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What We Can Learn from the Fall of J.Crew

Wider market forces contributed to J.Crew’s fall from grace. But the brand also faced challenges of its own making.
Source: J.Crew
  • BoF Team

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This week, J.Crew's Millard “Mickey” Drexler announced his decision to step down as CEO after 14 years, amidst turnaround efforts that have failed to work. The news came two months after the departure of Jenna Lyons, the company’s longtime creative mastermind, and follows several years of shrinking sales growth at the American specialty retailer.

How quickly things change. Once upon a time, Drexler and Lyons were known for restoring J.Crew’s cultural cachet and boosting its financial fortunes. At its peak, the brand was synonymous with Michelle Obama’s all-American brand of casual chic. But sales growth began slowing in 2012 and the company has been on a downwards trajectory ever since.

What went wrong?

Certainly, market-wide challenges like the rise of e-commerce, falling mall traffic, discounting culture, a post-recessionary mindset and increased competition, especially from fast fashion players, all played a part in J.Crew’s fall from grace. But the brand also faced specific challenges of its own making.

J.Crew was once known for moderately priced, classic items liked “stadium cloth” coats, cashmere sweaters and bathing suits. (For decades, ordering a bathing suit from J.Crew’s catalogue was a rite of passage for young women.) Drexler and Lyons brought the brand into the zeitgeist, inspiring consumers with a sparkles-meets-military mashup. But as J.Crew’s fashion credentials began to grow, its focus on staple items suffered and an increasingly cool and expensive product mix alienated once-loyal customers, who saw J.Crew as out-of-touch with their needs. Lyons stuck to her aesthetic. But while early on she had forged a true partnership with Tracy Gardner, the company’s president from 2004 until the middle of 2010 and the yin to her yang, Lyons never found another equally strong partner on the company's merchandising team, contributing to a growing disconnect with customers.

The moment of truth came in July 2013, when an unhappy customer wrote Drexler an email saying, “I am so disheartened and disappointed that you are leaving your core values and styling and abandoning your loyal customers. I would have thought you had learned your lesson at the Gap!! Why mess with these iconic brands and change them into something they’re not?” Drexler embraced the feedback, assembling members of his executive team for a phone conversation with the customer.

“We are on it for sure,” he emailed the customer after the call. “I hope you see a difference this Fall.” True to his word, Drexler brought back J.Crew favourites. But he also turned to lower-quality manufacturing in order to reduce prices and thereby further fuelling the customer backlash.

Sometimes the company was slow to make strategic shifts, changing too late in the game. Back in 2014, Drexler repeatedly said J.Crew would never get into the so-called “athleisure” segment. Then, in 2016, following the recommendations of an external consulting company, the brand dipped its toes into activewear, announcing a partnership with New Balance long after the athleisure market had bubbled and Lululemon was already facing trouble.

There’s also the simple truth that J.Crew’s aesthetic had started to feel passé. And that the company faced a mountain of debt, which, at last count, had reached $2.1 billion. To be sure, a shakeup was overdue, but the brand also failed to adequately prepare for a post-Drexler, post-Lyons future.

Meanwhile, J.Crew’s Madewell division has thrived with its laid-back, modern-day interpretation of classic American clothing. But if it’s not careful, the fast-growing Madewell could easily fall prey to some of the same woes that beset J.Crew.

As for the future of the J.Crew brand, incoming CEO James Brett, formerly of West Elm, has already learned his own lessons on quality. Earlier this year, the company's "Peggy" sofa attracted a flurry of customer complaints and West Elm was forced to withdraw the item from sale and offer customers a full refund.



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