Aeropostale Expansion

Bhargavesh Gottam
Shaji Elimuttil
Josh Johnson
Udhaya Aelety
Anisha Komandla

The retail industry is one of the most arduous markets for a company to survive in. The
difficulty related to successfully establishing oneself in this market can be allotted to the intense
competition that is present with the number, quality and reputation of other comparable retailers.
This competition, available both locally and globally, has forced retailers to rethink and redesign
their current marketing strategies and operations. Enhancement or revision of a companys
current market strategies can be facilitated by looking into the 4 Ps: product, place, price and
promotion. With superior customer satisfaction in respect to the 4 Ps, which boils down to
Putting the right product in the right place, at the right price, at the right time, marketing and
success of a company can be well established. Another technique to enhance the marketing skills
of a company is to put into use the 3 Cs: company, customer and competition. Utilizing this
technique will aid in the creation of a plan by which products can be sold and determine what
company will strive in a certain market. This helps realize the possibility of success before
establishment of the business.
Aropostale, established in 1973, is a mall based retailer whose primary products are
clothing and accessories to the price sensitive portion of the market. Comparable to the
promotional style of Old Navy, Aropostale has year round promotions including sales of over
70% on all items at certain times during the year. Aropostale has used several methods to
promote its products. One method would be to partner with the album release of several bands
including Fall Out Boy and The Black Eyed Peas. The Aropostale stores would cells CDs and
give free shirts that are related to the album released by the band, with a certain purchase
amount. Aropostale also promotes through charity service such as the work the company did to
help out Haiti after the horrific disaster that occurred there or through the work the company
does to raise awareness of teen homelessness. Aropostale does not often promote via TV

commercials, but it has released a few TV advertisements. There are many seasonal sales
promotions including back to school sales, after Thanksgiving sales, and sales during December.
The clothing quality is also comparable to that of Old Navy; most of the clothing is made of
cotton or polyester and they do not utilize the higher end materials like wool or cashmere. The
pricing of the clothing at Aropostale makes it a viable option for the teenage market, which
depending on the geographic location can be very price sensitive.
According to the companys annual report, the company provides customers with a
focused selection of high quality fashion and fashion basics at compelling values in an
innovative and exciting store environment. Aropostale does keep up with modern fashion
trends to a point, but it focuses more on basic styles that are affordable to the general teenage
population. The target customers for Aropostale are primarily teenagers in high school within
the age range of fourteen to seventeen. This target market represents eight percent of the total
U.S. population. These customers are usually only part-time employees of retail stores or other
low paying jobs that offer slightly better than minimum wage. The retailer appeals to these frugal
customers who are trying to cut back on expenses by offering low-priced apparel and accessories
that are basic in nature but still fashionable. This was actually one of the companys strengths
from 2007 through 2009 as its revenue increased by forty percent in a market recession. Most
other rival retailers struggled during this time period as their items were pricier than that of
Aropostale.
In addition to having a store dedicated to teenagers, the retailer also has a smaller branch
called P.S. from Aropostale that solely serves children. P.S from Aropostale, a subsidiary of
Aropostale, primarily targets elementary age children from ages four to twelve, which makes up
twelve percent of the U.S. population. Parents of these children are all in for getting their

