Member Brief: The New Prep

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The man wearing the overcoat was gone. The black frock coat that he wore was tailored to his long frame. Inside the coat read “One Country, One Destiny” and he had it on when he passed away. In March 1865, just two weeks before his assassination, Brooks Brothers commissioned the manufacturing of the coat for the president. The insignia along the silk twill embroidery was intended to be a reminder that national unity was utmost priority.

Born in 1818, Brooks Brothers is the oldest living retail brand in American history. It should be honored for its contributions to American lore, politics, and tradition. Its story has long been of fascination to me. To my dismay, and for a short time, the company viewed my work in menswear as competition. I’ll explain. The retailer had been around for so long that it felt a part of the country’s fabric. What anyone in brand retail understands is that fabric preferences change with the times, even if it takes 200 years.

I still remember the phone interview. Now a senior writer at The Daily Beast, Tim Teeman was departing the New York Times when he decided that he would end his time at the newspaper of record by featuring a one-year-old startup that felt it could compete against the country’s oldest and most venerated fashion brand. Regardless of our idealism (or delusion), the front page feature of the fashion section catapulted the brand to relative awareness. In the process, our hopeful admiration of the brand that we respected all but laughed at us. Teeman wrote:

While Brooks Brothers experimented with “performance” shirts akin to Mizzen & Main’s, Mr. Blee said that customers preferred the general wearability of conventional all-cotton. The stretch fibers felt synthetic to them. Although a range of Brooks Brothers oxford shirts have moisture-wicking properties, he said, “We are known as a natural-fiber house: 100 percent cotton, 100 percent cashmere.” [1]

Just seven years later, the 202-year-old brand has sold to Authentic Brands Group and Simon Properties for $325 million, around the same as Bonobos, which sold to Walmart for $310 million 10 years after launch. Family run from 1818 to 1946, Brooks Brothers would go on to change hands a number of times; most recently, Marks & Spencer sold it to Claudio Del Vecchio in 2017 for $225 million.

The brand had a number of missteps over its last two decades. Here are Brooks Brothers’ four critical mistakes:

  • a failure to account for the shift to casual wear
  • a failure to anticipate a shift towards inclusion
  • a position on technical fabrics that was amended too late
  • a focus on traditional retail in a period of digital commerce growth

Despite $179 million direct-to-consumer revenue in 2019, the company remains heavily dependent on foot traffic. Like a number of distressed retailers, Brooks Brothers hitched its fortune to the promise of top-tier shopping mall guarantees. COVID canceled such guarantees, perhaps permanently. The brand’s recent acquisition communicates an innovator’s dilemma, or a set of decisions made that prioritizes a current customer’s needs over investment into new technologies or strategies that may address future needs. The author of the concept, the late, great Clayton Christensen, once wrote:

With few exceptions, the only instances in which mainstream firms have successfully established a timely position in a disruptive technology were those in which the firms’ managers set up an autonomous organization charged with building a new and independent business around the disruptive technology

In 2013, technical fabrics disrupted Brooks Brother’s position. They ignored it until it became a problem, later launching their own version in 2019. In 2018, the shift to casual wear further contributed to this disruption. And by 2020, the pandemic’s effect on retail made the company’s future untenable. The long-term effects of the pandemic, however, are yet to be realized. The shift to work from home culture may permanently harm the market for formal wear like suits, cotton dress shirts, and ties.

In theory, Brooks Brothers should have addressed a number of concerns cited by Christensen: resource dependence, retail market mix, and understanding disruptive technologies. In four short lines, New York Times reporters Vanessa Friedman and 

Steep growth in the first seven years was halted by the financial crisis. Later, the social movement toward casual Fridays, the rise of the dressed-down tech uniform and the shift toward online retail all began to chip away at the Brooks Brothers market, and it struggled to adapt. [2]

Brooks Brothers could have emerged out of bankruptcy with a focus on direct-to-consumer retail and a collection of strategic, smaller retail outlets. Instead, they have chosen to pursue the same physical retail model that has come to define it. And this is where their dilemma compounds. Their new owner is suffering from an innovator’s dilemma of their own. Simon Properties is in a class with Brookfield Properties, Taubman Properties, Washington Prime Group, and Macerich Company. Two of its peers are now trading as penny stocks. And one of them just went on media record with its delusion.

The CEO of Macerich Thomas O’Hern explained his positive outlook despite collecting just 40% of rent from his tenants in April and May. In June, that number was 58% and in July, 66%. The headline read like confusion.

