Moriah Lutz-Tveite LXFM 501

November 17, 2011 Final Business Plan

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Table of Contents Executive Summary p. 3 Management and Organization p. 4 Company Description p. 4 Management Team p. 5 Legal Entity and Ownership p. 6 Infrastructure p. 7 Organization Charts p. 9 Current Brand Positioning p. 13 Current Products and Services p. 14 Current Target Customer p. 16 Product/Service p. 17 Purpose of the Product p. 17 Unique Features p. 17 Stage of Development p. 18 Product Limitations p. 19 Product Liability p. 19 Proprietary Rights p. 19 Governmental Regulations p. 19 Production and Supply Chain p. 20 Environmental Factors p. 20 The Market p. 21 Industry Profile p. 21 Competition Profile p. 24 SWOT Analysis p. 27 Competitive Advantage p. 27 Customer Profile p. 28 Customer Benefits p. 29 Target Customer Profile p. 29 Market Development Plan p. 30 Marketing Plan p. 31 Marketing Objectives p. 31 Marketing Target Profile p. 32 Market Penetration p. 33 Branding and Marketing Strategy p. 36 Financial Plan p. 39 Plan for Further Action p. 40 Citations p. 41

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Executive Summary J. Crew Home will be introduced as a subsidiary of The J. Crew Group in two stages. The

first stage will consist of small home goods being offered within current J. Crew retail stores, Jcrew.com, and the J. Crew catalog. The second stage will introduce furniture and larger home items to the merchandise mix and will bring with it a separate J. Crew Home website and catalog as well as J. Crew Home retail stores. The purpose of this expansion is to promote J. Crew as a lifestyle brand for the entire family. By adding a home line, J.

Crew has the opportunity to increase brand loyalty and tap into an active home furnishings market with its signature preppy and exuberant aesthetic.

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Management and Organization

Company Description

J. Crew is an All-American brand selling apparel to men, women, and children. The company began as a catalog business in 1983, and the brand opened their first store in 1989. Today, the company is valued at $3.1 billion (J. Crew Group p. 2-3). The brand

specializes in updated classic looks for every member of the modern preppy family. The J. Crew Group includes J. Crew, Madwell, and crewcuts. All three brands are offered in

retail stores, through a catalog, and online. The J. Crew Group does not currently wholesale any of its products.

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Management Team

J. Crew is managed by a board of five officers with the assistance of five directors. The officer positions are Chief Executive Officer and Chairman of the Board, President and

Executive Creative Director, Executive Vice President of Human Resources, Chief Administrative and Financial Officer, and Executive Vice President of Retail and

Factory. Jenna Lyons, President and Creative Director, and Millard Drexler, CEO and Chairman of the Board are the two most visible and well-known members of the J. Crew executive management team (Investor Relations). This management team is supported on

the store level by store managers and assistant managers.

Millard Drexler, CEO and Chairman of the Board

Jenna Lyons, President and Creative Director

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Legal Entity and Ownership

Until March 2011, J. Crew had been well known for being a public company. However, The J. Crew Group has now been acquired by TPG Capital, L.P. and Leonard Green & Partners, L.P. (J. Crew Group p. 2). The J. Crew Group is organized as a corporation. This means that the company has separate legal standing from its owners and they are

protected from liability.

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Infrastructure

The J. Crew Group has a large and well-designed infrastructure. The company operates hundreds of brick and mortar stores including 219 J. Crew retail stores, 8 crewcuts retail stores, 20 Madewell retail stores, and 85 J. Crew factory stores. J. Crew retail stores are on average 6,400 square feet. Madewell stores are significantly smaller with an average

of 3,900 square feet (J. Crew Group p. 4-5). The J. Crew, crewcuts and Madewell websites are an important part of the Group’s infrastructure. Additionally, catalogs are a

large source of revenue and marketing. In 2010, 3.9 billion catalog pages were distributed (J. Crew Group p. 5).

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Beyond the retail channels of J. Crew, there are several other infrastructure elements. The

brand employs its own in-house design and merchandising teams. This is an important feature of the company as a lifestyle brand as there is direct involvement in product

creation and development (J. Crew Group p. 6). In order to source their merchandise, J. Crew relies both on buying agents and directly purchasing from manufacturers. These are not long-term contracts, and this is the one piece of infrastructure the company does not

directly oversee and carry out (J. Crew Group p. 6-7).

J. Crew design team at work.

J. Crew does oversee their own distribution through two facilities located in Asheville, North Carolina and Lynchburg, Virginia. Additionally, J. Crew operates its own call

center (J. Crew Group p. 7). J. Crew currently employs 3,800 full-time and 8,900 part-time associates. The company considers the labor force to be a steady and reliable

element of their company infrastructure (J. Crew Group p. 8).

