When J.Crew recently added a $3,000 tortoiseshell jacket to its online catalogue, some thought the price was a typo. Why would the retailer, best known for hawking cotton T-shirts and khakis to college kids, think it could sell a jacket that costs nearly as much as tuition?
Turns out the “limited-edition” jacket— hand-sewn and complete with “shimmering French sequins”—is part of a trend among a handful of middle-of-the-road retailers to go upscale. Banana Republic, for one, recently introduced its BR Monogram series of finely tailored suits and shirts (with 30 to 40 per cent higher price tags), and opened a Monogram speciality store in New York.
Since the margins are better, trying to get customers to move up makes great business sense. But it isn’t easy.
Going from high to low is a far easier transition, says David Ian Gray, principal at Vancouver-based DIG360 Consulting. Consider Stella McCartney’s mass market line for H&M or Isaac Mizrahi’s line at Target. Successful moves from mid to high are hard to come by. Why buy a suit at Banana Republic for $860 when, for a bit more, you can get one from Hugo Boss?
Another risk is alienating the current clientele. When loyal shoppers suddenly find items way beyond their budgets in the stores, it can turn them off. The key, says Gray, is keeping the right mix. “Too much and you’re perceived as getting elitist,” he says. “It’s a nice little balancing act.”
If retailers do it right, the payoff can be the addition of a whole new market. “Everyone has been reading the data on how well the luxury guys are doing, especially as they move down into an upper-mid-price point,” says Gray. So it’s not surprising that others want to move up into the same space.
The only remaining problem is the timing. With the U.S. economy in a tailspin and Canada’s in danger of following, right now most consumers are tightening their belts. They’re certainly not hitting the stores to buy more expensive ones. M
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