children brand name clothing at a cheaper price. These parents want their children to have some
resemblance of fashion worn by older teenagers without having to burn a hole in their wallets;
P.S. from Aropostale offers just that. This branch of the retailer is slowly gaining popularity and
offers a long-term staying power within the target market, which bodes well for the company. In
total Aropostale and its subsidiaries market to twenty percent of the U.S. population with its
target customers extending from elementary to high school aged children.
A majority of the clothing is meant to be for a more casual setting and no formal clothing
is offered. Common products include t-shirts, hoodies, jeans, and pants that are more casual than
khakis. The laid-back nature of the clothing can be seen in several aspects of the apparel. The
jeans may often have marks of distress (e.g. tears, rips, fades). The t-shirts have graphic logos
that are either printed or stitched onto the t shirt without neat cuts. The button-up shirts are
slightly faded, so they would not look good tucked in to a pair of dress paints or paired with a
suit. The clothing retailer also produces lots of little accessories such as wallets, hats, socks, and
jewelry. The smaller branch of the retailer, P.S. Aropostale, appeals to an even younger
population, but they still sell similar products. Again, no formal clothing is produced or sold by
Aropostale, so a majority of the tops sold are clothes that are mainly only be worn by the
younger population. The main settings where Aropostale will be worn include elementary,
middle, or high school settings and other events associated with those age groups.
Unlike Abercrombie and Fitch, Aropostale does not discriminate its customers based on
their weight or size. For example mens t-shirt sizes range from X-Small all the way to XXXLarge. The mens jeans range from as small as 27 inch waist to as large as 42 inch waist. This
sizing range shows the companys interest to be marketable to all sorts of people, rather than

discriminating based on what a person may look like. Also a variety of colors in all clothing are
offered as to appeal to a wide variety of tastes and inclinations.
Aropostale retail stores are primarily found in a mall setting, and not on an
individual/independent basis. As a result the retail stores are surrounded by similar stores.
Aropostale has two main competitors that by and large target the same market. Collectively,
Aropostale, Abercrombie & Fitch, and American Eagle are known as the 3 As due to their
close resemblance to each other and the similarity in the markets they target. These retailers
focus on creating basic blue jeans, hoodies, graphic t-shirts, and other apparel and accessories.
Most of the apparel these retailers create features their logos in some way especially on their
hoodies and t-shirts. American Eagle promotes savings as Aropostale does, but its price of
equivalent items is above the prices one would find at Aropostale. The pricing at the other
similar mall-oriented retail store, Abercrombie & Fitch, exceeds what one would find at
American Eagle. The price differences between the companies are usually accepted as
representation of the respective qualities.
The macro-environmental trend among teenagers nowadays has shifted from wanting this
logo-centric design that the 3 As provide to desiring low-cost fashion focused apparel. Forever
21, H&M, and Zara have grown to become major competitors due to the fact they offer greater
variety of trending apparel at lower costs than any of the 3 As; they appeal to the price
sensitive population. In addition to offering lower prices, these new competitors serve a clientele
of all ages which critically hurts Aropostale as well as the other two retailers. According to
Business Insider, Aropostales comparable sales fell 15 percent last quarter while H&M, a
Swedish retailer, said its U.S. sales rose 10 percent in the first half of 2013. This just shows the

fact that Aropostale must adapt to the macro-environmental trend and concentrate on producing
more fashionable cost-friendly items.
Performing a SWOT analysis on Aropostale can help identify what Aropostale can
improve upon. SWOT analysis is a strategic analysis of the companys strengths, weaknesses,
possible opportunities, and threats that may hinder the company. The primary strength of
Aropostale is that it has a significant presence in the United States and Canada in comparison to
American Eagle and Abercrombie & Fitch and even its new competitors. The retailer also offers
relatively cheap products and large discounts on its merchandise, but this has grown to become a
weakness as retailers such as H&M offer prices that are cheaper than Aropostales discount
prices. P.S. from Aropostale serves as another strength to the company as it faces less
competition because not many companies are targeting elementary aged children. This advantage
makes it a valuable asset in the long-run.
In addition to these strengths, the company relies on vendors that have their sourcing
offices located in the United States, even though these third-party vendors manufacture their
products in other countries. This allows Aropostale to avoid any negative economic impacts that
may occur in foreign markets and any vacillations in foreign currency. Although they do not have
to deal with production directly, a major threat that faces Aropostale is that it relies heavily on
only a few vendors to ship its inventory. According to the companys annual report, the company
sourced approximately 84% of [its] merchandise from [its] top five merchandise vendors. With
such a high dependence on only a few vendors, any delay in shipment or any other adverse
economic or natural disaster that may affect the vendor could lead to detrimental effects for
Aropostale. The retailer could be faced with the risk of an inventory shortage and an inability to
supply consumer demands. This could lead to once loyal consumers turning elsewhere to other