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Organization Charts

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Current Brand Positioning

J. Crew can be described as being positioned as a “better” brand. The company’s products are priced at a higher level than retail stores like The Gap. J. Crew is similarly

priced to Banana Republic and other stores found in shopping centers. J. Crew’s products are not luxury items; however, they are basic pieces and everyday items for many

aspirational luxury customers. The brand is positioned slightly below contemporary designers like Diane von Furstenberg and DKNY. J. Crew uniquely positions itself as a lifestyle brand that speaks to the All-American sophisticated consumer. The company

views its unique aesthetic and high quality products to be its strongest strengths in positioning the brand within the market (J. Crew Group p. 8).

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Current Products and Service Offered

J. Crew currently offers outerwear, loungewear, wedding attire, swimwear, shoes, bags, belts, hair accessories, jewelry, work wear, and casual wear. Denim is also offered

especially through Madewell. J. Crew seems to have every category of apparel covered. The product selection is only limited by the brands signature preppy style. No product is

overly trendy rather every item shows refined taste. The products offered are often perfect staple items as J. Crew offers many items such as sweaters and pants in a variety of colors. The recent addition of a bridal line has helped J. Crew expand its prowess as a

lifestyle brand.

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J. Crew also offers many services to their customers to enhance their shopping experience. Personal shoppers are available for free appointments in store, online, or over the phone. Personal shoppers can offer expert styling advice and tips, help customers find

a sold-out style or size, give sneak peeks and first access to new arrivals, and open the store early or stay late to accommodate a customer’s schedule. J. Crew offers special

services to men including home delivery of an in-store item, a list of style essentials for men, and a “go-to” personal shopper who helps expedite the shopping experience.

Crewcuts also offers special personal shoppers just for kids and their parents. J. Crew offers the use of wedding specialists to help future brides pick out the perfect look.

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Current Target Customer

J. Crew has a fairly broad target market that focuses on women and men ages 25-40 for the namesake label; however, the brand is also popular with teens and college students

who prefer a preppy style. Crewcuts offers children sizes 2-14 for both boys and girls, so parents can begin dressing their children in the brand until they are old enough or big

enough to fit into J. Crew apparel. Madewell targets a slightly younger female audience than J. Crew by offering a bit of a downtown twist on the signature J. Crew preppy style

(J. Crew Group p.3-4). Most J. Crew Group customers are educated and affluent with over 75% of customers having attended college and 71% of customers earn more than

$60,000 (quantcast.com/jcrew).

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New Product and Service

Purpose of the Product

The J. Crew Group will introduce a home line named simply J. Crew Home. The purpose of this new line is to expand both the corporation and the image of J. Crew as a lifestyle

brand. The purpose of J. Crew Home is also to fulfill a need for J. Crew customers. Home goods priced in the “better” range of products are few and far between. J. Crew is

perfectly positioned to offer home products that like the brand’s apparel thrive on an All-American aesthetic geared towards the modern, preppy lifestyle.

The J. Crew Lifestyle

Unique Features

The unique features of J. Crew Home will be aesthetics and service. First, J. Crew Home customers will be able to rely on products that are functional but also on trend. Rather than focusing on neutrals, J. Crew Home will feature vibrant colors in primary, pastel, and neon shades. Secondly, J. Crew Home will thrive on excellent customer service

including on-time delivery and affordable shipping rates. The Home line will adopt J. Crew’s use of personal shoppers to allow aspirational customers to have a similar

experience to hiring their own interior decorator.

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Stages of Development

Currently, J. Crew Home is a stage of research and product development. The company is compiling an expert merchandise and development team to assess the needs of the future

J. Crew Home customer. Possible color palettes and materials are being looked into.

J. Crew Home will have two main stages of development. The first stage will be introduced for the 2012 Holiday Season. This stage will feature small home items such as

picture frames, throw pillows, ornaments, throw blankets, coffee table books, and wall hangings. The entire collection would be offered on the J. Crew website and in the J.

Crew catalog. Additionally, this merchandise would be offered within existing J. Crew stores. The home products would be given their own section of the store near the cash

registers. Selection of home products would vary by store based on available retail size. The home products would be integrated into all store marketing for the holiday season.

For the next 12 months, similar small home products would be offered J. Crew stores and online with new items appearing for the spring season, graduation, weddings, and back to

college dorm and apartment purchases in the late summer and early fall.

