Abercrombie & Fitch changed their marketing strategy several times in their history. They used to sell sports equipment and clothes, but in the 1970s, they went bankrupt and after reorganization they focused on selling the high-quality clothes that were especially appealing to the young Americans. Now A&F own four famous brands – A&F, A&F kids, Hollister and Gilly Hicks. However, their marketing strategy needs to be significantly revised. 90% of sales depend on the young people who buy clothes of two brands Hollister and A&F. Moreover, traditional sales in the brick and mortar shops have been stagnating or declining.
Nowadays, A&F has to face many challenges. They own more than 1,000 stores and do not use advertising to promote their products. They invest a lot of resources into in-store marketing and try to attract the young and attractive people. Because of that there have been critics who say that A&F lacks diversity. The company is quite inflexible and in the nearest future they may lose their leadership. For instance, most American retail companies try to expand overseas into the developed and developing countries in order to find the new customers. However, A&F is very slow in entering the new markets. At the moment they are work only in 8 countries and do not plan to change their expansion strategy in the short-term, even though their sales abroad have been constantly rising. Secondly, A&F’s pricing strategy does not let the sales grow quickly, because the new stores rely on the “conservative assumptions”. In the case study one can read that the gross profits rates went down in the past years. Some of the reasons include high costs of production, high prices on clothes, etc. The gross profits may probably have dropped due to the competition in the market. In the case study the authors mentioned only four companies that compete with A&F. They are GAP, Vitoria’s Secret, J.Crew, Aeropostale, and American Eagle Outfitters. However, there are much more American and foreign companies that offer high quality clothes to the customers. The competition has increased in the past years and A&F has failed to change their business model to address the changes.
The alternatives could include the gradual shift from in-store marketing to the advertising that is applied by the competitors. For example, Victoria’s Secret use 400 million catalogs to promote and sell their products. Aeropostale uses celebrities to advertise their products and offer discounts to the customers. Another alternative for A&F could be using e-commerce so that the people who cannot come to the stores were able to buy A&F brands online. If the company does not look in the direction of e-commerce, it might lose their key customers – young people who spend much time on the internet.
Based on the analysis of the current situation and the possible alternatives, A&F should become more diverse and accessible. A&F’s main problem is that they rely too much on the past history. However, in the modern world the buying habits and tastes are changing very quickly – the society has become much more inclusive and A&F should not put too much emphasis on the “cool, good-looking people” and the sex appeal. If the company wants to increase the average unit retail again, they need to be more proactive and perhaps to stop relying on the instore experience. Instead, they should use discounts and other traditional marketing tools more often to attract the larger number of customers into the stores. As it was written above, e-commerce could also bring many benefits to A&F. Now direct-to-consumer sales equal to $600 million a year and the company plans to increase this figure up to $1 billion. An increase in the direct-to-consumers sales may be the outcome of better presence on the internet and wider advertising. So far the company has been focused on the traditional stores and they should think of a similar strategy for the internet that could position A&F’s brands differently from their competitors. Finally, A&F should cooperate more with the online platforms where people prefer to buy clothes. The new distribution channels may significantly increase the volume of sold products.
References
Mahi, C., Boelsems, G., Garrison, J. (2012). Abercrombie & Fitch. Richard Ivey School of
Business Foundation.
