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Abercrombie & Fitch
Manal Akhtar
Katrin Franye
Jason Ip Chuk San
Mike Kaminski
Alejandro Brusi Montero
Zhengran (Max) Zhu
(211532876)
(214002711)
(212286613)
(212084133)
(214011597)
(212140000)
MKTG 4321 S
Dr. Markus Geisler
0
April 6, 2015
Table of Contents
EXECUTIVE SUMMARY .................................................................................................................................. 2
INTRODUCTION ............................................................................................................................................. 3
INDUSTRY LANDSCAPE .................................................................................................................................. 3
ANALYSIS ....................................................................................................................................................... 5
SWOT ANALYSIS ............................................................................................................................................ 5
MYTH MODEL PERSPECTIVE ......................................................................................................................... 7
CUSTOMER EXPERIENCE DESIGNS ................................................................................................................ 8
PROBLEM ...................................................................................................................................................... 9
ALTERNATIVES............................................................................................................................................. 10
RECOMMENDATION ................................................................................................................................... 14
IMPLEMENTATION ...................................................................................................................................... 16
CONCLUSION............................................................................................................................................... 18
APPENDICES ................................................................................................................................................ 19
ENDNOTES................................................................................................................................................... 22
EXECUTIVE SUMMARY
Starting out as a small athletics supply store to becoming one of North Americas most
recognizable brands, it is undeniable that Abercrombie & Fitch (A&F) has a long and storied
history in American culture. That history is also filled with brilliance by way of innovation and
rebranding, as well as defeat through bankruptcy and controversy. In fact, Abercrombie & Fitch
has had its fair share of issues in terms of controversial practices and the inability to rebrand and
reposition itself in the retail industry and in the minds of its consumers as well. Although the
company maintains its strength in its vast portfolio of brands, its weaknesses are heavily
restricting any ability for the company to make a rebound in the market. These weaknesses
include the ease of substitution by similar brands such as Aeropostale and American Eagle, as
well as the fact that their merchandise is generally sold at higher price points in comparison to
these competitive brands. The companys focus on being physically attractive and exuberating
sex appeal combined with their overly-sexualized in-store experience forms the basis behind
their brand image of an all-American retailer. As a result of this belief, the company has made it
its mission to ensure that their strategy centered on inclusiveness is maintained. With the new
social trend towards beauty in all shapes and sizes, the companys practices have been criticized
and negatively received, which inevitably led to a decline in sales and its customer base.
Alternatives to improve A&Fs current business model include: changes to their target market,
brand image, and product offering. After analyzing and weighing the strengths and weaknesses
of each alternative, we felt it would be the most beneficial for A&F to employ an initiative that
aims to change their company image. In doing so, we believe that adopting a Doppelganger
mentality to continually match up with consumers current tastes and preferences would be
crucial in turning around the companys performance.
2
INTRODUCTION
Are you beautiful? In a perfect world, the answer to such a question would obviously be
yes, everyone is. However, by Abercrombie & Fitchs standards, we would not all make the
cut, and that is where things took a nasty turn for the company.
Although A&F was established in 1892, it did not start selling modern apparel until 1979.
In that time, the company experienced both good and bad periods serving as a large supplier of
hunting and sporting goods, eventually culminating with the companys bankruptcy in 1977.
Following its failed attempt to focus on athletic clothing between 1979 and 1988, the company
was acquired by Limited Brands and it changed its focus entirely on modern fashion. From that
point on, the company not only experienced massive financial success, but it also established
itself as a fashion and cultural icon.
With scandals and declining sales plaguing their every step, recent times have not been so
favourable for the company. A&F is now scrambling once again to promote a more positive
corporate image, which saw long-time CEO Michael Jeffries stepping down from the company
and bringing in a wider range of sizes. However, the question still lingers to what else the
company can do to get itself out of this sticking situation and once again become one of the top
American retailers of clothing.
INDUSTRY LANDSCAPE
To get a better idea of the current state of A&F, it is useful to examine its industry
landscape as well as the present status of some of its competitors. Although retail sales took a
massive hit during the financial crisis of 2007-08, current retail sales have bounced back and are
nearly at the levels of those before the crisis. As the economy continues to improve with job
3
creation as well as the expected increase in disposable income due to lower gas prices, retail
sales are also expected to increase. But one thing has changed - where consumers shop. Rather
than shopping at individual brand boutiques (i.e. American Eagle, Aeropostale or A&F),
consumers are now choosing to spend their money at larger retailers who offer a greater selection
and often at lower prices. These include stores like H&M, Forever 21 and Zara where consumers
are often less brand conscious and prefer to have the freedom to choose from many brands and
different fashion styles.