The second stage of J. Crew Home would be introduced for the 2013 Holiday Season. This second stage will introduce larger home products including bedding, kitchen ware, towels, flat ware, and furniture. These products will be added to the existing small home items. A separate J. Crew Home website will be created to feature the full collection of items. A separate catalog for J. Crew Home will also be released for the 2013 Holiday Season. Additionally, J. Crew will plan to open 3-5 J. Crew Home stores for the 2013

Holiday Season offering the full range of home products including furniture. These brick and mortar stores will be opened in metropolitan areas with outdoor shopping plazas such as New York City, Chicago, and Atlanta. During this stage, J. Crew stores will continue to carry the smaller home items. As J. Crew Home grows in popularity, the brand will

plan to expand by opening additional brick and mortar stores around the country. J. Crew Home will also offer couples the opportunity to create a wedding registry at the store or online. This will bring the lifestyle brand aspect of J. Crew full circle as a bride can now

purchase her wedding dress and pick out her home décor from the same company.

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Product Limitations

One of the major limitations of J. Crew Home is the size of the larger products within the line. Because of this, customers who do not live near a J. Crew Home store will only be able to view small home goods in person at their local J. Crew store. While online and

catalog shopping will be available, not all customers will have the chance to see the products in person before purchasing. Another limitation of the home line is that it cannot

be promoted to such an extreme that J. Crew loses any business from their very successful apparel products. Apparel and home goods will be competing for retail space within J. Crew stores. The home goods will not be able to overtake the apparel goods.

Shipping such large items may also be a limitation for J. Crew Home. J. Crew is accustomed to only distributing and shipping lightweight and small products. The company must not allow these new challenges to limit quality customer service.

Product Liability

The greatest product liability for J. Crew Home will be providing items that live up to the high standards of the J. Crew name. Shipping larger and more expensive items directly to

customers will also require the company to use practices that ensure a safe and on time arrival.

Proprietary Rights

All proprietary rights to J. Crew Home will be owned by The J. Crew Group. This is

standard practice for the corporation as J. Crew, Madewell, and crewcuts are all trademarks with the U.S. Patent and Trademark Office (J. Crew Group p. 9).

Additionally, all licensing of the production of home goods will be handled through the J. Crew Group. As J. Crew Home does not plan to wholesale any products there will be no

need to license their goods to other retailers or collect royalties.

Governmental Regulations

The governmental regulations for J. Crew Home will be overseen by The J. Crew Group. These regulations include customs, truth-in-advertising, consumer protection regulations, and zoning ordinances. The corporation will oversee the quota and duties applicable for J.

Crew Home items imported from manufacturers outside the United States (J. Crew Group p. 9).

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Production and Supply Chain

Facilities The creation of J. Crew Home will not require The J. Crew Group to build any

additional facilities besides the brick and mortar stores detailed in Stages of Development. Instead, the corporation will plan to expand their design and distribution

facilities. The company will plan to hire a specialized design and merchandising team for J. Crew Home bringing in professionals with previous experience in the home goods and

furniture business. However, in order to stay true to the J. Crew aesthetic, veteran members of the J. Crew design and merchandising teams will be brought in to consult along every step of the creation of J. Crew Home products. The large size of J. Crew

Home products may require additional space to be built onto J. Crew’s two distribution centers. However, a completely new distribution center is not necessary.

Suppliers

J. Crew Home will not be responsible for the manufacturing of its own products. Instead, the line will follow suit with the rest of The J. Crew Group and use contract suppliers

found either directly by the company or through buying agents. J. Crew Home will follow company policy by using a wide variety of suppliers as to not depend on any single

supplier. Research may be necessary to find the best suppliers for the new line.

Environmental Factors The most important environmental factors for J. Crew Home will be to ensure that all

supplies are collected in a sustainable manner and all workers are treated fairly. Adding furniture to The J. Crew Group means the company will be working with wood and leather in addition to their traditional fabric based products. The J. Crew Group must

monitor the welfare of animals that are being used to produce leather and the wellbeing of forests that timber is being collected from in order to prevent involvement in any

scandals.

Design and Merchandising

@ J. Crew Headquarters

Manufacturing @ Contract Suppliers

Distribution Centers in VA

and NC

Retail Stores or Shipped to Customer

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The Market

Industry Profile

Current Size The home furnishings business is currently a $108 billion a year industry. Furniture is the largest sector of the industry bringing in $53 billion annually. Soft home goods such as

bedding and curtains make up a small portion of the industry with $8 billion in sales each year (Census).

Growth Potential Even with the economic downturn there has been an increased consumer interest in

buying home products. The home furnishings industry has the greatest momentum of all retail categories and bedding, linens, and lamps have the greatest growth potential

(Reuters). A recent New York Times article suggested this industry in growth and interest in making home improvements is due to consumers’ uncertainty of the financial market.

