Abercrombie & Fitch Brand Strategy: Best Practice or Marketing Mistake?

I made an observation this holiday season which I’m sure many others have as well. Email special offers GALORE. Lots of them. Often. And they get better everyday. First 20% off. Then 30% off. Then 50% off. And today…60% off. Wow. The interesting thing to me is how it has been the same story across many retailers, these three being ones I shop regularly: Banana Republic, J. Crew, New York and Company, and Victoria Secret. (Being somewhat clothing obsessed this is focused on clothing retailers).

This situation is not a surprise this year. The media told us to expect deep discounting. Retailers announced it themselves. All retailers but one: Abercrombie & Fitch. I was surprised to read in the Wall Street Journal a while ago:  Abercrombie Fights Discount Tide Clothing Retailer Accepts Lower Sales in Its Strategy to Protect Margins and Hip Reputation. This is a rather bold move when the economy suggests otherwise. Imagine being the CEO making the call. The economy is down, consumer discretionary income is shrinking, and our competition will be out in full force discounting to drive sales. Short-term decision making would scream the need to follow-suite to maintain share and move inventory. I applaud Abercrombie for holding ground on the profit line. We know the business principal that in the short-term, you cannot grow market share and profit at the same time (not including a decline in CGS). At Frito-Lay I had to know which ‘mode’ we were in: Profit mode, or share mode and determine my pricing/promotion strategy.

I will be very interested to see the long-term impact on the Abercrombie Brand. Consumers become accustomed to promotional discount strategies which decreases brand value over time. I no longer pay full price at J. Crew or Banana Republic, two of my favorite stores. I know their clothes will ALWAYS go on sale. I had this discussion with some friends who do the same. Abercrombie surely is taking a hit in sales in the short-term; but this will be a great case study over time to see if the strategy pays-off in profit and strength of the brand. How well do they know their customers? Naturally, hindsight will make the CEO lauded or chastised. And the only unfortunate issue for me is that my niece wants Abercrombie clothes for Christmas. So of course I paid…full price.

What do you think of the Abercrombie & Fitch strategy?

 

Posted by Jackie Kuehl at 12/18/2008 2:21 PM
Categories: brand marketing, marketing strategy, relevant marketing
 

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