competitors to fulfill their apparel wants. Another apparel company known as Urban Outfitters
actually employs a strategy of encompassing a large amount of vendors (4,100 vendors) while
only purchasing less than 10% of its merchandise from any one of them. This allows the
company the ability to drop any one of its vendors if necessary without any adverse effects.
Aropostale must employ a similar strategy or face the ineludible consequences of relying
heavily on a few vendors.
The retailer also has several other glaring weaknesses that must be addressed in the
coming future to prevent the company from collapsing. As mentioned earlier, teenagers are
trending more towards purchasing fashion-focused products rather than the basic offerings and
logo-centric products that Aropostale provides. Aropostale placed its name on apparel not only
to promote its brand but also to appeal to the then, current trend among teenagers of wearing
brand name clothing. In addition to this, womens merchandise sales, which accounts for sixty
percent of all sales, are struggling. This can be credited to the fact women are more sympathetic
to fashion changes than men are. Fashion is ever-changing though and the retailer must readjust
to the wants of the consumer if the company wants to keep afloat. Another weakness is that the
retailer has almost zero to no international presence as it only has twenty-six stores outside of
North America.
The presented opportunities for the company could prove profitable and well worth the
risk in the long-run if it chooses to pursue them. Aropostale could pursue the opportunity to
expand globally to countries such as China, the second largest apparel market in the world, and
to the United Arab Emirates, which boasts highest per capita spending on apparel in developing
markets. The retailer should tap into this market soon before other competitors take control and
gain loyalty among international customers. Aropostale could also expand its brand in a similar

manner as Gap by creating higher quality store like Banana Republic that does not publicize that
it is a subsidiary of the parent company. By doing this, Aropostale can expand its target market
from just adolescents in high school to people in college and the work field. This store can offer
more fashion-based apparel at slightly higher prices to attract more sophisticated individuals who
value fashion. The company could also expand in a similar way to American Eagle and create a
store that is similar to aerie that sells undergarments, dorm wear, and active apparel to both men
and women. This market is almost completely untapped which is visible by the small amount of
companies that are in this market. Aropostale could profit immensely from entering this market
and offering its own products and apparel.
There are several simple ways by which Aropostale could promote and increase its sales
to its current market group, but a far more effective and profitable approach for the future would
be to expand the target audience to which Aropostale sells. Focusing on the differentiation
aspect and the weaknesses of Aropostale, two opportunities that could prove to be profitable by
expanding the targeted market include the opening of a higher end store and also the opening of a
store focusing on undergarments, dorm wear, and active apparel for men and women. The
distinction between prices offers high quality clothing for the people that can afford it. The
Aropostale and its higher-end counterpart will offer a variation on the price tag as well as what
the price tag is on; the higher end store will sell formal apparel such as suits, slacks, dress shoes,
ties etc. for both men and women while the original Aropostale store will offer lower end
products to the more price-sensitive population. The other proposed branch store will offer under
garments and other associated apparel for both men and women, something that is not offered at
stores like Victoria Secret and aerie. There are many details that are involved in the establishment
of two new stores under the Aropostale name, but with the variety and quality that will be

