J.Crew will attempt to lure U.S. consumers on the constant hunt for bargains and discounts to a new chain of stores featuring lower prices.
Industry observers say with three different options to buy lower priced J.Crew brands, the threat of cannibalizing the main brand looms. But the J.Crew Mercantile product offerings are not expected to erode mainline brand sales.
J.Crew Mercantile stores will be located in regional malls, closer to urban areas than the J.Crew Factory stores, which are located in outlet malls further from more heavily populated areas. These strategic locations are thought to prevent cannibalizing of main brand sales.
Growing pressure to discount goods has been impacting the retail apparel sector recently and major sellers have been responding by reducing prices. J.Crew Mercantile is a response to the increased need for apparel retailers to discount prices in order to remain profitable.
This newest merchandising initiative by J.Crew is part of CEO Millard Drexler’s ongoing efforts to expand the firm’s penetration into different segments of the market. During his tenure, beginning in 2003, he created Madewell, a youth-oriented chain offering casual apparel and has also launched several stand-alone men’s stores.
Another potential profit and growth opportunity for J.Crew is its anticipated IPO, currently being prepared by Goldman Sachs Group.
J. Crew is owned by Leonard Green & Partners and TPG, private equity firms.