Many consumers think it is more beneficial to spend money on a home they currently own rather than invest in untrustworthy money markets (Thaler).

Geographic Locations

Throughout the United States, there are 65,144 furniture and home furnishings stores. These stores are most highly concentrated in California, Texas, Florida, and New York. This concentration is rather logical as these states have the highest populations. These

same states also have the highest percentage of sales as part of the entire US market with California making up $12.5% of sales. However, Delaware, Connecticut, and Utah have

the highest sales per capita (Census). Furniture production within the United States is heavily concentrated in North Carolina with Thomasville Furniture and Broyhill

Furniture Industries in addition to numerous other companies are produced in the north central region of the state (Duke). However, like many other products, furniture is also

produced overseas particularly in China and other Asian markets.

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Industry Trends Many mass retailers in the home furnishing business have begun increasing the number of decorative items they carry in store as these items have been more popular in recent years than larger furniture (Moin). Additionally, many brands are now offering lower

priced items to get budget conscience customers in the door (Skarlachan). On the other end of the industry, designers are creating lifestyle brands by adding home goods to their

merchandise mix. Many luxury brands including Armani, Bulgari, and Versace now operate high-end hotels featuring each brand’s designs (Zargani).

Versace Hotel Room

Seasonality Factors Sales of large pieces of furniture are not particularly based on seasonality. However,

smaller items are extremely popular around the holiday season as consumers are looking to decorate their own homes and purchase gifts for others. Many retailers hire additional staff to keep up with increased demand for holiday related items (Williams-Sonoma, Inc. p. 6). Additionally, items like flatware and home appliances that couples may request on a bridal registry are likely to be popular during the traditional summer wedding season.

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Profit Characteristics According to the U.S. Census, the average profit rate for furniture companies is 4.9%.

This is only slightly lower than the average rate of 5.4% for apparel companies (Census).

Distribution Channels A few home furnishing companies like Pottery Barn, Ethan Allen, and IKEA distribute

solely through their own retail outlets that may include retail stores, outlets stores, catalog, and e-commerce. However, many other brands also distribute through

wholesaling to either department stores or specialty furniture stores. Ralph Lauren Home is an excellent example of this kind of distribution as the brand sells its home goods on its

website and through flagship stores; however, these products are also available for purchase at department stores such as Neiman Marcus and Macy’s.

Basis of Competition

Just like the apparel industry, aesthetics are extremely important to the success of any home furnishings company. However, there are many other important factors. First, home furnishings must be made of quality goods that will last for years. Most consumers view home furnishing purchases as an investment, and companies must compete based on who

can provide high quality goods. Secondly, price is an important factor. The price must align with the quality of goods offered, so customers do not feel they have been cheated. Finally, delivery and other services must be impeccable for a home furnishing business to

be successful. These companies must have a liberal return and exchange policy as designing a living space is not as simple as just trying a sweater on to see if it fits.

Risk Analysis

The greatest risk for the home furnishing business is that consumer preferences may change. Currently, consumers are continuing to spend money on their homes despite

economic uncertainty. However, if the economy would take a turn for a worse, consumers may no longer have the funds to spend on purchasing things for their homes.

This can be especially dangerous for the home goods industry since items such as furniture require a large initial cost for companies and must be made in advance of being

offered to the consumer. Companies should be conservative in placing orders of large items in order to prevent an overstock of inventory.

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Competition Profile

J. Crew Home will have a wide range of competition; however, for the purpose of this business plan only two competitors will be focused on. Anthropologie Home will be

considered a major competitor for the first stage of J. Crew Home when the brand will carry on small products inside of existing J. Crew stores. However, as J. Crew Home

expands to include furniture and opens its own stores, Pottery Barn will be evaluated as an important competitor.

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Anthropologie Home Anthropologie is a subsidiary of Urban Outfitters, Inc. The first Anthropologie store was

opened in 1992 and today there are 153 stores in North America and Europe. Anthropologie caters to women ages 28-45 and makes up about 36% of Urban Outfitter,

Inc.’s revenues (Urban Outfitters, Inc. p. 1-2). Like J. Crew, Anthropologie does not retail any merchandise, but does utilize a catalog and e-commerce for retail sales in

addition to stores (Urban Outfitters, Inc. p. 3). Anthropologie did not have a strong 2010 fiscal year with an increase of only 3.3% in sales compared to a 5.6% increase for sales

throughout Urban Outfitters, Inc. (Urban Outfitters, Inc., p. 34). Currently, Anthropologie offers clothing, shoes, and accessories for adult women. The home items Anthropologie carries are sold in retail stores intermixed with apparel items. A full range of home items including bedding, bath items, furniture, rugs, curtains, hardware, lighting, pillows & throws, wallpaper, wall décor, room décor, dinnerware, candles, and books are

offered on anthropologie.com. Selections of these items are available in retail stores based on available space. The price range for Antropologie’s home items is extremely broad ranging from $12 for a small candle tin to $6,000 for a sofa. Anthropologie is

currently collaborating with French brand A.P.C. for a line of high end quilts and pillows. All home products sold by Anthropologie reflect the bohemian aesthetic the brand

promotes.

