Wednesday, April 2, 2014

Sartorial Statements: How Mulberry and J. Crew Have Lost Touch With Their Consumers



“Don’t be a lemming!” “If everyone else jumped off a bridge, would you jump too?” It is unfortunate that the executives who run Mulberry and J. Crew have forgotten these childhood lessons. J. Crew and Mulberry found success by positioning themselves as affordable luxury: purveyors of on-trend high-quality items that were priced for upper-middle-class consumers. J. Crew’s classic clothing was the uniform for young lawyers and bankers in New York City who spent the bulk of their salaries paying off student loans, but needed chic, professional clothing. In London, Mulberry’s handbags named after famous stylish women, such as the “Alexa” after Alexa Chung, were carried by young professional women all throughout the city. 

Craving ever-larger revenues, both brands tried to reposition themselves as purveyors of high-end luxury goods. Their business logic looked sound: while general retail has taken a hit recently, the luxury goods market has continued to rise. Mulberry hired former Hermes executive Bruno Guillon, while J. Crew capitalized on the star power of creative director Jenna Lyons. Both brands sought the elusive status of becoming luxury icons akin to Chanel and Cartier, for whose goods there appears to be no price ceiling. From the viewpoint of someone who studiously reads Bloomberg, the Financial Times and the Wall Street Journal, it would appear that attempting to become Chanel is a fail-proof way to increase revenues. Simply reposition your brand to attract the high-spending customers whose only criteria for purchasing are that the brand must be European or American and come with an eye-popping price tag.

Unfortunately, the executives leading J. Crew and Mulberry fundamentally misinterpreted their brands’ position in the market. Consumers purchase J. Crew and Mulberry precisely because they are not in a position to purchase Chanel and Hermes. Women such as the Duchess of Cambridge and Michelle Obama know that when they wear Mulberry or J. Crew, it is seen as an expression of solidarity with the average professional woman. J. Crew and Mulberry are fundamentally not haute couture brands and their products have a definite price ceiling. That ceiling is the price of real couture item. The price ceiling for J. Crew’s professional clothing is the price of an Armani or Chanel suit. The price ceiling of a Mulberry bag is the price of a Dior, Celine or Hermes bag. When purchasers of affordable luxury goods find themselves with enough disposable income to purchase real luxury goods, they are not going to continue purchasing affordable luxury brands. Instead, they will switch and purchase the real luxury brand, because a lambskin Chanel 2.55 bag will turn more heads than a Mulberry ostrich-skin Bayswater bag. As a result, affordable luxury brands will find themselves losing customers if they price their goods too high in an attempt to compete with real luxury brands.

In addition, the idea that a high price tag speaks for itself in regards to the quality and exclusivity of a product worked ten years ago, when consumers in emerging luxury goods markets were not as savvy, and when the world’s economy was doing much better. However, today Asian shoppers are no longer willing to purchase whatever high-priced item Western brands tout as the hot item of the season, even if it is from Chanel or Louis Vuitton. Meanwhile, American and European shoppers are finding they no longer have the disposable income to maintain a shoe closet that rivals Carrie Bradshaw’s.

J. Crew and Mulberry have learned their lesson the hard way. Mulberry has lost two-thirds of its value in the past two years since Guillon attempted to scale up its market position, and Guillon has now left the company. J. Crew’s attempt to break into more fashion-focused clothing has left many of its loyal customers complaining that the brand’s quality has declined and its clothing is too trendy and no longer wearable for the professionals who provided the brand with its early success. The complaints have been strong enough that last July the CEO responded by holding a personal phone call with a long-time customer. While a brilliant PR move, it did not appear to help J. Crew’s results, as its profits have declined much more severely in the past quarter than comparable companies like Ann Taylor and Banana Republic. Nevertheless, J. Crew is still clinging to its desire to achieve semi-couture status by offering an increasing array of expensive, trendy items that are definitely not office-appropriate.

The market for clothing and accessories is extremely wide, with plenty of room for Mulberry, J. Crew and similar affordable-luxury companies to flourish and expand. Indeed, as the real haute couture brands continue to push their prices up, brands such as Mulberry and J. Crew will likely find an eager customer base among consumers who seek style and quality, but are not willing or able to pay astronomical prices. But consumers have already shown Mulberry and J. Crew that they will not find success if they insist on jumping off the high-end luxury goods bridge like a pair of lemmings.

1 comment :

  1. My problem with J. Crew is the poor quality of the clothes. Not just poor quality for the price, but poor quality in general… They can try to position themselves as a luxury goods company, but I am not impressed when there are threads hanging out of their garments, buttons pop and seams break so easily.

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