offered, the Aropostale Company will definitely see profits soar. This is the basis of the ideas
behind the two new stores mission statement, relating the idea of quality and profitability with
customers and net income. Our mission is to grow rapidly and profitably through the innovation
of apparel available to a consumer who desires modern style. We deliver value through quality
material, varying clothing styles, and a convenient return policy. The mission statement is made
in order to express the values of our two new stores and the details behind them.
****Aropostale is known for its comfort and casual apparel. Although it is a very
established company, it would be highly favored for the company if it decided to encompass a
brand, Exquisitique. An assortment of grand clothing will be provided including formal suits,
ties, and elegant dresses. It will be catered to fit mostly everyones budget. This new brand will
primarily be targeted towards higher-end consumers of the age range from 12 to 45 years.
Exquisitique will offer all the memorable apparel and accessories one needs for an
elegant occasion for both children and adults. Whether it is for a business conference or a special
occasion, Exquisitique will have it. Our apparel will include all party dress codes excluding
casual attire. Our store will include a variety of attire ranging from khakis, blazers, dress pants,
ties, cocktail dresses, blouses, watches and many other accessories. Khakis will be about $60,
blazers will range around $50-90, dress pants will be about $70, and watches will be around
$100. The price range for ties will vary from $20-40 depending on the embroidery and the style.
Cocktail dresses will be priced at $60 and above. Footwear for men, women, and children will be
available at $60 and above. Our vision is to have all the essentials one must need to look
sophisticated and exquisite under one roof.

We preferred not to mention Aropostale in the new brands name, as it is a vertical

extension. We did not want consumers to associate the formal suits to Aropostales main
clothing line. Aropostale does not necessarily offer the highest quality material, as its products
are very affordable; therefore, we did not want the consumers to assume their formal clothing
would be made out of the same material by linking the two brands together. There are two
different images and styles being presented. One is aimed for middle class consumers and the
other is for upper class consumers. One has a casual and comfy essence, whereas the other
provokes a luxurious and exquisite aura. Our marketing strategy is similar to the branding
process of Gap and Banana Republic. Although they are both under the same company, Gap is
not mentioned in Banana Republics name as two different qualities, styles, and prices are being
presented. Banana Republic has generated a huge amount of revenue for the Gap corporation. It
has posted net income of $333 million, or 71 cents per share, for the quarter ended May 4, up 43
percent from $223 million, or 47 cents per share, a year earlier.

The table listed above depicts the performance of the Gap franchise and its subsidiaries. It
highlights how significant Old Navy and Banana Republic are for the Gap corporation.

Hopefully, Exquisitque will augment to the success of Aropostale as Banana Republic has done
for Gap.
In 2005, Aropostale launched a chain, JimmyZ, which was a more upscale brand that
designed clothing for surfers and skaters. There were fourteen stores that were opened;
unfortunately, all of them closed down in 2009. According to Aropostale Chief Executive
Julian Geiger, "Discontinuing the Jimmy'Z concept will enable [them] to focus on businesses
which align with [their] core competencies, and generate greater long-term shareholder value.
We are using this integral occurrence as a learning experience for us. Aropostale wanted to
appeal more to the younger generation. However, at Exquisitique, we wont just have selections
for adults to choose from, but will have a variety of choices for children as well.
Conducting the SWOT analysis for Exquisitique could better prepare for foundation of
the brand. The strengths for this strategy are that it would provide a huge selection of formal
clothing for people of all ages. Its sense of style will undoubtedly appeal to a wide variety of
consumers. However, a major weakness that is tied to this concept is the distinct price difference
to the current Aropostale products. There is a chance the price tags of formal suits at
Exquisitique shocking price-sensitive consumers who regularly shop at Aropostale. They might
be under the impression that since the latter is a subsidiary of the former, the prices will be
relatively similar. There is also a chance that shoppers who do not normally purchase from
Aropostale might not want to purchase from Exquisitique because they may believe that the
apparel is the same material and style as the former. We will have to eradicate all these barriers
by advertising and strategically planning this diversification. Segmenting and targeting our
consumers is the first step in this process. An opportunity present for Exquisitique is to build a
reputable presence in the Asian markets. It would be highly advantageous for Aropostale to take