Nevertheless, boutique brick-and-mortar stores are still a major driving force in the retail
fashion industry. While A&F is struggling, - their 2015 first quarter earnings report fell short of
analysts expectations and management has withdrawn $80 million from its cash reserves i - they
are not alone in this situation. In fact, Aeropostale (who targets the 14-to-26 age group) has
experienced declining sales with many financial analysts predicting financial losses for the firm
in the near future. Both companies however, rely on physical locations to drive their sales, as
their stores account for roughly 90% of sales. Their third competitor - in terms of both fashion
and target market - American Eagle (AE) also finds itself in the same position with declining
sales and a loss of relevance. More recently, AE has seen its stock prices surge due to a new
market strategy that attempts to broaden its consumer base and offer more incentives through
promotions (but fewer discounts) for consumers to shop at their stores.ii
Despite this and the reduced appeal of in-store shopping, A&F still has the opportunity to
maintain its profitability and image. Retail sales are still powerful, particularly during the holiday
season, and companies such as AE have proven that retailers are able to emerge from temporary
slumps. It is now up to A&F to make the necessary changes to succeed in the evolving market
environment.
4
ANALYSIS
To further identify the opportunities that can be explored in the retail sector, below are
three models that position A&Fs brand within their external environment.
SWOT ANALYSIS
Please see Exhibit A for a condensed version of A&F retail environment.
Strengths:
A&F has a strong and varied portfolio of brands under its umbrella, catering to a range of
age groups including Abercrombie, Abercrombie Kids, Hollister and Gilly Hicks. According to
its 2014 annual report, A&Fs brands can be found in malls across the world, operating 843
stores in the US and 163 stores abroad. iii Despite having a low global presence, the company
still has strong brand recognition - affiliated to its nationality - and its major presence in the
States obviously reinforces that message. Lastly, A&F has a strong e-commerce presence as total
online sales totalled 19 percent of overall sales in 2014. iv
Weaknesses:
Two of A&Fs four brands, Abercrombie and Hollister, carry related products with
similar prices and can easily replace one another as substitutes. Without differentiating their
brands through intensive marketing efforts, A&F is unable to maximize the benefits from each
brand, which increases the risk of cannibalization by one of them. The American retailer is also
extremely reliant on the US market; for instance, 52% of total sales were attributed to the US and
the remaining 48% were from international sales and direct-to-customer sales (Exhibit B). v
Therefore any changes in American consumer preferences or macroeconomic factors will
heavily impact Abercrombies financial performance.
5
Almost all of A&Fs products offerings are targeted to millennials yet are priced
extremely high relative to competitors such as Aeropostale and AE. For example, denim jeans at
Abercrombie generally retail for $68-$88 whereas similar jeans at Forever 21 retail for $25.vi
This can essentially limit the amount of merchandise bought at Abercrombie & Fitch, seeing as
most young consumers buying from the clothing brand do not have the disposable income
necessary to make frequent purchases. Current brand image and marketing tactics also give rise
to the companys lack of focus in regards to an online presence. When shopping at an
Abercrombie & Fitch store, customers tend to find loud music, dim to no light , heavily scented
perfume, alluring pictures, a disorganized layout, all while being served by extremely attractive
staff members. This would be ideal if the store was catering to teenage boys and girls, but this is
a major turnoff for several other people. (Exhibit C)
Opportunities:
As long as American values continue to resonate with local consumers, A&F has the
potential to gain deeper penetration in foreign markets, particularly in China and Japan. With the
rise of e-commerce and a strong online platform, A&F will also be able to remain in a
competitive position going forward, as it already grasps many of the first-mover advantages in
this area. Lastly, the mens and womens apparel industry is improving in the wake of the Great
Recession, posting 5 and 4 percent growth respectively in 2013. vii These numbers are a
promising indicator for A&F and retailers alike in the industry.