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Pottery Barn Pottery Barn has been a subsidiary of William-Sonoma, Inc. since 1986. Currently, there

are 193 Pottery Barn retail stores and the brand’s catalog has been an important marketing and sales tool since 1987. Pottery Barn offers a wide range of home

furnishings and furniture. The brand also offers a wedding registry service (Williams-Sonoma, Inc. p. 3). Pottery Barn operates similarly to J. Crew by using an in-house

design team and then sourcing production to a wide variety of vendors in 44 countries (Williams-Sonoma, Inc. p. 5). Sales were up for Pottery Barn in the 2010 fiscal year by

14.3% making it the strongest division within Williams-Sonoma (Williams-Sonoma, Inc. p. 43). Pottery Barn specializes in home goods and offers furniture, outdoor items, rugs and window coverings, bedding, bath items, lightings, accessories and pillows, flatware,

holiday items, and gifts. Pottery Barn’s products range in price from $6.50 for a decorative candle to $4,600 for a complete dining set. Holiday sales are especially

important to Pottery Barn as customers purchase decorative items for their own home or gifts for their friends and family. Pottery Barn claims to herald an All-American

aesthetic, but at times their style seems indistinguishable from any other brand. Pottery Barn has recently developed an iPad app, and the company also actively engages with customers on Facebook and Twitter. Like J. Crew, Pottery Barn relies mainly on print

advertisement and their catalog for marketing. It is also important to note that Williams-Sonoma also owns Pottery Barn Kids and PBteen that offer similar products as Pottery

Barn catered to a younger generation (Williams-Sonoma, Inc. p. 3-4).

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SWOT Analysis

Strengths 1. Current, loyal brand following. 2. Provides new options and could open door to future collaborations.

Weaknesses 1. Cost of developing completely new kind of product for company. 2. May take away retail space from apparel products.

Opportunities 1. Take market share away from competitors with a less defined

aesthetic. 2. Incorporate into marketing campaigns to show J. Crew lifestyle.

Threats 1. Existing home goods competitors like Anthropologie & Pottery Barn. 2. Poor sales of this line could harm J. Crew’s financials in down

economic time.

Competitive Advantage

From an aesthetic perspective, J. Crew Home will have a strong advantage over Pottery

Barn. While Pottery Barn lacks a singular style or direction, J. Crew is well known for its designs that incorporate bold colors and trendy accents. J. Crew is already a lifestyle

brand which is a distinction Pottery Barn does not share. Additionally, J. Crew Home will have the advantage of being a new option in a market while being backed by a trusted name. Having J. Crew Home products in both J. Crew and J. Crew Home stores will

allow for more opportunities for customers to view and purchase products compared to Pottery Barn which only sells products through its own store.

Like J. Crew, Anthropologie definitely has a distinctive style. However, marketing

bohemian and feminine products to women in their 30s as Anthropologie attempts to do seems problematic especially for home goods. Women in Anthropologie’s target market are likely to be married and/or have children. Therefore, they are more likely to want to

decorate their homes in a grown-up and sophisticated manner. Anthropologie style is not likely to be appealing to male partners. J. Crew Home will be able to create products that

appeal to both sexes while still being fun and exciting.

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Customer Profile

As mentioned in the competitive analysis section, Anthropologie considers their target market to be women ages 28-45. Pottery Barn makes no attempt in their annual report to identify a target market. However, according to quantcast.com, 42% of Anthropologie

customers are between the ages of 18-34, and 37% of customers are male (quantcast.com/anthropologie). Interestingly, 40% of Pottery Barn customers are ages 35-

49, 88% are Caucasian, 63% have no children, and 40% make over $100,000 a year (quantcast.com/potterybarn).

Anthropologie

Pottery Barn

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Customer Benefits

J. Crew Home customers will benefit from purchasing from a company that understands their lifestyle and is able to market directly to them. J. Crew currently attracts a wide

range of customers from college students to soccer moms, but what every customer has in common is a desire to dress in a preppy and pulled together manner. J. Crew is able to offer a variety of products at a price range that is attainable for their younger customers

and easily affordable for their older, more established customers. J. Crew Home will continue this J. Crew legacy by offering products with a focused aesthetic that appeal to

all members of the family.