initiative to expand its name internationally. However, first and foremost, Exquisitique must test
the waters with American consumers before expanding its horizons. Once there is a green light, it
should whole-heartedly advertise its brand globally and become a multinational company like
Banana Republic. A potential threat that Exquisitque should be precautious about is that there are
many stores that sell high-quality formal clothing such as H&M, Express and Banana Republic.
Due to the huge selections already around them already, consumers might not be as receptive of
Aropostales new formal clothing line. Therefore, it must completely analyze its competitive
strategy. Exquisitique has the niche advantage in the sense that it is offering a luxurious clothing
line for kids as well unlike its competitors. Tailors will be present at every store if customers are
not satisfied with the fitting of the clothing. It will also have a more versatile apparel to choose
from and provide an overall cost advantage. Depending on the popularity of the company, prices
will be adjusted. Our concept is to multiply Aropostales current success with the proposal of
Exquisitque. Its inclusivity of a huge age range and versatility of style will be the renowned face
of this new brand.
Another part of Aropostales expansion includes the opening of LoveAero. LoveAero is
a new store that will sell undergarments for men and women who ages range from 13-45. We
will be selling lingerie for the women as well as boxers for men. In addition to those items, we
will also be selling any other necessities for men and women.
We have chosen Aerie, which is a branch of American Eagle, to serve as our model for
LoveAero. Not only is Aeries sales increasing quarterly, the company also has consistent
customers. Aerie sends out coupons and special offers to customers on their mailing list. This is a
great marketing strategy to attract customers. In addition to mailing special offers to customers,
Aerie also has incremental incentives throughout the year both in stores and online. These deals

consist of discounts such as $15 off every $100 spent or even $25 off for every $150 spent.
Customers like these kinds of deals because they are able to buy more for a price break or
discount. Though these marketing techniques may not seem beneficial to the company, they are
indeed. People shop at stores with offers like these, which increases a companys sales.
LoveAero not only will sell quality undergarments, it will also sell affordable
undergarments. Keeping in mind that the age group we are targeting is possibly going through a
rough financial time, we want to deliver what the customers want at the price they want. Also,
since the teen unemployment rate has more than doubled the national average, it has led to teens
having less money to spend. Below I have included a graph, which depicts the teen
unemployment rates and minimum wages from 2007-2013. Graphs like these are what we use
when pricing items.

Teen unemployment
rate

In addition to considering the social class, income and age of our customers, we have also
considered their lifestyles. Our products reflect the daily needs of our customers. Our intention is
to create products, which are long lasting and are of quality.
Looking at the company orientations towards the marketplace, we have considered all of
the concepts. The production concept consists of our inexpensive and readily available
undergarments. If a customer needs an item, which is not offered in store, we will make sure to
provide the customer with that item either through another store or by shipping the item directly
to the customer. Next, the product concept consists of our quality undergarments. We will ensure
to use only quality materials. After all, we want loyal customers who will return to our store time
and time again. In addition to advertising though our main company, Aropostales website we
will also advertise through promotions and word of mouth. We hope that customers who love our
products will tell their friends and family to shop at our store. This exemplifies the selling
concept. Since LoveAero is branched off of an already established store, Aropostale, it will have
a pool of customers.
Overall the expansion of Aropostale presents a very good foreseeable plan due to the
fact that it increases the amount of people its targeting with the two different stores with two
different products along with the original store as well as the fact that the prices ranges of all
three total stores vary which helps, again, different people buy different and varied products.
With stores such as Banana Republic and Aerie that will compete with the potential expansionary
stores of Aropostale, the stores must present a different aspect to the same style of products in
order for Aropostales subsidiaries to stand out. In order for more people to buy Aropostales
products the 4 Ps and the 3 Cs have to come into play and decide who, what, when and where
to advertise these products. The goal is to provide more opportunities, monetarily and

selectively, for the average and above average consumer to express themselves through the high
quality clothing provided by Aropostale.

Works Cited

http://www.aeropostale.com/category/index.jsp?categoryId=3534619
http://www.mindtools.com/pages/article/newSTR_94.htm
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEa_pDwrQfBE
http://www.marketwatch.com/story/gap-inc-reports-fourth-quarter-earnings-per-shareincrease-of-66-percent-2013-02-28