Can J. Crew find success in China?

One of the First Lady's favorite clothing retailers is trying its luck in the world's most populous nation, but Chinese shoppers may be puzzled by the brand.

By TheWeek.com Aug 3, 2012 11:25AM

J.Crew, the popular clothing retailer favored by First Lady Michelle Obama (now a private company), is planning to expand into China, whose booming consumer market continues to attract U.S. companies of all stripes.

 

However, while J. Crew has enjoyed a domestic resurgence in recent years under CEO Mickey Drexler, the company has had bad luck overseas, shuttering its operation in Japan four years ago after dismal sales. Today, J. Crew has no stores outside Canada and the U.S., and it's an open question whether the retailer's mid-range brand of "cashmere cardigans and Capri pants" can find success in Asia. 


Here, a guide to J .Crew's global ambitions:


How large is J. Crew's Chinese expansion?
Pretty modest so far. The company is planning to sell its clothes in Hong Kong and Beijing at Lane Crawford, a high-end department store. It also plans to open a standalone store in Hong Kong as early as next year, and is scouting locations in Shanghai and Beijing. Hong Kong receives nearly 28 million tourists from mainland China every year, and J.Crew hopes to reel in those shoppers.


How have other Western clothing companies fared in China? 
Quite well. Gap (GPS)and Levi's have strong businesses in China, appealing to those "looking for midrange, high-quality clothing," say Jeffrey Ng and Mariko Sanchanta at The Wall Street Journal. Similar European brands, like H&M and Zara, have also done well. 


What obstacles does J.Crew face?
Despite the success of other midrange clothing retailers, it "isn't clear whether the U.S. line will be well-received in China, where consumers favor luxury European brands and logos," say Jeffrey Ng and Mariko Sanchanta at The Wall Street Journal.

 

By contrast, it's "easy for a Chinese consumer to understand Gucci," Franklin Yao, a brand consultant, tells The Journal. They think, "It is expensive, so it must be good, and you must be someone if you have it." But "how does a Chinese consumer understand the history and lifestyle that [J.Crew] represents?" Another obstacle: J. Crew is late to the game, and will have to "compete with dozens of midtier international clothing names already in the market." In addition, China's economy is beginning to slow down, which could affect sales.


So... is the expansion worth it?
Probably. "Brands entering China only now still have a lot to fight for," Yuval Atsmon, an analyst at McKinsey, tells Bloomberg. "Even a slower growing China would still deliver more apparel growth than any other market in the world."


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