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ABERCROMBIE & FITCH:
An Upscale Sporting Goods Retailer Becomes A Leader in Trendy Apparel
By: Alexandra Ryan Ahmad Dina - 0906585641 Andre Samuel Saut Bakara - 0906585673 Deni Rahmatsyah - 0906585793 Didit Raditya - 0906585811 Emalia - 0906499165
and has gone global. therefore A&F expanded the products to meet needs and wants different life stage. 212 Abercrombie. This acquisition gave its first touch by changing the slogan into “The Adventure Goes On”. A&F survived by catering to local tastes and preferences. All the way through history. Michael Jeffries. A&F was ranked as the 4th profitable (net income as percentage of sales) company in apparel retailers in 2006. It was about repositioned the company as a provider of youth apparel with specializing in the provision of outdoor clothing. OH. whether with the current and future condition. A&F gain an astonishing performance.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 2 Abercrombie & Fitch Competitive Strategy and Advantage in the Marketplace Overview Abercrombie & Fitch (A&F) is headquartered in New Albany.5 million. Currently. But a question was raised. It recognized to become the largest retailer apparel in the world. the brand name has expanded since its success. In 1988. the positive ones to be retained and gave a hit in expanded the variety. with a slogan “The Finest Sporting Goods Store in the World” was producing luxurious sporting goods and rugged apparel for affluent customer. the innovation was just adjusted with the war condition and consumed properly in the market. will the business keep sustain? . the company went for bankruptcy in the year of 1977 and a year later Oshman’s sporting goods bought Abercrombie for $1. 515 Hollister co. Study for the old company was conducted. Just like during the World War II. classic American men and women’s apparel. The name Abercrombie and Fitch originated in 1892. A&F did a good job with keeping up customer relationship and changing fashion. eliminating sporting goods and started introducing casual. Due to some internal and external problems. Under Jeffries leadership. the trends eventually go beyond age. The company hires the best looking employees to represent their store as brand representatives and dressing employees in their latest fashion and styles. The group markets under different stores: 356 Abercrombie & Fitch stores. 28 RUEHL and The newest brand 14 Gilly Hicks (Winthrop Corporation). The acknowledgeable CEO of A&F. In 1988 Limited acquired the company for $45 million and completely turned around and changed everything. The net profit is just keep going up and the company development retailers become emergent. However. the company decided to change its image to that of a Luxury lifestyle brand and expanding their retail store thought large market. able to make the store concept and strategy as the place that match with the fickle youthful needs and wants.
Case Analysis Transforming A&F’s Image The Abercrombie & Fitch (A&F) brand was established in 1892 and considered as luxury sporting goods retailer with conservative tastes that became well known as rugged and high-quality outdoor gear for affluent clients. Famous for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the expeditions of Admiral Byrd to the North and South Poles. It was also a place where individual in the community. After evaluated the business model. and reflecting this value through their product and marketing communication. A&F did a great job keeping up with customers and changing fashions. hunters. A&F goods were prominent for their durability and dependability.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 3 Problem Identification The challenges that would be faced by A&F in the future were to maintain its competitive advantage in which new entrant from US and abroad intent to imitate A&F strategies. This image was positioned A&F as expensive and exotic goods. 2. Some of values such as good qualities and legendary old product were retained. A&F was not just a place to purchase goods and apparel. In 1978 Oshman’s Sporting Goods bought A&F which at that time was struggling to develop a strong identity & experienced with recessions. Maintain their connectivity with their very dynamic target market. war-time troubles. The new management believed that A&F can change their initially image to adapt and keep up-to-date with styles for the 1980s. In 1992. changing ownership & legal battles. in 1988. After a few owners. As our group has concluded that the main competitive strength of A&F are their ability in extracting the values which their consumer can relate to. president and heads of royal family. Michael Jeffries was appointed as new CEO and began repositioning Abercrombie & Fitch as a more fashion-oriented casual apparel and classic American clothes business directed at 18 to 22 year-old male and female college students with a product assortment reflecting a youthful lifestyle based upon an East Coast heritage and Ivy League traditions by introducing new format. This acquisition became a turning point for A&F to build the new character of the brand. Anticipate the move of their rivals. bankruptcy. inventory shrinkage. including adventures. Through its history. Therefore. in answering this challenge A&F has to ensure that they are able to: 1. A&F’s slogan was changed from “the finest sporting goods store in the world” to “the adventure goes on”. . A&F was bought by Limited Inc.
