In the partnership between Nordstrom Inc. and J. Crew Group Inc., experts believe it’s J. Crew that’s come out on top.
“The win for J. Crew is fairly obvious,” said Paula Rosenblum, managing partner at RSR Research, a retail research and advisory firm. “They get to sell their product and their brand without making an investment in new stores. Basically, they’re getting square footage in an existing box.”
Nordstrom JWN, +0.05% announced Monday that it will be selling an edited assortment of J. Crew merchandise at its full-line stores as well as online.
See: Nordstrom to sell J. Crew merchandise
J. Crew, which was taken private in a 2011 deal, operates 287 J. Crew retail stores and 170 factory stores, in addition to 108 stores that sell the company’s Madewell merchandise. It also operates a number of e-commerce sites.
According to its second-quarter earnings release on Wednesday, J. Crew saw revenue at the namesake brand decline 6% to $476.7 million from $506.5 million a year before. Same-store sales fell 9%.
Madewell, on the other hand, reported a 15% sales increase to $78.3 million from $67.9 million. Same-store sales climbed 4%. Madewell already sells merchandise at Nordstrom.
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Nordstrom, of course, is also set to benefit from the deal.
“Nordstrom has … the opportunity to talk to a younger customer without creating and marketing its own private-label brand,” said Rosenblum. “That can be a long and arduous process.”
And the department store is getting merchandise that’s new and distinct. “Traditional apparel retailers are struggling to attract and convert customers, and the ability to offer something different may be enough to get new or existing customers back through the door,” said Jared Wiesel, partner at Revenue Analytics.
For J. Crew, this could also be a chance to better its earnings results.
“If it works out as planned, this partnership could be part of the answer J. Crew is grasping for in its efforts to turn around very soft sales,” said Wiesel. “On the flip side, the big unknown is whether a product that wasn’t selling in a J. Crew store is better suited for success in a Nordstrom.”
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Others, including Arnold Aronson, partner and managing director of retail strategies at Kurt Salmon, a management consulting firm, believe the two brands are compatible, so it’s a win-win.
Moreover, this creates an opportunity for Nordstrom and J. Crew to walk the line of adding just enough fresh merchandise without “oversaturating the market,” said Aronson.
“Now [retailers] are backing off and creating much more intelligent assortments and making sure they get quality sales, not just quantity of sales,” said Aronson, emphasizing the need for more items to leave the store at full price rather than at a discount.
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Beyond just adding stacks of cardigans and racks of dresses, this partnership is one that will get a lot of attention and could work well in the long run if handled strategically.
“I don’t think this is a one-time opportunistic marriage that they’ve made,” Aronson said. “Both are too important and have too much riding on their success that it’s not just a dollars-and-cents thing but a brand extension.”