The Madewell plan to sell at Nordstrom and Net-a-porter isn’t just another wholesale deal — it’s a sign of the times underscoring the industry imperative to be multichannel and global; the blurring lines between retail and wholesale, and the challenging, often treacherous specialty retail sector.
“The big picture here is that over the last year or two, the channels of product distribution have been totally redefined worldwide as we look at it. More importantly, we are only looking at it through the lens of the customer,” said Millard “Mickey’’ Drexler, chairman and chief executive of J. Crew Group. “And as we looked at the availability of our products, we started to look at distribution differently. This, for us, is really a new beginning. I wouldn’t call it necessarily a wholesale distribution. I would just call it distribution that makes sense from a customer point of view, from a brand point of view, from a Nordstrom and Net-a-porter point of view. Why would they do it? It’s very simple. It’s an opportunity for them. Where can you buy Madewell and J. Crew? We are not a wholesaler by nature. We have a small distribution. It’s scarce,” and confined to the company stores and Web sites. “I can count on one hand the wholesale brands that are not [widely] available online or in stores that are not discounting.”
Already this year, Caché, Wet Seal and C. Wonder declared bankruptcy, and Kate Spade Saturday and Piperlime said they would shut down. In recent years, Arden B., 77Kids, Demo, Ruehl, Gilly Hicks, Martin + Osa, Forth & Town, and Rugby were shuttered, and in several cases never really got much past the start-up phase.
Madewell continued its growth trajectory last year and was up 32 percent in revenues in the third quarter. Its big sister, J. Crew, struggled in 2014 as did other chains, indicating that the J. Crew Group needs to rev up its business. It sees Madewell as a major part of the solution. The 85-unit chain turned the corner to profitability two years ago, and is expected to open its 100th store this year. It posted $174 million in revenues for the first three quarters of last year, and exceeded $180 million for all of 2013.
As reported Thursday, Madewell will launch on Net-a-porter.com on Feb. 25 and on nordstrom.com on March 2. On March 6, Nordstrom will start selling the brand in 15 locations.
“It’s a line that we know our customers like because we asked them,” said Pete Nordstrom, president of Nordstrom Inc. merchandising. “Madewell has really great styling at good prices. It will sit in the t.b.d. department and to a large degree falls into the entry price point bucket” and next to such labels as J Brand, Citizens of Humanity, Paige, Free People and James Perse. “Madewell is a little bit below those prices, but it’s a brand that customers know. It really represents relevance, modern, casual American sportswear.”
Originally, “They expressed an interest in selling denim. We said we were interested in the whole collection,” said Nordstrom, who visited J. Crew Group in New York about four months ago to finalize the deal. Asked why only 15 doors will carry Madewell at the outset, Nordstrom said it wasn’t a question of price, style or value. “It’s all compelling to our customers,” he said. It was more about J. Crew Group getting it together to handle the distribution and working out the logistics. If the process is smooth, Nordstrom suggested Madewell could be in more doors.
Madewell, a former workwear company in New Bedford, Mass., dates back to 1937. Drexler started reinventing the label in 2007 after he purchased the trademark and sold it to J. Crew. He’s long considered Madewell a work in progress before it came into its own identity, showed profit potential and was ready to be rolled out. It’s got a young, hip, casual tomboy appeal, with denim, accessories and T-shirts at its core.
About a year and a half ago, Drexler overhauled the Madewell team, recruiting new design, marketing and merchandising heads. A denim studio was created and the focus was more squarely shifted to products resonating best with consumers, like denim, chambray shirts, dresses and leather boots. The brand is designed and operated separately from J. Crew.
The J. Crew brand began selling on Net-a-porter in 2010 and has been selling its apparel inside Lane Crawford stores in Asia.
The Madewell deal with Nordstrom recalls Topshop’s agreement with the Seattle-based department store retailer. Sir Philip Green, Topshop’s owner, said last November that his brand was in 51 Nordstrom stores and that the number would grow. Bringing Topshop in reflects Nordstrom’s efforts to broader its base of customers and its image, too, and Nordstrom executives have said that the introduction of Topshop was having a positive effect on the store’s young women’s department, Savvy.
Bringing Madewell to Nordstrom and Net-a-porter isn’t really a stretch. Green is friendly with Drexler and he has told him that Topshop is doing well at Nordstrom. Leonard Green & Partners, which owns J. Crew Group along with TPG Capital, also has a stake in Topshop.
“The globalization of brands isn’t just about geography. It’s also about channel of distribution. The smartest brands are going to leave their comfort zone,” said Mortimer Singer, ceo of Marvin Traub Associates. “You can’t just be a retail, specialty or department store guy. It’s all coming together. This is a very smart move by Madewell and you will see a lot more brands doing the same thing.”
Other observers said the Madewell deal could be a precursor for other arrangements, like establishing leased shops in department stores and additional deals overseas.
Whether Nordstrom lives up to Madewell’s expectations remains to be seen. In any case, Nordstrom’s presentation won’t have the full expression of the brand that Madewell enjoys in its own stores.
“Madewell is an American heritage brand with a more rock ’n’ roll feeling, versus classic preppie,” said Richard Vorisek, ceo of Richard Vorisek Associates brand and business development firm. “It’s very different from Nordstrom’s core assortment. Most jeans brands at Nordstrom are very much denim-based bottoms,” rather than lifestyle brands. “It’s a great addition and a great way for Nordstrom to differentiate assortments from competitors and hopefully drive a new customer to the stores.”
Vorisek did express some concerns. “Madewell on its Web site is very promotional. There are as many jeans on sale as there are at regular price. Twice as many dresses are on sale as not. Nordstrom tries to run a less promotional business. They will have to be cautious and know what’s going on at Madewell and work closely with the Madewell merchants to create an assortment that is not sale driven and appropriately differentiated from highly promotional items at Madewell.”
According to Robin Kramer, president of Kramer Design Group, “The most successful brands are concentrating on fewer and more unique flagship experiences, as opposed to the heavy store roll-outs of the past, and have added e-commerce as a sales channel. When it comes to distribution in secondary and tertiary locations, fleets of brick-and-mortar stores are not always financially feasible. A strategic way for brands to connect with a new consumer base without the traditional capital investment is to align with a very reputable high-end retailer that already has that consumer. For example, when Barbour partnered with J. Crew, they had an opportunity to speak to a new consumer and gain brand awareness.”