Macerich Posts $27 Million Loss; CEO Touts Brick-and-Mortar Retail

Macerich’s loss was alarming. What O’Hern failed to mention is that their tenants are not “mom and pop shops” or independent retailers. His company represents some of the world’s leading enterprise retailers. Publicly-traded companies, privately-owned giants, and venture-backed DTC brands lease from Macerich, Simon, Taubman, and Washington Prime. O’Hern added:

eCommerce is an expensive business model due to high delivery costs, greater product returns, and high consumer-acquisition costs. The crisis has shown the importance of brick and mortar locations.

Major retailers should have been in the position to address their liabilities over the short term. The fact that many could not communicates another weakness in retail: many retailers were not in position to survive without malls. A small number of these retailers are over-leveraged with debt and overly-dependent on malls to be able to cover personnel costs and interest payments. But what if foot traffic fails to return to pre-COVID levels? Macerich, Simon, Brookfield, and others will report more losses over the next several quarters.

Simon’s strategy is born out of this realization. In a time when just 40-60% of retailers are open and fully operational in these malls, mall ownership groups are doing whatever they can to prop up their model. Several retailers have co-tenancy clauses; without stores like Lululemon, Apple, or Brooks Brothers, other retailers can amend or break their leases.

“The New Prep”

The new strategy at Brooks Brothers will be tied to maintaining the status quo, not preparing it to compete in the new reality of the industry that it started.

In a recent thread by Clayton Chambers, he explains the dynamic faced by aging retailers like Brooks Brothers and J. Crew. He included an important note on the shifting dynamics of inclusive culture, one that is amending the consumer perception of American classism:

It’s not the first time we’ve seen this happen with the old guard of American fashion. Hip-hop culture has used Ralph Lauren as a centerpiece in their work, highlighting the irony + disparity of American classism. [3]

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Sad Jay Gatsby in front of his favorite store.

In the Esquire article that Chambers cites, a small excerpt explains Ralph Lauren’s great fortune.

Over the years, Polo has made little to no effort in its marketing to embrace the culture that created a totally new market for the brand. [4]

For retailers like Ralph Lauren and Tommy Hilfiger, African-American streetwear culture co-opted their styles. That new base of organic interest drove the two brands to extraordinary heights in the 1990s. Ralph Lauren Corporation (and its $5.5 billion market capitalization) remains a beneficiary of that accidental cultural impact. Brooks Brothers stands in contrast. The “brand of Presidents” has remained the country club counterpart to the preppy menswear industry. And of all dilemmas that Brooks Brothers have failed to innovate away from, cultural inclusivity may be its undoing.

Flip through the pages of 1965’s “Take Ivy,” and you’ll see a monolith of culture. Brooks Brothers was front and center in this now-legendary narration of American Ivy culture. In hindsight, this era was the brand’s peak.

Described by The New York Times as, “a treasure of fashion insiders,” Take Ivy was originally published in Japan in 1965, setting off an explosion of American-influenced “Ivy Style” fashion among students in the trendy Ginza shopping district of Tokyo. The product of four sartorial style enthusiasts, Take Ivy is a collection of candid photographs shot on the campuses of America’s elite, Ivy League universities. [5]

Brands like Noah, Aimé Leon Dore, and Rowing Blazers have purposefully expanded the definition of “preppy” to include the streetwear and hip hop cohort of consumers that Ralph Lauren gained by happenstance.

Like Aimé Leon Dore and Noah, Rowing Blazers’ presence is noticeably diverse. Product page and brand photography aside, the images shared through social channels communicate a common theme. But more than a theme, it’s a welcome sign. In the 1960s, Brooks Brothers was the preference of country club members and Ivy League students. Over the decades, their branding failed to catch up. Today, those country clubs have evolved beyond their 60s-era monolith (in many cases) but so has the face of elite education. Not only do the images of these three retailers reflect a casualization of the American consumer, they each expand the definition of the traditional menswear market to champion genders, ethnicities, and cultures.

To compete, Brooks Brothers will require an agility and a reinvigorated image that is commonly associated with its challengers. When Abraham Lincoln received his coat with the historic message of unity sewn along the seam, Brooks Brothers was responsible for the progressive message. One hundred years later, they failed to take their own advice. This has opened the door for modern brands to fill a void left by their innovator’s dilemma. If “Take Ivy” was published today, its pages would look like Rowing Blazers.

Additional Reading: Psychographics in Focus

By Web Smith | Editor: Hilary Milnes | Art by Alex Remy | About 2PM

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