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Vanessa Friedman of the FT says there were two reasons why Mickey Drexler helped clothes retailer J Crew to sales of $1.7billion in his eight years with the company (previously he took Gap from $400 million to $14 billion in 18 years).
First, he saw the opportunity to raise the style quality and move to where there was a “lot of white space” between very cheap clothes and designer.
Second, he “took a page from Brooks Brothers’ book and it was a high margin, high profit page: you don’t pay wholesale. Because if you pay wholesale you have two problems: one, discounters – you always have to drop your prices; and two, margin. Say something costs you $50 to make. You mark it up to $150 for wholesale. The retailers mark it up 2.2 or 2.3 times, which is standard. You can’t undersell them, so you have to sell your sweater for $350. But if you are the only retailer, you sell it for $150.”
Two questions for local retailers:
Where is the white space for you?
What can you source direct from the supplier and control the margin of?
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