Target Customer Profile

When considering the target customer profile for J. Crew Home, the target market for J. Crew of men and women ages 25-40 will be kept in mind. J. Crew Home will be looking to attract two separate target markets. The first target market is aged 18-30. This market is made up of college students and graduates who are looking to decorate and furnish a

dorm room, college apartment, or first home after graduation. In order to attract this market, J. Crew Home will offer affordable small items and incorporate them into

advertisements featuring young models.

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The second market will focus on men and women ages 30-45. This market is likely to be newly married, purchasing their first home, or raising children. The furniture and higher priced items will be targeted to these customers as they look to feather their nests with

investment pieces.

Market Development Plan

J. Crew Home will enter the home goods market in a two-step process as previously described. The entire assortment of products will be offered on a separate J. Crew Home website. Advertisements will be specially developed to show smaller apartment friendly

items in the lives of college students and young grads along with separate marketing pieces featuring furniture in family homes.

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Marketing Plan

Marketing Objectives

The marketing objectives of J. Crew Home are to introduce a new line into the J. Crew family of brands to maintain the current customer base and attract new customers to the

brand. This will be achieved by following the 4P’s in both Stage 1 and Stage 2 of development.

PRODUCT- Stage 1: Coffee table books, table lamps, picture frames, wall art, small gifts, throw pillows, etc. Stage 2: Stage 1 products in addition to furniture, bedding, flatware, and bath items. PLACE- Stage 1: Jcrew.com, J. Crew retail stores, and J. Crew catalog Stage 2: Jcrewhome.com, J. Crew Home retail stores, J. Crew Home catalog, and J. Crew stores (for small items only) PRICE- Stage 1: $20-$200. Most products priced between $50-$80. Stage 2: $20-$4000. Small items remain priced under $200. Large pieces of furniture In $800-$4000 range. PROMOTION- Stage 1: Integration into J. Crew online advertisements and J. Crew catalog. Visible product placement in J. Crew stores. E-mail blasts to J. Crew mailing list. Stage 2: Continued integration into all J. Crew ads and catalogs. Separate J. Crew Home catalog and online ads. In-store advertisements for J. Crew Home in J. Crew stores.

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Marketing Target Profile

Since J. Crew Home will have two separate target markets, slight variations will need to

be taken to reach each group. In order to reach the 18-30 year old age group, J. Crew Home will use advertisements on sites like Facebook and YouTube favored by this age

group. A separate Facebook web page offering giveaways at graduation and back to college time would also be a great way to reach this target market. J. Crew Home might

want to consider advertising on college campuses during move-in week.

In order to reach the target market of 30-45 who will be buying J. Crew Home furniture and other items to fill their home, the company will focus on online advertisements for websites like Martha Steward and Rachel Ray which are likely to attract women who

enjoy caring for their homes. Additionally, J. Crew Home will advertise in and work to be featured in stylish magazines such as Vogue and GQ that attract a slightly older and

sophisticated crowd.

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Market Penetration

Product Development and Merchandising Plan The products for J. Crew Home will be developed jointly by an in-house design and

merchandising team made up of both veteran J. Crew employees and individuals experienced in the home goods business. Initially, J. Crew Home will use a top-down

planning strategy to create the first collection of smaller items. The design and merchandising teams will be responsible for planning what will be produced and how

much of it. Following, the first output of merchandise, J. Crew Home will adopt an interactive planning model that will allow store managers to communicate with the

design and merchandise team. This will allow the appropriate amount of J. Crew Home items to be present in each retail location. As J. Crew Home expands into its own retail stores, the design and merchandise team will once again help direct from the top-down what new large items will be featured in store. However, the team will be able to use

feedback about the smaller items already sold in J. Crew stores to determine their future popularity in J. Crew Home stores.

During Stage 1, merchandise will include small home items such as picture frames, throw

pillows, ornaments, throw blankets, coffee table books, and wall hangings.

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This second stage merchandise will introduce larger home products including bedding, kitchenware, towels, flat ware, and furniture. These products will be added to the existing

small home items.

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Pricing Strategy J. Crew Home will mainly use the “better” pricing level as its base with most items being

priced similarly to other upscale, non-designer retailers. However, many of the smaller items marketed towards the 18-30 age group will fall into the “moderate” pricing level with few of these items being priced over $100. On the other hand, some of the larger

furniture items will be priced well into the thousands and may qualify as a “bridge” item that is nearly as pricy as designer items of a similar product.

Distribution Channels

In stage 1, J. Crew Home and its small items will be distributed through J. Crew retail stores, Jcrew.com, and the J. Crew catalog. During stage 2, J. Crew Home will be

distributed through Jcrewhome.com, the J. Crew Home catalog, and J. Crew Home retail stores. Small items will continue to be distributed through J. Crew retail stores. J. Crew

Home retail stores will begin with 3-5 stores and slowly expand from there.