• Though some goods may not be considered direct substitutes due to brand identification. one article of clothing becomes difficult to tell apart from a similarly looking article of clothing. economies of scale provide a significant advantage over the local stores. rivalry is moderate to high. there is a lack of drastically new innovative products that creates rivalry when firms are unable to differentiate their products in the industry. objective. The most powerful and widely used tool for assessing the strength of the industry’s competitive forces is the fiveforces model of competition1. and business model.000 stores worldwide and generated $16 billion revenue in 2005. The low growth in this industry also “makes it less attractive to new entrants”. The rivalry between competitors is intense and forces each company to reinvention itself to maintain efficiencies and inventory control. see Michael E. “How Competitive Forces Shape Strategy. 1 The five-forces model of competition is the creation of Professor Michael Porter of the Harvard Business School. Crew Group. A&F’s Industry and Competitive Environment Analysis Analyzing A&F’s industry and competitive environment begins with identifying the industry’s dominant economic characteristics. • In the apparel industry. From these three competitors. strategy. The industries characterized by rapid product innovation which required designer. further analysis should focus on the competitive dynamics of the industry. (AEOS). In the specialty retail industry. .Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 4 Before defining the A&F’s new format and competitive advantage that brought them became a leader in trendy apparel industry. once the name brand has been removed. The apparel industry is mainly comprised of several main rivals of equal size. the analysis starts by evaluating the external and internal environment factors which potentially affect A&F’s business situation and management’s decisions regarding to its long-term direction. For his original presentation of the model. 2. As a result of a mature apparel industry. Inc. GAP was the largest. merchandisers and marketer to know better what consumer want and also strong product innovation capabilities such as continuous product innovation is primarily a survival strategy in this industry. no. A&F had three main competitors. • The barriers to entry are relatively low as the cost to purchase and produce apparel is minimal.” Harvard Business Review 57. After gaining an understanding of the industry’s general economic characteristics. Porter. with 3. Gap Inc. The market size and growth rate of apparel industry is slightly big and growing quite fast as changes of lifestyles. (GAP) and J. American Eagle Outfitters Inc.
Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 5 • The suppliers also hold little power due to the company buys merchandise from numerous factories and suppliers around the globe. A&F enhanced their capabilities to sell the product through Web sites equipped with shopping-cart technologies. primarily located in South East Asia and South America. the next step is to determine the driving forces2 that might influenced in reshaping the industry landscape and altering competitive condition. • Consumers as buyers are willing to pay a premium price for perceived quality and “fashion recognition”. Once these competitive forces defined. “Essentials of Strategic Management: The Quest for Competitive Advantage” Second Edition. One would expect buyers to hold minimal power over their suppliers because of the fragmentation of the retail industry. Due to analysis above.”3 • Marketing innovation – using controversy as a free advertising such as publishing a provocative catalog photograph. Sometimes globalization becomes a strong driver to broaden its current market share. relaxed PJ's and beauty things. most of the collective impact of the five competitive forces is moderate to week. Moreover A&F also launched new men’s line. revealing clothes and racy slogans can alter the 2 Driving forces are the major underlying causes of change in industry and competitive conditions.wikipedia. thereby allowing retailers leverage in negotiating prices. • Emerging new Internet capabilities and applications – the ability to reach consumers via the internet gives buyers extraordinary ability to explore the product offerings from any brands and shop the market for the best value. it meant that the apparel industry is still competitively attractive in the sense that A&F can reasonably expect to earn good profits. Ezra Fitch. To do so. p 58 3 Gilly Hicks.org/wiki/Gilly_Hicks . velvet and leather for upscale segment and Gilly Hicks is a lifestyle brand specializing in women's “knickers from casual to sexy. but the pricing points tend to be very elastic. As known that A&F planned to open its first European store in London in 2007. featured with high-quality apparel made from cashmere. The potential driving forces for A&F in the apparel industry are as follows: • Increasing globalization – competition in apparel industry begins to shift from a regional focus to international. http://en. • Product innovation – creating wider product differentiation to attract more firsttime buyers has been a key driving force in apparel industry. A&F tried to introduce two or three new items in its stores every week.
