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It’s no secret that Loblaw was looking to expand its Joe Fresh clothing line in the U.S. beyond the freestanding New York City locations that opened in 2011. Joe Mimran, the man behind the brand, once told reporters he saw the potential to grow the brand to as many as 800 outlets by 2016.
Mission (nearly) accomplished. But has the brand tied itself to a sinking stone?
Loblaw signed a four-year deal to open shops, ranging in size from 1,000 to 2,500 sq. ft., within 700 of JC Penney’s 1,100 locations across the U.S.
While partnering with a department store chain is a quick way of exposing a brand to markets across the U.S., Joe Fresh aligned itself with a retailer that by all accounts is hanging on by a thread. Last year sales for JC Penney plummeted 25% and footfall decreased by 13%.
As the cash-strapped retailer struggles to find its way, Joe Fresh is left with a sizable presence and platform for its brand, but “no clear sense whether JC Penney is going to maintain a commitment to the [store-within-store] strategy,” says David Finch, assistant professor of marketing at the Bissett School of Business at Mount Royal University. “So you’ve got Joe Fresh and the other store-to-store partners caught in the middle of this challenge.”
Though JC Penney has been on a steady decline for the past two years, it was reasonable to believe the chain was poised for a comeback when in 2011 it hired former Apple Inc. and Target Corp. exec Ron Johnson to breathe new life into the stagnant chain.
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“There was a fair amount of hope that Johnson would be able to post a turnaround and it did have and still does have terrific retail locations,” says Toronto-based retail consultant Wendy Evans of the optimism surrounding Johnson’s hire. But Johnson was given his walking papers in April after his everyday low-price strategy that clipped the coupon from JC Penney’s advertising arsenal not only alienated loyal consumers, but failed to lure in a younger, wealthier demographic.
Does the financial turmoil surrounding the floundering JC Penney chain hurt the Joe Fresh brand? It doesn’t help, says Evans.
But given Mimran’s ambitions, the store-within-store concept was the best route due to the cost of opening stand-alone stores and the lack of good retail space available in the U.S., she says.
“Growing from a green field standpoint is really difficult so partnering is certainly a good alternative,” she says. It was also a safer investment for Loblaw Companies Limited, which is busy trying to defend itself in Canada against the likes of Walmart and Target which continue to creep into the grocery aisle. “The minute you start moving into a U.S. expansion strategy that involves significant capital it pulls capital away from defending home territory… I think that’s probably what led them down the JC Penney road,” says Finch. While few flaws surround the expansion strategy itself, the question now is if JC Penney was the right fit.
This story originally appeared in the May 20 issue of Marketing, available now to subscribers, or for free on newsstands at the Cannes Lions International Festival of Creativity, June 16-22.
