J Crew is the latest in a long line of US clothing retailers to target the UK. So what’s the attraction and is it worth all the expense?
News that all-American fashion retailer J Crew is heading to the UK with the launch of a transactional website should come as no surprise. Details of the where and when remain sketchy, but when it does happen, it will merely be symptomatic of a trend for US retailers to cross the pond that has been gathering pace for years.
The epicentre of this quiet invasion is, of course, London’s Regent Street, which over the past few years has seen Brooks Brothers, Armani Exchange, Banana Republic and nearby Abercrombie & Fitch all deciding that the area is fertile territory for a European debut. US retailers have in fact been making the trip across the Atlantic for years, with Urban Outfitters having been in the UK since 1998 - although sister brand Anthropologie only took the plunge in October last year, when it opened an impressive flagship, again on Regent Street.
However, the obvious question is, why do US fashion retailers seem to regard London as a stepping stone for establishing themselves in Europe when the negatives appear to outweigh the positives? Rents on Regent Street are among the highest on the continent and labour costs in the capital are also above the European average.
Yet this is not a simple matter of commercial madness and corporate aggrandisement, says Bryan Roberts, global research director of retail intelligence firm Planet Retail. “Half of it is about dipping your toe in the water and establishing a European bridgehead,” he says.
“You can put some of it under the marketing budget. On Regent Street there’s a lot of tourist traffic. You have to reckon that the figures do stack up in some measure, even though the stores will be loss leaders.”
The view strikes a chord with James Bidwell, European chief executive at Anthropologie. He says: “There is a huge opportunity for American retailers in Europe - particularly the UK. As a tourist and commercial centre, London is incredibly compelling for retailers.” When the retailer’s Regent Street store launched, it was the “second most successful opening” in Anthropologie’s history.
Similarly, David Roth, chief executive at The Store, marketing communications firm WPP’s global retail practice, says: “There’s a view in the US that if you stick to the domestic market, you’re constrained by the domestic market.” Low growth rates and the sense that turning a penny might prove rather more difficult in the local market than overseas could be further spurs for US retailers.
So J Crew notwithstanding, which US retailers might look threatening to UK retailers as the next big import?
The most obvious candidate for an overseas foray might be Pittsburgh-based American Eagle (see Shop Watching, p20), which has a solid financial base in the US and serves more or less the same customer as Abercrombie & Fitch, Hollister and, to an extent (although it caters to a somewhat older demographic), J Crew. However, it has significantly lower price points - a fact that might work in its favour, even if the usual margin-boosting ‘pound for US dollar’ pricing strategy were deployed.
Others range from gymwear specialist Lululemon Athletica to Wet Seal, the women’s young fashion chain. And this is before the many options presented by Limited Brands, which owns lingerie chain Victoria’s Secret and accessories firm Henri Bendel, are considered.
There remains every reason, therefore, to suppose that J Crew will not be the only US retailer to cast an eye over the UK during 2010.