Abercrombie & Fitch Brand strategy follow-up: Is it the 'Brand Bubble'?
A follow-up to a prior post about Abercrombie & Fitch’s brand pricing strategy for the holiday season: In a nut-shell, Abercrombie was not going to play the game of deep discounting like their competitors. They were hoping to gain long-term brand impact by maintaining their prices. I had many comments on that blog-post. Most agreed the short-term hit would help their long-term brand image.
In the Wall Street Journal on February 14th (happy belated Valentines’ day) is the article ‘Abercrombie Profit Drops 68%’. They had to reduce prices as much as 90% in January to clear inventory’. That isn't really a surprise. Unless they were really obtuse, they had to know that would happen in this economy. The WSJ article goes on to say Abercrombie’s CEO referred to the fourth quarter as ‘a nightmare that included unprecedented promotional activity by other retailers’. HUH? While I applauded his guts to hold firm, what planet was he on not to expect this short-term hit? When managing for long-term profit, you can expect a hit in volume.
This will sound so text-bookie, but a review of three factors that influence the demand curve, or shifts in demand, simplifies the issue: 1) Consumer Tastes. Let’s assume that didn’t change. 2) Available substitutes. They were beat here with many choices. 3) Consumer Income. Hmmmm. This is a no-brainer as consumers traded down.
I’m no financial genius but I'm sure they realized when managing for long-term profit, you can expect a hit in volume. The long-term strategy makes sense if consumers find value in the brand. I wonder if they considered that before stocking the shelves with holiday inventory. Maybe they were hopeful. Maybe they had their head in the sand. Maybe it’s just the ‘Brand Bubble’…(more on that later).
Would love to hear your comments.
Jackie
Obviously they did not realize that there were many factors against them
All indicators were consumers would shop for necessities and where they felt there was a price vale. Ie Wal-Mart etc.
Youth will buy games etc before fashion,
Mall locations are having a tough time.
Online is growing with the more affluent shopper.
Bottom Line-They need Kuehl Marketing!
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So after your first post, I decided to go into Abercrombie and see for myself, this past week while I was in Boston. Yep, still not much on sale, but the item that was, was a great coat (I forgot to pack a warmer one!) and I got it for 75% off! Funny thing is that not many people noticed the small sale section since it was hidden by a palm tree and another table. HMMMM....great coat, great price and an inventory, wow....how do we get it off the shelves???? maybe have it visible for consumers to see it!
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Hi Jackie,
I am a high school student in Virginia. I am involved with the International Baccalaureate Program, and for my IB Business Management class, I have to do a paper about a company, complete with commentary and analysis, concluding with advice for the company on how I think they should handle a problem. I have chosen to do my paper on Abercrombie and Fitch's marketing strategy. While searching the web, I came across your blog. I enjoyed reading your blog and they provided some good insight for me and my studies. I feel the two Wall Street Journal articles you have referenced (The one in this entry and the one about A&F from December) would be of great assistance in my paper. However, I don't have access to the Wall Street Journal website, and I tried to sign up online, but it costs, as you probably know. I was wondering if you would be able to email me the two articles I mentioned. They would really strengthen my project, and I would really appreciate your help. Let me know if this is possible. Thanks so much!!
Thanks,
Katherine
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My personal opinion-
If A&F were so stuck on keeping there arrogant image especially through rough times, they should have been offering some kind of sales incentives or advanced customer loyalty program. They didn't want to drop prices until they absolutely had to, when they should have been doing a buy one get one free or half off, or special customer loyalty day sales, etc ,etc
A lot of major companies made a very crucial mistake of downsizing , and should have weighed there options more carefully for upgrading and positive growth. Obviously there is a risk, but for desperate times come desperate measures
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I'm a college student, and personally.. i would pick fashion over games anydayyy
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A recent Business week article titled, 'Abercrombie & Fitch: Lower Prices Aren't So Bad After All' - http://www.businessweek.com/magazine/content/09_48/b4157062825221.htm
Its always cheaper to keep a current customer than to win back a customer who left. Its even cheaper to get a new customer than to win back a customer who left.
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Wow! thats very useful tips for me because i am also doing marketing for Bulk SMS, so a lot of thanks for these tips,
regards to all,
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Cool,
Abercrombie are overpriced and they made a huge mistake but not discounting, we know and know they know it... i dont think they will continue to make the same mistakes tho...
Thanks for writing, most people don't bother.
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