Threats:
More notably, A&F has been subject to negative publicity in the last three years due to
their discriminatory hiring practices and the offering of small clothing sizes for females. These
decisions have caused a damper on their performance, which was apparent in 2013 when their
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sales dropped by 11 % in comparison to 2012. This was also the same time when Mike Jeffries
remarks resurfaced which regarded only targeting thin and cool college and high school
students.viii Overemphasis on the American market is also a potential threat as it is not consistent
with the globalization of the retail fashion industry. Brands such as ZARA, H&M and Uniqlo are
still expanding in the US and therefore pose a viable threat to A&Fs key market share. ix
i.
It mitigates the impact of undesirable customers - fat, loud, obnoxious, etc. - on their
desired customers, which could prompt them to leave
i.
It reduces the shopping stories shared by customers on formal and informal social
networks (i.e. I was shopping at A&F once and I saw...)
A&Fs employees are also renowned for poor customer service, as their employees are
inadequately trained and are mainly focused on keeping the merchandise neat and folded. xiii
While this may reject customers seeking an emotional connection to the store, it helps A&F
standardize the customer-employee experience across all its 567 stores and, again, making it
appear that the entire store was designed for you (ruffled clothes indicate the presence of other
customers).
In sum, the lack of emotional proximity that A&Fs employees provide to its customers
enhances their brand performance. The richness of their physical and social cues - from images
of playful, vibrant youth to the perceived seclusion one feels as they shop - provides customers
with a one-of-a-kind consumption experience amongst hundreds of similarly-designed stores in
large shopping malls across the globe. Best of all, it delivers its product differentiation at a very
low cost as the largest cost driver for retail businesses (labour) is standardized at minimum wage.
xiv
PROBLEM
Where exactly did A&F go wrong? Firstly, its branding strategy was built around
adhering to the companys all-American look through sex appeal. As a result of this,
Abercrombie & Fitch established itself as the epitome of what is meant to be cool for its
teenage target market. In doing so, the company alienated many groups of people on the basis of
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only going after the attractive consumers who fit the aforementioned look policy. This strategy
was nevertheless more apparent when Jeffries expressed his reasoning to only target the
attractive all-American kids and to exclude those who do not belong to this model. Positioning
the company in such a way has given rise to many other problems ranging from discrimination in
the workplace, its employment practises, and its treatment of customers.
ALTERNATIVES
In order for A&F to turn their business around, it must significantly alter its business
operations in order to embrace the change in customer preferences and the emergence of new
trends. Below are three distinct alternatives that Abercrombie & Fitch can undertake in order to
respond to such things. Each one of the alternatives focuses on one of Abercrombie & Fitchs
key areas of interest: the target market, the companys image, and the companys product
offerings. The following section will detail some strengths and weaknesses for each alternative,
based on criteria we have set, and deliver a final recommendation.
Teenager. One who prefers to be the brand himself or herself rather than a person that
embodies a few specific brands. Brought on by the power of digital and social media,
particularly Instagram, young adults now possess the technological channels to build their own
brand images and (nourish) the significance of individual voices and the power of the one
persona behind them. In the words of Marcie Merriman, former director of brand strategy at
Victorias secret, social media and style blogs have given teenagers the impetus to develop
individual styles rather than sharing trend uniforms or must-haves with their peers.xv As a
technology of power, A&F can adopt a cultural image of a techspressive force and join forces
with todays teens to help them express themselves better. Be on their side!
The second component to this alternative addresses a potential contradiction to the
promotion of the aforementioned 2015 teenager. Although the company has had a history with
narrowing its clientele to only the beautiful people in the words of ex-CEO Jeffries, A&F risks
its business to become too focused on this specific niche, which is apparent with brands such as
Brandy Melville. Furthermore, it gives rise to naysayers who spread the image of the A&F brand
as a green Luddite technology - an inauthentic retailer that threatens to make you another victim
of their vicious branding and potentially take away from your ability to express yourself as a
brand. To address this problem, A&F should expand its definition of a beautiful person to one
that the mass majority of society accepts. It will aid in their recovery from a negative image of
being a disrespectful brand, while also helping them own a broader market presence.
