With the news that J.Crew was readying itself for an IPO, and then that the company was in talks to sell to Fast Retailing -- or maybe to E-Land -- it's clear that change is afoot for the retailer. And part of that change is going to entail international expansion, particularly if J.Crew sells to Japan's Fast Retailing or the Seoul-based E-Land.
Since Mickey Drexler took the reins at J.Crew in 2003, the company has become famous for its turnaround from an uncool American classics retailer to a fashion-forward brand that shows at New York Fashion Week.
There's a lot that J.Crew has done right in the last decade. For starters, quality got an overhaul across the board. As Ashma Kunde, a retail analyst at Euromonitor International points out, J.Crew President and Creative Director Jenna Lyons upgraded everything from the cashmere used for sweaters to the light fixtures placed in stores. Its presentation is impeccable and consistent across all consumer touch points, including catalogs and in stores.
And then there's the styling: the pencil skirts with sneakers and sequins with sweatshirts. Lyons's eye for quirk, color -- those coral lipsticks! -- and layering took J.Crew's classic separates to a more editorial level that was nonetheless approachable and commercial.
Where J.Crew hasn't always nailed it? International.
J.Crew's focus was squarely on its domestic business when Drexler came to the helm, which makes sense given that the company was struggling at the time. Later on, the company went big in Japan and opened 70 storefronts with a partner, only to withdraw in 2008. The failure of those stores might be attributed to not treading lightly enough and not taking the time to establish a strong brand presence in the country before setting up so many locations, says Aria Hughes, associate editor for retail at WGSN.
As Drexler has said, the Japan stores were poorly managed and "embarrassing."
Pricing across borders has been difficult for the retailer, too. When J.Crew opened its Canadian stores and website in 2011, it raised prices to as much as 50 percent above U.S. prices, causing a wave of outrage from consumers. Although Drexler admitted at the time that J.Crew had messed up on that count, the retailer went through a similar bout this fall when it raised prices on its UK customers.
Since withdrawing from Japan, though, J.Crew has been cautious about making moves abroad. Pricing stumbles aside, the brand carefully positioned itself before entering the UK market. By initially selling to the UK through Net-a-Porter, J.Crew was able to test out the market and see if consumer interest was there, Hughes says.
When it did make the move, J.Crew was careful to align itself more with upscale contemporary labels and less with inexpensive high street brands. The company launched a pop-up on the Central Saint Martins campus, rather than in a more touristy area, and paired up with street style stars like Caroline Issa to further establish its fashion cred. In part, that may be because there's not much room in the fast fashion scene.
"The UK is tapped out in terms of high street, trendy fashion," Hughes says. "There are so many options for fast fashion in the UK. [J.Crew] had to elevate the brand and make it seem fashion-y in order to create a point of difference."
Each new market is going to require different positioning, though. In 2012, J.Crew set up a wholesale partnership with the popular Chinese department store Lane Crawford. Tying itself to a known quantity like Lane Crawford in order to build brand awareness is a smart move, Hughes says. Saturdays Surf took a similar tack when it opened locations in Tokyo in 2012.
When it comes to entering Asian markets, Kunde says she believes J.Crew would do better to play up its American heritage than to take the same high fashion tactics it did in the UK. With a quirky, charming aesthetic that appeals to Asian consumers, Kate Spade has done well in those markets by emphasizing that it's Kate Spade New York, she says. J.Crew has a lot of potential in foreign markets, but it's going to need to keep expanding at a good clip.
"[J.Crew] should really capitalize on the international markets before someone gets there first," Kunde says.
If J.Crew sells to Fast Retailing, it will have a ready-made partner to help in its Asian expansion, thanks to Fast Retailing's mega-success with Uniqlo.
Kunde says that Fast Retailing would be an even bigger beneficiary of that steal since it's looking to rise up through the retail ranks in the U.S.. There are only 17 Uniqlo stores stateside -- as with J.Crew in Japan, Uniqlo at one point expanded too quickly in the U.S. and then underwent a series of store closings -- and J.Crew would lock in its presence there.
"International is important if J.Crew is going to be sold or to go for an IPO," Hughes says. "People want to know that globally it can exist, and it can -- but it has to be cognizant of what countries it enters and take it slow."