company’s kiss of death.

An outlet strategy can hurt a brand’s reputation, devaluing its product as a whole. J. Crew’s decision to open J. Crew Mercantile, a lower-priced alternative to the namesake retailer, could have a similar effect.

Even though the Mercantile store is in malls versus outlet centers, Lewis writes “it’s still a discounted model with the J.Crew brand name attached to it.”

Once consumers are accustomed to lower priced versions of their favorite brands, it’s difficult to convince them to pay for the higher priced option ever again, a trend evidenced by Michael Kors.

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At the same time, demand for lower costs means J. Crew might feel like it has no choice but to offer shoppers an alternative, even if it is trading away its premium image as a result.

“While the outlet store expansion strategy is the path of least resistance to faster and more profitable growth, in the case of J.Crew, it’s almost a necessity,” Lewis wrote.

3. The brand has lost its identity.

The brand’s lack of identity is evident in its clothing designs, which have become increasingly offbeat in recent quarters.

For instance, this skirt is a far cry from the preppy basics J. Crew is known for.

“The brand is now entering a period of schizophrenia. J. Crew, J. Crew Factory stores and website, J. Crew Mercantile – will the real J.Crew please stand up?” Lewis wrote.

J. Crew’s fate is looking ominous.

“In the long term, consumers are not stupid,” he wrote. “And over time if they see the name J. Crew more often than not attached to lower value, J.Crew will be devalued in their minds.”