J. Crew trained customers to want one thing — and now it's killing business

J. Crew - Fall 2016 - NYFW - First Look
J. Crew - Fall 2016 - NYFW - First Look

J. Crew's business is still declining.

The company reported that comparable sales were down 8% in the most recent quarter.

One huge problem?

J. Crew's customers have likely been conditioned to discounts and promotions, something that Banana Republic's customers have been conditioned too, as well.

In fact, this has been an issue plaguing much of the retail industry lately.

"It starts to train the customer to expect 30% off or 40% off going forward, and the onlyway to untrain her is to have a big fashion hit that they happen to buy very little of, and train her to start [shopping] more like [the store was] a fast fashion retailer," Mizuho Securities Managing Director, Betty Chen, told Business Insider.

J. Crew is known for its frequent sales.

"That people are unwilling to pay full price means that discounting at mainstream stores and via the mainstream website is also very frequent," Neil Saunders, CEO of consulting firm Conlumino wrote in a note to clients last quarter. "While this is a necessary evil to clear down inventory, J. Crew is building a reputation as a retailer from which customers should never buy at full price — something that is hampering its ability to rebuild its brand and price integrity."

But it looks like J. Crew will be making some changes to help fix these problems.

Looks from J. Crew's Spring 2016 collection:

Chen pointed to do the company's relatively new CFO, Michael J. Nicholson, who had a "stellar history of controlling expenses at Ann Inc.," where he previously worked.

"If he can bring over similar measures at J. Crew, that would be instrumental," she said.

That — coupled with fashion (and quality) that customers want — could potentially help solve J. Crew's problems. Until then, J. Crew will have to change consumers minds with apparel that resonates and get them to pay full price again.

Fortunately, there are some bright spots in the business. Trendy sister store Madewell saw comparable sells increase 6%, but the parent company's comparable sales were still down 7%.

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