J. Crew Mercantile: Potential reward worth the brand risk?

J. Crew recently announced the test of a “value priced” division called J. Crew Mercantile, opening soon in a Dallas regional mall. The concept is meant to be different from J. Crew outlet stores and from the flanking Madewell brand. My question (on RetailWire) concerns potential erosion of the parent J. Crew brand in the first place:

The key difference from Mr. Drexler’s experience at Gap Stores is that Old Navy represented an entirely different brand. Most customers didn’t recognize it as a division of the same company (at least initially) so there was less risk of cannibalization. The company’s “good/better/best” approach to its three divisions worked for a long time until oversaturation and merchandise missteps caused it to stumble.

The use of the J. Crew name on a “value brand” is risky. It sends a signal that the core brand’s prices are too high (or its value perception is lacking) when most of its recent problems stem from bad product development. One concept store is unlikely to move the needle in one direction or the other, so the priority needs to be fixing J. Crew in the first place.

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