Ann Taylor, J. Crew, Gap are now looking to luxury items to boost profits in this volatile economy. However, this new strategy could be alienating their core customers.
In a story by MSNBC, the report on Ben Hunter and Katie Regan...the quintessential couple that you would see in a Banana Republic ad. They left Banana Republic recently empty-handed and perplexed by an unexpected new presence in their favorite chain: the first outpost of the new upscale BR Monogram concept. A woman's woman's suit jacket is 40% higher than at Banana Republic.
Three major specialty-apparel chains — $2.4 billion Ann Taylor; $1.3 billion J. Crew Group; and $15.76 billion titan Gap Inc., which owns Banana Republic — are all pushing new, higher-priced upscale collections. Fast on the genteel heels of BR Monogram, the first J. Crew Collection store will open in Manhattan on Madison Avenue and 79th Street this summer. J. Crew is aiming highest of the three, offering limited-edition products — such as a $3,000 jacket with French sequins in various shades of tortoiseshell hand-sewn into silk chiffon — that are already available online.
J.Crew Francette Ballgown $2,200
Now that the luxury tier of fashion is outperforming midpriced merchants...and have been the past few years, fashion chains have been coveting that brass ring. Catching hold can mean higher profits. And, of course, as any consumer of luxury items knows, there's simply the snob appeal.
But the risks are big. A company can alienate loyal customers — as Banana Republic did with Hunter and Regan — while failing to attract new ones. Shoppers seeking more expensive items made from better-quality materials already have plenty of choices at department stores, designer and contemporary boutiques, and online.
BR Monogram shrug sweater & pencil skirt
Additionally, the timing couldn't be worse! The three chains are trying to trade up just as an economic slowdown hits consumers across the board. Just when Gap was looking more attractive, they want to go upscale? Monthly same-store sales results for March are the worst in 13 years. Some experts fear that the economic downturn will crimp shopping until late next year.
Ann Taylor and Gap are also struggling to turn around their main businesses. Ann Taylor recently announced plans to close 117 stores, delay its new concept store until 2009, and cut jobs in a massive restructuring to improve earnings. Banana Republic has been healthier than Gap or Old Navy, but also stumbled in March, with same-store sales plummeting 8%
Read "Major retailers launch upscale collections" here
H&M has announced that by the end of the year, they will open 4 new stores in the Greater Atlanta area, including a 20,000 square foot flagship store. The first expansion of H&M into the Southeast began Thursday with a grand opening of the North Point Mall store in the affluent suburb of Alpharetta. This particular store offers only women's and young women's separates, dresses, and
accessories, catering to suburban moms and daughters of the area. The flagship store is set to launch in June at Atlantic
Station, a mixed-use retail and residential development in Atlanta's
Midtown district that will offer the chain's full line. Atlantic Station will be the only Atlanta store to offer Pink Label,
H&M's trendiest women's collection, as well as any designer
collaborations, such as past collections by Karl Lagerfeld, Stella
McCartney and Roberto Cavalli. Two more stores, one at Town Center Cobb, and another in the Mall of Georgia, will open this fall, similar in
size and format to the store unveiled Thursday. The first store's grand opening, hosted by celebrity stylist Robert Verdi, sounded like a blast, so keep an eye out for dates of the coming unveilings!
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