models and suggestive clothing designed specifically for the small and skinny. Just take a look at
any A&F billboard - one is likely to find several semi-nude young models portraying a sexuallycharged scenario while wearing A&F gear (Exhibit E). This is the dominant theme in any headto-head (H2H) interactions with the brand, particularly in its brick-and-mortar stores. As the
retail setting still remains as a main driver of key sales revenue for most retailers, A&Fs
physical environment may be perceived as more uninviting than inviting. In fact, the atmosphere
captured by scantily clad girls folding clothes, loud electronic dance music (EDM) and its strong
Fierce cologne sprayed throughout the store, can be seen as too focused on selling sex and
intimidating for those who do not identity with these things. On the contrary, retailers such as
Zara make it their mission to save up to 20% more energy and by mobilizing the H2H experience
to build a more powerful consumer-brand bond by forging stronger emotional attachments with
its shoppers. This alternative suggests a move away from being the traditional sexy brand
(physical beauty) and reinventing sexy by means of promoting diversity above all. By
removing its edgy, all-American sex appeal, this could essentially be going against everything
that Abercrombie & Fitch stood for, and so, this alternative would see the company embracing
this new wave of sexiness through cultural diversity both in terms of its brand image and its
merchandise and its employees. In doing so, Abercrombie & Fitch would:
i.
Still remain true to the core values it represents, and the brand loyalists who
consumed the existing brand;
i.
Provide its consumers with national values that they would not hesitate to embody,
share and consume (especially in the United States, their largest market).
12
National ideologies are always a safe choice for marketers, especially as America deals with its
fallout from the worlds economic stage, and the trend towards promoting beauty through
different looks should definitely not be ignored.
13
i.
Creating opportunities for co-creative collaboration between its consumers and its
design process, by allowing them to suggest what items best define them and how
they add to their A&F style;
i.
Each of these ambassadors will be able to infuse A&Fs storyline with their personal stories,
adding depth to the brand message and extending its longevity in the competitive marketplace.
RECOMMENDATION
Rejection of Alternatives One and Three
Given A&Fs current state of affairs, alternative one would push the brand to mainstream
popularity as it would broaden the individuals that are attracted to its brand. For most of its postrevitalization history - after 1988 - A&F has stayed true to bringing teenagers on board with its
culture rather than adapting its culture to support the teenager. By only stocking sizes to a certain
level for girls, it becomes a mythical brand that is a sisterhood of its own and gives any wearer
the admission to its special club. Opening the doors will take away from the specialty of the club
and would demolish the foundational strategies that has made it successful all these years.
On the other hand, A&F is not positioned well-enough to broaden its clothing lines and
remove its iconic, flashy ABERCROMBIE & FITCH top designs. Their quality, while highlytouted, is more expensive to produce than fast-fashion giants such as H&M and Zara and any
significant price cuts could saturate the market with A&F clothing - making it less special and
desirable. An attempt to design clothing with their consumers may not work either; after all,
14
most of the thought leaders are teenagers and their opinions may not be widely accepted by
A&Fs regular teenage shoppers. And hiring brand ambassadors to deliver the brand message
makes A&F more susceptible to bad publicity, which is the exact reason why it discourages even
its own employees to interact with in-store shoppers.
Both of the above alternatives attempt to help A&F evolve with the changing
marketplace, but only resolve A&Fs problems from one dimension and leave another open for
doppelganger image attacks.
IMPLEMENTATION
In order for Abercrombie & Fitch to change its brand image in the minds of its
consumers, the company must first give them a reason to alter their prior understanding and
opinions on its pre-existing methods of operation. Think of this alternative as a way to sustain
the desire to be a part of Abercrombie & Fitch, but with a more modern acceptance for diversity
both in terms of its employees and its retail stores. By upholding the companys standards when
it comes to its clothing line, Abercrombie & Fitch can definitely implement a move towards
16
diversity through a more diverse workforce, new procedures in regards to its look policy, and the
promotion of different genres of music in their stores.
It comes with no surprise that sex sells and Abercrombie & Fitch is no stranger to using
sex symbols to sell its merchandise; however, this can also be perceived as intimidating for
consumers who do not identify with this all-American image. Because of this, it is important for
Abercrombie & Fitch to introduce more diverse models both in terms of its advertisements and
its employees so that this brand image which is centered on diversity can resonate with a much
larger mass of teenage individuals. In doing so, Abercrombie & Fitch still keeps its powerful
image of being all-American, but it gives consumers a reason to once again wear the clothes
knowing that the connotation of being culturally diverse is another form of sex appeal. At the
same time, it goes beyond just revitalizing Abercrombie & Fitchs image through its promotion
of its workforce; the company also needs to reformulate its stores so that customers are treated to
a much more accepting environment to step into. Music plays a major role in setting the
atmosphere for shoppers retail experience and so, Abercrombie & Fitch can easily incorporate a
much more diverse playlist to really portray that culturally diverse theme throughout its stores.
