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Introducing J.Crew Mercantile, The Factory Outlet That Isn't

J.Crew Factory is opening stores that will be located outside of traditional outlet malls, but carry the same merchandise.

Posted on July 13, 2015, at 4:00 p.m. ET

J.Crew will open the first store in its new "J.Crew Mercantile" chain later this month, as outlet goods continue their great migration into malls and shopping centers.

While some have characterized J.Crew Mercantile as a "new budget-friendly label," in reality the chain will simply sell J.Crew Factory merchandise, at the same prices, in locations far from the typical outlet mall.

Changing the name could make J.Crew Mercantile more palatable to landlords. Traditional mall owners can be reluctant to host stores with "Factory" or "Outlet" in their names, fearful of cheapening a mall's image and reducing its appeal with both higher-income shoppers and the retailers that will pay top-dollar rents to target them.

"Mercantile will carry current J.Crew Factory merchandise β€” prices will be the same," a spokeswoman for J.Crew said in an email to BuzzFeed News. "The main difference is the locations will be outside typical outlet centers," she said.

J.Crew Factory's website says Mercantile will feature "original styles once only found at J.Crew Factory Stores." It also has a tagline under its logo, calling J.Crew Factory "the online home of J.Crew Mercantile."

Consumers once drove for hours to outlet malls, which were located far from city centers, to snag otherwise unobtainable deals on designer leftovers and clearance goods. But as outlet centers proliferated, and consumers remained price-conscious as incomes stagnated, outlets have largely evolved into places for chains to hawk entirely separate, cheaper, lower-quality versions of their brand.

Strong sales and margins at outlet locations have provided a rare bright spot for apparel retailers in particular, and have given them a way to compete against off-pricers like Nordstrom Rack, T.J. Maxx and Off 5th, which are booming.

Using J.Crew Mercantile to sell J.Crew Factory goods away from typical outlet malls is akin to the recent decision by Express to convert some of its regular mall stores into "Express Factory Outlets" in the past year. Industry watchers lauded the move as a smart way of converting underperforming mall real estate; J.Crew's decision appears to be a recognition that consumers are hungrier for its lower-priced outlet brand than its full-price chain.

As of May 2, J.Crew operated 283 regular retail stores, 142 outlet stores and 87 Madewell locations. The company said on an earnings call last month that it plans this year to open 21 more outlet stores, 20 Madewells, and just 11 more J.Crew full-price stores.

J.Crew's first Mercantile store will open later this month in Dallas at The Shops at Park Lane, it said in a statement last week. Unlike a traditional outlet mall, the "mixed-use urban" shopping center is home to the biggest Whole Foods in North Texas, a Nordstrom Rack, Home Goods, Old Navy and Dick's, according to its website.

J.Crew, which reported dismal sales and eliminated 175 jobs last month, is under pressure to turn its business around. The chain has been losing luster with its once-loyal fan base this year, drawing criticism for its high prices at regular stores and a move from its traditional aesthetic.

The Wall Street Journal reported last year that the company was planning a new chain for "budget-conscious shoppers" under J.Crew Mercantile, a name it trademarked in November 2013. J.Crew CEO Mickey Drexler deflected the report in comments to Women's Wear Daily, saying it was "a name that was available and we liked." He added, at the time, that plans for the brand have "kind of been distorted beyond the reality of what it is."

Drexler may have been accurate in that: J.Crew Mercantile isn't quite a new destination for the budget-conscious. It's an extension of the chain it already has to fill that niche β€” J.Crew Factory, but away from the outlet mall.