A lowly supermarket fashion line from Canada has popped up in an airy, orange-and-white-hued store on Manhattan's high-profile Madison Avenue – a test for a bold U.S. retail invasion by grocery giant Loblaw Cos. Ltd. that begins in earnest this week.
With last week's launch of the temporary Joe Fresh Style clothing store in the Big Apple, Loblaw is betting that its $69 cashmere sweaters and $39 skinny jeans will help the Canadian retailer slug it out with international titans in a crowded cheap-chic retail scene. On Thursday, it takes the wraps off its first permanent store, in a busy mall outside New York City, and on another a week later in a bustling suburban shopping centre.
On Nov. 3, Joe Fresh moves into the big leagues on Manhattan's Fifth Avenue, and plans an even bigger flagship on that prestigious, high-rent shopping strip by next spring.
But the push by Joe Fresh into the U.S. comes just as other affordable fashion powerhouses – including Spanish-owned Zara – are preparing to roll out their own splashy oversized stores on Fifth Avenue. At the same time, consumers are getting anxious about the uncertain economy, raising questions about the outlook for the crucial holiday season. Joe Fresh and its creative director, Joe Mimran, will feel the pressure to deliver low-cost styles that catch on in one of the most cutthroat fashion centres in the world.
"Fashion is a tough business and New York is a very tough town to be in the fashion business," said Emanuel Weintraub of retail consultancy Emanuel Weintraub Associates in Fort Lee, N.J. "They're going to have to play their best major-league ball game."
It's an expensive game. At $2,250 (U.S.) a square foot, retail rental rates at the best spots on Fifth Avenue – not far from the Joe Fresh locations – are the priciest in the world among main-street sites, realtor Cushman & Wakefield reports. In contrast, a comparable store site on Bloor Street in Toronto is just $326, $249 on Robson Street in Vancouver and $47 on 17th Avenue SW in Calgary.
Loblaw executives are rolling the dice despite the poor track record of Canadian retailers – including the grocer – in the U.S. Loblaw is among a string of domestic merchants forced to retreat from the U.S. market, unable to find a niche and succeed in the ultra-competitive landscape. And while Joe Fresh is a familiar brand among fashionistas, it's far from a household name south of the border.
Still, Mr. Mimran is no stranger to U.S. retail terrain. As co-founder of fashion chain Club Monaco, which was acquired by Ralph Lauren, he experienced first-hand the challenges of the U.S. market, including Fifth Avenue.
"That gives him a tremendous leg up," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consultancy and investment banking firm in New York City. "It's not nearly as risky for someone who has gone through and dealt with all of the issues. He's done it and done it successfully ... I think he's got an above-average chance to be successful, more than 50 per cent, and that's pretty good."
Style aficionados on Twitter are already giving the Canadian banner an early nod. "Joe Fresh on Madison Avenue is full of surprisingly affordable basics, but the cashmere is going fast," a writer at the popular fashion blog Racked.com tweeted last week.
Others, such as Courtney McGeever, who works in communications in New York, said they were keen to check out the shop. "I'm up in Canada often, and I discovered the brand fairly recently," she said in an e-mail after tweeting about Joe Fresh.
Loblaw needs the buzz. Its Joe Fresh line has been one of the bright spots in a grocery field in which sales are flat or declining. Apparel industry sales aren't buoyant either, but Allan Leighton, then president of Loblaw, said on a July conference call that Joe Fresh's performance "relative to other apparel businesses would be something that most people would die for."
In Canada, Joe Fresh, launched in 2006, is on its way to hitting $1-billion (Canadian) in sales, with most of them in Loblaw's larger stores, but, more recently, also in new standalone Joe Fresh outlets. In the summer, it ran a temporary "pop-up" shop in East Hampton, a wealthy enclave outside New York City.
Nevertheless, Joe Fresh is arriving on Fifth Avenue at a time when Zara and Uniqlo, a coveted Japanese low-cost fashion chain, are planning big new flagships on the main street, Mr. Davidowitz noted. Others, such as H&M, already are nearby.
Mr. Mimran envisions as many as 500 to 800 U.S. Joe Fresh stores and further expansion in Europe and Asia. He's got more at stake on a personal level: in a departure from the Canadian marketing, he's touting his full name on his U.S. store windows.
The designer will make some mistakes at the beginning, and will have to adjust his strategy accordingly, Mr. Davidowitz said. "It's very hard at the beginning, as you don't have 50 stores" to get economies of scale and comparative information. "But he knows this. He's been through this drill ... His risk is going to be: will the product explode. People have to love it."