Market Penetration Plan At $108 billion in sales annually, the home furnishings business is a massive industry. Williams-Sonoma, Inc. is responsible for approximately $1.5 billion of that revenue (Williams-Sonoma, Inc.) compared with the $1.7 billion in revenues J. Crew raked in over the past fiscal year (J. Crew Group). Therefore, J. Crew Home cannot aspire to

reach the sort of dominance Williams-Sonoma and Pottery barn have within the market. J. Crew Home’s other major competitor, Anthropologie, produced about $818 million

revenues over the past year (Urban Outfitters, Inc.). However, Urban Outfitters does not release what percentage of that revenue came from home products.

J. Crew will plan for its home products to account for 1% of total company sales during

the first year of business and Stage 1 of product development. This would place sales revenues at $20.8 million and just a mere speck in the home goods industry. Through the

development of Stage 2 including furniture and the opening of J. Crew Home retail stores, the brand will plan to grow to approximately 7% of all J. Crew sales.

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Branding and Marketing Strategy

Branding One of the strengths of J. Crew Home is its use of the J. Crew name. This new line will seek to uphold every element of the J. Crew brand from product aesthetic to store and catalog design. J. Crew Home will help The J. Crew Group continue to mold itself as a

unique lifestyle brand catering to the modern, preppy American family.

Advertising and Promotion Like J. Crew, J. Crew Home will use solely print advertisement in lieu of television or radio commercials. These advertisements will be designed similarly to J. Crew ads. In fact, the goal of the company should be to incorporate both apparel and home products

into all future advertisements in order to promote the company as a true lifestyle brand. J. Crew Home may also want to offer special promotions the first holiday season it is

featured in J. Crew stores. An ad campaign entitled “Make J. Crew your Home for the Holidays” will be implemented using in store signage, e-mail blasts, and online

advertisements. J. Crew could offer a promotion that offers a free ornament to every customer who makes a purchase of $100 or more.

J. Crew Home could offer a similar promotion during early fall 2013 by offering a special edition desk organizer to students purchasing $100 or more. These sorts of promotions

will allow loyal customers to become familiar with the J. Crew Home line and products. Finally, J. Crew Home will honor the 15% discount J. Crew offers to students and

teachers.

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Non-Traditional Marketing

J. Crew already does an excellent job with non-traditional marketing by actively using Facebook, Twitter, and Tumblr. J. Crew Home will set up separate accounts on all three

websites, but the J. Crew and J. Crew Home social media accounts will interact closely to direct customers to each other’s pages. Additionally, J. Crew Home will use the e-

commerce site and online advertisements to its full advantage. J. Crew Home will set up a separate e-mail and mailing database to specifically target its customers. J. Crew will

consider developing an iPhone and Android app geared just for J. Crew Home customers.

Service Plan J. Crew Home will offer personal shopper and interior designer services to their customers. Since J. Crew Home retail stores will be in limited locations, these

professionals will be available online and on the phone to help customers with their purchases. Additionally, J. Crew Home will make sure to offer on time and affordable

delivery. J. Crew Home will also offer a 60-day return policy to allow customers time to try out new furnishings to make sure everything fits to their liking.

Trade Shows

Trade shows will be a negligible venture for J. Crew Home since the brand will not be wholesaling any of its merchandising.

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Measurement and Evaluation Evaluation of marketing efforts will mainly be done by increase in sales over the first

three years of J. Crew Home. If the marketing is successful, J. Crew Home will be able to keep pace with the growth rate of J. Crew and hopefully surpass the company average

growth rate as a new and exciting line. However, the number of fans and followers on J. Crew Home’s social media pages will also be an excellent indication of how the brand is

being received. J. Crew Home will seek to maximize communication with customers through these social media channels. Page hits on the J. Crew Home website and click

throughs of online ads will also provide important statistics. Marketing success can also be evaluated through the number of customers who sign up for the J. Crew e-mail list.

Marketing Calendar

October 2012 Stage 1 items introduced online, in J. Crew catalog, and in J. Crew

stores. November 2012 “Make J. Crew Your Home for the Holidays” campaign introduced

along with gift promotion.

Spring 2013 Continued integration into all J. Crew retail outlets and advertisements.

April 2013 Special high school and college graduation related advertisements. May 2013 Wedding season related advertisements introduced along with gift

appropriate items. August 2013 Back to school promotion and advertisements. October 2013 First three J. Crew Home stores, J. Crew Home catalog, and J. Crew

Home website introduced along with continued integration at J. Crew stores.