Furthermore, the company could tailor their music selection so that certain songs are played
during different parts of the day, rather than constantly playing the same genre of music
throughout the whole day. Finally, Abercrombie & Fitchs stores could also benefit by
encouraging its employees to piece together their own unique look using any articles of clothing
from Abercrombie & Fitch rather than have them adhere to a specific dress code which typically
encourages jeans to be worn cuffed and with flip flops for guys for example. As a result of this,
the company can really showcase their shift towards embracing diversity and essentially
17
celebrating individuality and uniqueness, but still demonstrating the all-American look that is
embedded in its clothing and its quality.
CONCLUSION
After a thorough analysis that covers Abercrombie & Fitchs past business history as well
as the current state of their business operations, it is clear that the company is in trouble. A
controversial CEO, depleting cash reserves, controversy over company values and declining
sales all culminated into present day problems for the company. By using specific models of
marketing, the company also shows no signs of wanting to align with the preferences and ideals
of modern day consumers. It is clear that Abercrombie & Fitch needs to do something, and they
need to do it now. To shake off their controversial image and reinvigorate their business
operations, the company must undergo a drastic change to play into current consumers desires.
As a result of this, we believe that it would be the most beneficial for Abercrombie & Fitch to
change their brand image so that they can sustain the elements of their identity that made them
successful. At the end of the day, if Abercrombie & Fitch does not embrace change, they can
soon be left behind in the retail industry. What is truly important is being ready for the next wave
and not being afraid to ride it when it comes.
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APPENDICES
Exhibit A: SWOT for Abercrombie & Fitch
Strengths
Weaknesses
Opportunities
Brand similarity
Overreliance on the US market
Pricing isnt in compliance with target
markets buyer power
Poor in-store experiences
Threats
EXHIBIT B: Sales from each geographic region (Abercrombie and Fitch Annual Report 2013)
19
Populist World:
Cultural Ideology:
Youth subculture
Identity Myth:
Desire is established
through sexy ads and
feeling of exclusivity instore (particular-sized
clothes, specific racial
preference)
Identity Position:
Lack uniqueness,
desirability and social
acceptance
20
21
ENDNOTES
i
<http://markets.ft.com/research/Markets/Tearsheets/Financials?s=ANF:NYQ>
ii
<http://www.reuters.com/article/2015/01/08/us-aeropostale-forecast-idUSKBN0KH1B520150108>
iii
iv
<http://advantage.marketline.com.ezproxy.library.yorku.ca/Product?pid=5A7C56D0-670A-41DB-A218EFD5FA924AD1>
v
<http://www.abercrombie.ca/anf/investors/investorrelations.html>
vi
<http://www.huffingtonpost.com/2014/12/03/abercrombie-sales_n_6265000.html>
vii
<http://advantage.marketline.com.ezproxy.library.yorku.ca/Product?pid=5A7C56D0-670A-41DB-A218EFD5FA924AD1>
viii
ix
<http://www.fashionunited.co.uk/fashion-news/fashion/clash-of-the-fashion-titans-hm-vs-forever212013121719445>
x
<http://www.gq.com/style/blogs/the-gq-eye/2014/12/abercrombie-ceo-mike-jeffries-is-out-but-how-bad-has-itgotten-really.html>
xi
<http://content.time.com/time/business/article/0,8599,1918160,00.html>
xii
Bitner, M.J. (1992), Servicescapes: the impact of physical surroundings on customers and employees, Journal
of Marketing, Vol. 56 No. 2, pp. 57-71.
xiii
<http://www.dailymail.co.uk/femail/article-447183/Poseurs-Paradise-Whats-really-like-work-new-Abercrombie-Fitch-store.html>
xiv
<http://www.salon.com/2012/02/04/the_absurd_life_of_an_abercrombie_fitch_model>
xv
<http://www.dailymail.co.uk/femail/article-2318963/The-art-perfect-1-25-inch-turn-Inside-Abercrombie--Fitchstaff-guide-thrown-preppy-look.html>
xvi
22