In the "J.Crew's New January Catalog Online To View {yey!}" post, Anon at 11:35 AM mentioned the following (great) observation: "Has anyone else noted that in the catalog pages they are noting the starting prices of the items and that they are lower than they have been in the past? (i.e., suede ballet flats starting at $98 as opposed to $138-$148 in the past). ...with a number of items in the catalog I noticed that the price was a tad lower than in the past (a pink/reddish dress at about $98 when in the past it would have been retailed at about $118 or $128). Anyway, just something that caught my eye."Well, we have some super smart Aficionadas (and Aficionados) as exampled by Anon at 1:14 PM (in the same post) who answered with the following: "This is a deliberate strategy to increase sell through at full price. It was discussed in the 3Q conference call and ballet flats were one of the examples given: ...
Brian Tunick - J.P. Morgan
We watched you the last couple of years. Your gross margins have been up I think 700 basis points. You’ve run a very full priced business. Now what happens going into 2009 is a lot of your customers are probably looking for the additional 50% off clearance you’ve been offering them. How do you reposition J.Crew to get back to a full priced business going forward?
Millard S. Drexler
I think that’s a really good question. ... I think the reset button has been pushed on value in America; homes, cars, gasoline, clothing, apparel, stocks, and everything else. So I think it’s hard to figure out when we come out of this. It is all about inventory management. ...
I will tell you what we’re doing without talking too much to our competitors. There’s clearly an opportunity. It’s interesting. Believe me, none of us is having fun running businesses today I don’t care what the business is. But I think what’s going on is a lot of this is playing into our hand in terms of our opening price points where in fact they were at some times higher than we’d like.
We’re going out with categories this spring; it’s too late now because it is what it is; and I think consumers are driving it and determining retail. But our ballet flat category will start at under $100 for the first time ever. We’re doing T shirt businesses at prices with good margin by the way and margin’s a function of sell-through along with high initial margin. So in some cases, this is all merchandising, you might take a point or two off initial if you can get better sell-throughs.
We’re looking at the competition now in that regard too. ...Having been through this a couple of times before in my career, the right goods win out if you’re managing the inventories correctly. So I don’t want anyone to think that’s not a critical issue here. We’ve all been caught by this tailspin of consumers not shopping other than for sales but we have key categories like ballet flats.
We’re weighting our inventory differently than we have this past fall. You’ll see inventory weighted towards more friendly price points so that it kind of averages out. And it’s all again dependent upon the inventory and the sell-through. But I think the reset button’s been pushed on price and I think we’re all dealing with where that will end up. ...
But I think that’s going to be really the billion dollar question for the retailers: When will they trust your prices again?"
I find this fascinating and I am curious if J.Crew's new "lower price point" strategy will work. :) Personally, I feel like I have been "trained" in the past few months to see some amazing sale prices, accompanied with great promotions (e.g. free shipping and additional percent off sales). So it's difficult for me to justify a full price purchase when I think the item will go "on sale" in just a few weeks. ;)
What are your thoughts on the lower price points to get customers to spend closer to the "full retail" price? Do you think customers will "reset" their price points? Do you think this strategy will work during these economic times against other competing retailers?
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