Abercrombie and Fitch – Paper

An assessment of the company’s strategies, key opportunities and threats as well as industry strategies and competitive dynamics shows a company that is poised to be a long-term leader both in the US and international retailing. Abercrombie and Fitch, headquartered in New Albany, Ohio, operates internationally throughout North America, Europe and Asia. According to the Abercrombie and Fitch Co. 2011 Form 10-K, “it operated 946 stores in the US and 99 outside the US” (Form 10-K, 2011).

The company participates in the specialty apparel retail market and provides value to its customers through its four brands, Abercrombie and Fitch, Abercrombie Kids, Hollister and Gilly Hicks (Form 10-K, 2011). The various brand all include casual sportswear apparel, personal care products and accessories for men, women and kids and bras, underwear and sleepwear for women, with a casual luxury appeal. They are however differentiated by the different age demographics they appeal to, minimizing cannibalization (Standard and Poor’s NetAdvantage).

The retail industry in the United States is considered mature and highly fragmented with demand directly mirroring population growth (Standard and Poor’s NetAdvantage). Abercrombie, like a lot of other companies in this industry, is considered to have reached its growth potential in the United States. To aid further growth, the American based retailer’s number one objective over the passed years has been global expansion. It has aggressively pursued an organic growth strategy internationally.

With the recent improvement in their e-commerce business and the projected 110 new stores by end of the 2012 fiscal year, Abercrombie and Fitch is in position to expand its customer base and obtain tremendous growth. International growth is however very costly and the company might be unable to successfully open and operate all its new stores. Other issues that could affect international growth include fluctuation in exchange rates and reliance of international suppliers.

Until recently, Abercrombie and Fitch’s business model was not focused on customer satisfaction, but on exclusivity, a sultry attitude and a cooler than thou ambiance giving it a very strong brand presence (Kang, 2005). Abercrombie and Fitch employs a focus differentiation strategy with a very specific target demographic. Their products very highly priced in comparison to their competitors. Abercrombie and Fitch walks the casual and luxury line enabling it to charge high prices. The target demographic is attracted to strong brands, fashion and value.

With the recent improvement in customer satisfaction, the brand should continue to realize greater revenue than its direct competitors. Trying to stand out in the apparel industry can be very difficult but Abercrombie, famous for bare chested models and racy marketing photography, has managed to differentiate itself from its competitors through its marketing campaign (Marketing at Abercrombie and Fitch, 2012). They have a minimalist approach to marketing with a less is more strategy as can be seen through the way their models dress and also lack to a TV presence.

Because it is geared towards the youth, Abercrombie has a very strong web presence with millions of followers on both Facebook and Twitter. Abercrombie and Fitch does not own any manufacturing facilities of their own and rely solely on the environmental sustainability initiatives of their suppliers (Drissen 2012). Although Abercrombie is able to charge premium prices for its merchandise, its pricing power over the customer is limited. During good economic times, customers are willing to pay for the products, but as the economy declines, the marginal customers are shopping for value.

This is evident in the graph in Appendix 1. At the heart of recession in 2009, because Abercrombie continued to charge premium prices, its has a greater reduction in operating revenue than its competitors that resorted to price promotions. To increase revenue Abercrombie has gone against its no price promotions policy to make its products more affordable to its customers. However, this is a price promotions are just a short-term solution to boost sales during the recession (Smith, 2011). Abercrombie also maintains borrowing power over suppliers by sourcing from multiple suppliers.

According to the Form 10-K, Abercrombie sourced from 170 suppliers during 2011 from around the world. Not more than 10% of its merchandise came from a single supplier (Form 10-K, 2011). Wall street journal, style and substance anf tries to be less haughty more nice. Kang Stephen june 17 2005 * Target market, America’s middle class which is disappearing really fast * Overprisced collegiate wear, does not provide the same combination of price and value – falls in a category, needs to diff itself * Fate is a more expensive gap Lee Jeremy Marketing, ANF Aug 19 2009:17 * Finding a balance between international growth and exclusivity is the key to long term success (aber’s situation, biting the abs that feed it holmes Elizabeth, wall street journal aug 18 2011 * Marketing Minds Blog Sourcing – not more than 10% from single vendor Promotional activity Stock prices closely tied to clothing line and what is considered in season ( Teens want to belong. This is milked highly by anf Message Communication in Advertising: Selling the Abercrombie and Fitch Image Claire E.

Driessen Faculty Sponsor: Scott Dickmeyer, Department of Communication Studies (journal of undergraduate research) Firms pursuing this strategy may be successful by generating a relatively high profit margin and a relatively low asset turnover. Soliman (2008) states that profit margin is derived from “pricing power, such as product innovation, product positioning, brand name recognition, first-mover advantage and market niches. ” (p. 824). Abercrombie and Fitch is cited as an example of such a business model. (

Experiencing decline in revenue due to promotions, same old customers Competition Lots of competitors targeting 14-30 bercrombie & Fitch: To Price Promote or Not To Price Promote? Tim Smith, PhD, Chief Editor? July 2011 wiglaf journal Major competitiors – * urban outfitters * American eagle * Aeropostale * Gap * Pacific Sunwear of California Organic growth strategy (growth) Corporate strategy (use of physical attractiveness) Fullprice selling widens profit margin Minimal caniballisn due to age diff and style diff Growth thru diversification (organic growth, start ups) Appendix