Earlier this week, we saw J. Crew, a storied U.S. retailer who had been playing with fire for years, officially declare for bankruptcy. After decades of unfocused corporate strategy, random brighter moments and a crippling private equity buyout, the grim reaper finally showed up on the brand’s doorstep.
To clarify, Covid-19 did not cause J. Crew’s bankruptcy. It’s my opinion that they are conveniently using this moment to restructure it’s debt and troubled balance sheet to try and resurface as a more financially stable company.
That being said, there are still lessons to learn from their failures. As Covid-19 continues to have the world in a headlock, the troubled waters of retail will only get choppier throughout this crisis. For the past decade, retail operations have been feeling the brunt of changing consumer preferences, lack of investment in technology and stale marketing initiatives. These things aren’t new but now that consumer spending has tanked, they’re exposing companies who’ve been behind the curve.
While companies like Asos were building a moat around their e-commerce operations through education and lifestyle content, companies like Victoria’s Secret were still trying to make a case for why retail was more powerful than e-commerce. As consumer preferences changed, certain fast fashion retailers such as Uniqlo and H&M were able to adapt their supply chains to lead to less waste, lower overheads and more agile operations.
But J. Crew was far from a bastion on innovation. In an interview with the WSJ, the former CEO Mickey Drexler confessed that he “underestimated the influence of technology on retail.” After a certain point, “pivoting to e-commerce” no longer became a strategy, but more akin to tying your shoelaces before a big race — it’s a good idea but it won’t help you necessarily win the race. Brands needed to be more innovative across their customer experience, solve for convenience and integrate with the culture that they lived in.
That brings us to the 3 business lessons we can learn from J. Crew’s untimely demise.
1. Brand Identity Builds Your Tribe
Was J. Crew preppy? Was it hipster? Was it athletic? Or, were they trying to be it all?
A clearly defined brand identity allows you to connect with your tribe and have them be champions of your products and values. In an effort to be something to everyone, they ended up being nothing to anyone. J. Crew’s hesitancy to double down on their brand identity and own a niche ended up backfiring on them. They weren’t evolving with their customers over time and they didn’t communicate their values and perspectives at any point of the customer journey.
At one point, they had a collaboration with New Balance while soon after releasing a collab with Nike. Any sneakerhead will you that New Balances and Nikes sit almost at the opposite ends of the sartorial spectrum.
Now, take a moment and think of brands like like Forever 21, H&M and All Saints. Can you picture the people that shop there? Exactly.
Ironically enough, J. Crew’s in-house women’s apparel brand Madewell did an excellent job of communicating it’s values as a bright, cosmopolitan and somewhat-whimsical.
2. A Burdened Balance Sheet is your Achilles Heal
This is the one that ultimately did them in and one that all founders should be wary of. In J. Crew’s case, it was nearly $1.7B in debt from their leveraged buyout that they were unable to escape. As their same store sales dropped consistently on a year over year basis, they simply could not generate enough cash to pay down their debt obligations.
Being over-leveraged can be the Achilles heel for any company and avoiding this trap should be focus of every founder, board and entrepreneur during times of market uncertainty. The immediate gratification of payouts and stock options may be intoxicating, but will your company be able to recover from it?
3. Never Lose Your Pulse on Culture
When was the last time that J. Crew had culturally relevant moment? The answer is, not since Michelle Obama’s appearance on Jay Leno in 2008. As the years progressed, J. Crew becomes less relevant because they lacked a point of view on the conversation around style and fashion. Due to their lack of clear identity, they became irrelevant in the face of newer, bolder, outspoken clothing brands that rapidly entered the market.
Without a point of view, they didn’t have ability to own any of the market share in the world they were competing in. While brands like Aime Leon Dore, Zara and Rowing Blazers ran up the score across social and culture, J. Crew was nowhere to be heard.
They could’ve solved this by activating their community of creatives and weekend warriors to be a part of larger conversations and empowering them with marketing dollars but this clarity of vision simply didn’t exist.
To summarize: Culture drives conversations. Conversations drive trust. Trust drives revenue.
Stay sharp or the next rhyme I write might be about you.
Questions about branding, sneakers or anything in between? Feel free to reach out to me on Instagram.