November 2013 Holiday promotions. Offer free shipping for all furniture through December 31.

April 2013 Creation of package rooms at moderate prices for new college grads looking to fill an apartment.

May 2013 Introduction of J. Crew Home wedding registry.

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Financial Plan

3-Year Sales Estimate

Calculating The J. Crew Group increasing its revenues at an annual rate of 10% as the growth rate has hovered around for several years, the following sales revenues were

calculated for fiscal years 2011, 2012, 2013, and 2014.

J. Crew Group Sales Revenues Fiscal 2014 Fiscal 2013 Fiscal 2012 Fiscal 2011

$2.521 billion $2.292 billion $2.084 billion $1.894 billion

From there, the estimated percentage of revenue J. Crew Home will make up was used to project revenue for the new line. The first applicable year will be 2012. Estimated percentage for that year will be 1% as only small home goods will be offered. The

following years will grow to 3% and 7% respectively as furniture is introduced into the line and additional retail locations will be opened. The high cost of large pieces of

furniture will be responsible for the large growth between fiscal years 2013 and 2014.

J. Crew Home Sales Revenue Fiscal 2014 Fiscal 2013 Fiscal 2012 7% share 3% share 1% share

$176.5 million $68.8 million $20.8 million

Cost of Product

Based on information from the J. Crew Annual Report, it seems company policy is to set retail price at double the cost of the good with a little wiggle room for sales and

promotions. J. Crew Home will stay true to this company policy.

J. Crew Home Cost of Product Fiscal 2014 Fiscal 2013 Fiscal 2012

$97.5 million $36.7 million $11.5 million Gross Margin

Fiscal 2014 Fiscal 2013 Fiscal 2012 $79 million $32.1 million $9.3 million

Price and Profitability Analysis

As a new line, J. Crew Home must be fairly conservative in their pricing strategy. The brand does not want to end up with excess inventory. However, prices must be high

enough to allow for a healthy profit. Additionally, as part of J. Crew, the home items will be priced high enough as not to lower the brand image.

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Plan for Further Action

Risk Analysis

The largest risk for J. Crew Home is the possibility of getting The J. Crew Group into an excess amount of debt. The cost for the corporation to startup this new division will be

significant.

An economic downturn is a huge risk to the company. Although home furnishings is a profitable industry currently that could rapidly change if the middle class and upper

middle class customer begins facing extreme financial difficulties.

Adding the J. Crew Home line will require The J. Crew Group to borrow funds which may cause the overall interest rate for the company to increase and make it more difficult

for expansion in the future.

Future Markets

J. Crew Home will be able to secure a growing slice of the market. It is already a popular brand with young college graduates. If such customers begin purchasing J. Crew Home

items at the age of 22, they are likely to become lifelong customers of the brand.

As the American consumer continue to invest in their home, furniture and other home goods sales will continue to steadily grow.

Long Term Strategy

The long-term strategy of J. Crew Home will be to increase the number of retail stores. Hopefully, the brand can eventually increase to over 100 locations. J. Crew Home will

also think about adding merchandise that caters specifically to children and teenagers in order to serve as competition to Pottery Barn Kids and PBTeen.

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Citations

Census Bureau, “Furniture and Home Furnishing Stores.” http://www.census.gov/econ/industry/def/d442.htm Duke Sociology Department. “North Carolina in the Global Economy.”

http://www.soc.duke.edu/NC_GlobalEconomy/furniture/overview.shtml https://www.quantcast.com/anthropologie.com http://www.quantcast.com/jcrew.com http://www.quantcast.com/potterybarn.com Investor Relations. http://www.jcrew.com/footer/investorrelations.jsp J. Crew Group. Annual Report. New York, 2011. Moin, David. “Retailers Shoot for Top-Line Growth in 2010.” Women’s Wear Daily. December 28, 2009. http://0-www.wwd.com.library.scad.edu/retail-

news/financial/retailers-shoot-for-top-line-growth-in-2010-2401509 Skarlachan, Dhanya. “Home goods chains benefit from their makeovers.” Reuters.

January 7 2010. http://www.reuters.com/article/2010/01/07/us-homegoods-analysis-idUSTRE60658X20100107

Thaler, Richard H. “Deer in the Headlights, Financially Speaking.” The New York Times.

October 8 2011. Urban Outfitters, Inc. Annual Report. Philadelphia, 2011. Williams-Sonoma, Inc. Annual Report. San Francisco, 2011. Zargani, Luisa. “Milan Design Week: Heading for Home.” Women’s Wear Daily. April 6 2011. http://0-www.wwd.com.library.scad.edu/markets-news/designer-