Mickey Drexler, the outspoken and charismatic CEO of J.Crew, made a whole bunch of fashion company CEOs super uncomfortable at yesterday’s Financo forum, an industry meeting in which company heads gathered to discuss the store as a showcase for brands.
According to the Financial Times, Drexler “sensationally hijacked” a meeting about retail strategy to rail about how luxury companies don’t acknowledge how important outlet sales are to their business. Drexler, a guest at the meeting not a speaker, took the floor, saying, “No one up there is telling us the truth when it comes to the percentage of their product sold at full-price and that’s a fact.”
He was referring to the growth and increasing importance of outlet sales to a company’s bottom line. Many companies, particularly in the luxury sector, treat their outlet business a bit like a dirty little secret–it can potentially dilute the image of a brand if you know that the $1,500 It-bag you’re lusting after can be had for $400 in an outlet mall in Kenosha, WI.
“In terms of contribution to ROI [return on investment] for a brand in 2013, online is number one, factory stores come in at number two and finally at number three, it’s bricks and mortar stores,” Drexler told the audience. “So don’t try and tell me 70% of sales come from full-price retail.”
The reason for this ranking? Shoppers–a la Michelle Obama–are more increasingly mixing high and low end fashion. The relatively crappy world economy is also a contributor, prompting consumers to go bargain hunting, thus feeding the need for these discount outlets. The FT is reporting that 50% of Asian travelers come to the US and hit up an outlet mall. Not surprising considering that the Chinese have surpassed the US as the number one consumers of luxury goods.
All of which means, Drexler’s onto something and he’s thrown down the gauntlet to the industry: Start admitting that outlet sales are important.