TORONTO — Add Joe Fresh to the list of Canadian retailers that entered the United States with a bang only to retreat after failing to catch on in the brutally competitive apparel market.
The Loblaw Cos.-owned brand, which at its U.S. peak in 2013 had six prime locations in New York City and a vast distribution deal with J.C. Penney at nearly 700 stores, recently closed its final store in the trendy neighbourhood of Soho.
“We’ve wound down our Soho store as we re-evaluate our strategy for the market,” Mario Grauso, president of the Joe Fresh unit, said in a statement. “Overall, the Joe Fresh brand is strong and growing, with a number of positive developments.”
The brand is still available in the U.S. online at JoeFresh.com, he noted.
The news comes just months after Joe Fresh ended its supply deal with J.C. Penney at a reduced number of stores, and five years after the brand had a splashy opening for a 14,000-square-foot, two-storey flagship location on tony Fifth Avenue in New York, where the world’s biggest brands pay sky-high rents for a piece of prime Manhattan real estate.
“They were trying to be competitive in a fast fashion market that is already the norm in the U.S., and it’s everywhere,” dominated by global fashion giants such as H&M, Uniqlo, Forever 21 and Zara, said Sandy Silva, fashion and beauty analyst at market research firm NPD.
In Canada, Joe Fresh has grown from its debut inside a handful of Loblaw stores in 2006 into one of Canada’s biggest clothing brands. It now has 14 freestanding stores in this country and more than 350 locations inside or adjacent to a Loblaw store.
“People go into grocery stores a couple of times a week, so they have an advantage from a lot of impulse buying,” Silva said. “But in the U.S., they would have to build up that brand and the competition is very, very tough.”
A year ago, Joe Fresh was already on tenuous ground south of the border. Loblaw confirmed it was reassessing its New York outlets, but intended to keep the Soho location open. In recent months, it had closed stores on 34th Street and Madison Avenue and two stores on Fifth Avenue.
At 7,500 square feet, the Soho store was roughly the size of its former Joe Fresh flagship on Fifth Avenue. It quietly closed down several weeks ago.
“It’s really sad the J.C. Penney deal went bad because [a shop within a department store] is really great way to expand and you so not have the real estate costs, but unfortunately they hung their hat on somebody that’s not very successful,” said Toronto-based retail consultant Wendy Evans. Joe Fresh began selling in 683 J.C. Penney stores in early 2013, but that was scaled back to 200 stores as it got caught up in the U.S. chain’s own struggle to win back consumers alienated by an overhauled brand strategy.
“New York is one of the very hardest markets to enter, the most competitive in all of the United States,” Evans added. “Some retailers basically see it as a marketing expense to have their faces in Manhattan, but the costs are so high and the American consumer is very demanding.”
In Canada, Loblaw has the benefit of scale and attractive real estate within its own stores.
A number of Canadian apparel retailers have made forays into the U.S. market and failed to catch on, including Le Chateau, Tilley Endurables, Mark’s Work Wearhouse and the now-defunct chains Danier and Jacob.
Some retailers basically see it as a marketing expense to have their faces in Manhattan, but the costs are so high
But there have been a number of notable success stories: Montreal-based shoe retailer Aldo Group has more than 1,000 U.S. stores, Lululemon Athletica has a strong foothold in the market and, Club Monaco, the first venture from Joe Fresh co- founder Joe Mimran and later bought by Polo Ralph Lauren, has stores throughout North America and around the world.
It was Mimran’s aspiration to bring the Joe Fresh brand into the U.S., but the company’s desire to grow the brand stateside might have diminished after Mimran exited his role as creative director of Joe Fresh brand he last year.
Grauso has been credited with spearheading a broader international expansion effort for Joe Fresh through global partnerships. Since 2014, Joe Fresh has opened stores in South Korea, Saudi Arabia and Egypt and is expanding into the Philippines and Mexico as part of a plan to open 140 global stores in 23 countries through local partners by 2018.
He also streamlined the entire Joe Fresh assortment over the last year in order to make it more productive.
“We are really happy with the performance in Canada and still looking at opportunities to expand internationally,” Loblaw president Galen Weston said last month after the company’s annual general meeting.