Risky Business. Is the World Ready For Upscale Banana?

April 21, 2008 • Shopping


Ann Taylor, J. Crew, Gap are now looking to luxury items to boost profits in this volatile economy. However, this new strategy could be alienating their core customers.

In a story by MSNBC, the report on Ben Hunter and Katie Regan…the quintessential couple that you would see in a Banana Republic ad. They left Banana Republic recently empty-handed and perplexed by an unexpected new presence in their favorite chain: the first outpost of the new upscale BR Monogram concept. A woman’s woman’s suit jacket is 40% higher than at Banana Republic.

Three major specialty-apparel chains — $2.4 billion Ann Taylor; $1.3 billion J. Crew Group; and $15.76 billion titan Gap Inc., which owns Banana Republic — are all pushing new, higher-priced upscale collections. Fast on the genteel heels of BR Monogram, the first J. Crew Collection store will open in Manhattan on Madison Avenue and 79th Street this summer. J. Crew is aiming highest of the three, offering limited-edition products — such as a $3,000 jacket with French sequins in various shades of tortoiseshell hand-sewn into silk chiffon — that are already available online.

J.Crew Francette Ballgown $2,200

Now that the luxury tier of fashion is outperforming midpriced merchants…and have been the past few years, fashion chains have been coveting that brass ring. Catching hold can mean higher profits. And, of course, as any consumer of luxury items knows, there’s simply the snob appeal.

But the risks are big. A company can alienate loyal customers — as Banana Republic did with Hunter and Regan — while failing to attract new ones. Shoppers seeking more expensive items made from better-quality materials already have plenty of choices at department stores, designer and contemporary boutiques, and online.

BR Monogram shrug sweater & pencil skirt

Additionally, the timing couldn’t be worse! The three chains are trying to trade up just as an economic slowdown hits consumers across the board. Just when Gap was looking more attractive, they want to go upscale? Monthly same-store sales results for March are the worst in 13 years. Some experts fear that the economic downturn will crimp shopping until late next year.

Ann Taylor and Gap are also struggling to turn around their main businesses. Ann Taylor recently announced plans to close 117 stores, delay its new concept store until 2009, and cut jobs in a massive restructuring to improve earnings. Banana Republic has been healthier than Gap or Old Navy, but also stumbled in March, with same-store sales plummeting 8%

Read "Major retailers launch upscale collections" here

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