FIGURE 1. the clothing store selling denim and active sportswear to men and women ages 24-40 and the other one is Aerie. To address this. Apparently young people purchase the product not just for the functionality but because it promotes a certain value that they can relate to. merchandiser and marketers visited college campuses once a month to talk to student and explore what they liked and how the spent their time. A&F has better positioning in term of fashion content and price compare to two main competitors. As shown in figure 1 below. a 4 A strategic group is a cluster of industry rivals that have similar competitive approaches and market positions. “Essentials of Strategic Management: The Quest for Competitive Advantage” Second Edition. This tool is useful for comparing the market positions of industry competitor. A&F need to reveal the market positions of industry competitor using strategic group mapping4. an intimate apparel sub-brand and stand-alone stores. one is Martin+Osa. action and announcement. attitudes and lifestyles – rising social issues & changing attitudes and lifestyles can be dominant to lead the industry change. After determining its driving forces. resource strengths and weaknesses and the thinking and leadership styles of their executive is valuable for predicting the strategic moves competitors are likely to make next. also planned to launch Madewell. J Crew. • Changing social concerns. COMPARATIVE MARKET POSITIONS OF SELECTED APPAREL RETAILERS5 The next analysis is competitive intelligence which scanning the rivals’ strategies. A&F need to anticipate that AEOS planned to launch two new store concept in 2006. Other competitor.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 6 competitive positions of rival firm and effectively attract attention of teenager and young adult who often respond positively to this kind of marketing strategy. p 62 5 Source: Goldman Sachs . Michael Jeffries made sure that A&F apparel reflected the lifestyles of college student by assigned team of designers.
the KSFs are appealing design and color combinations. Putting emphasis on a comfortable and positive work environment for their employees illustrates that they know what it takes to be successful (such as taking away the usual way of working. and replacing them with open work areas that promote team work).Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 7 lower price casual clothing store for women selling merchandise and preparing an initial public offering of common stock of $355 million. product attributes. Furthermore. even through in economic recession (strong financial performance). He like his employees works in a communal area with his staff members. A&F’s Resources and Competitive Strength Analysis A&F provide higher quality. A&F is a major status symbol in many high schools and colleges in America because of its higher price and fashionable look. higher priced items and focus mainly on clothing. Leading by example is another strong characteristic. including its collection of competitively valuable resources & capabilities to focus their competitive advantage on current market trends. A&F need to evaluate its internal situation. Following that. The final step in evaluating the industry and competitive environment is consolidating the above analyses to determine if the apparel industry offers strong prospect for attractive profits. whose population in US was growing and somewhat considered to be recession-proof. or intangible assets with the greatest impact on future success in the marketplace. The company has figured out what works for them as an organization using SWOT analysis. . A&F’s major competitive advantage is its brand name. a strong network or store concept and advertisements that effectively communicate value and the brand’s image. “Essentials of Strategic Management: The Quest for Competitive Advantage” Second Edition. cubicles and strict eight hour days. A&F need to define the industry’s key success factors (KSFs)6 which affect the ability to prosper in the marketplace. Based on that. Michael Jeffries is not held up in a stuffy office where is he is inaccessible. In the apparel industry. this apparel industry market is fundamentally attractive for A&F since they had an evitable market. It catered to teenagers. competitive capabilities. A&F provides healthy meals that help stimulate good ideas 6 Key success factors are the strategy elements. p 67. Strengths A&F has continually made a successful profit over the years. Most consumers are willing to pay extra for the Abercrombie name and style. low-cost manufacturing to achieve scale economies.
When a customer gets too comfortable with a certain name brand. a bag to hand out to customers with their purchase that they can use every time they make a purchase (such as “Go Green”.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 8 A&F knows that in order to be successful in selling a high priced product. Keeping it exciting. they could keep their current line. Spend a lot of energy figuring out ways of perfecting their brand without racially excluding customers and potential employees. may complete the look. This will attract a broader base of customers. A&F’s brands are mainly. In order to appeal to the mass. along with perfumes and hats. A&F has made it clear that they chose not to lower prices as it would cheapen the product. new and fun will ensure that the customer will always come back looking for more. More interest equates to more money. Creating a beach inspired footwear line. pants. “peace” theme). they have alienated particular groups that have expressed interest their brand. it becomes easy for them to venture out and buy from someone else. Weaknesses A&F has not done well in creating a culturally diverse atmosphere internally or externally. By desiring to remain exclusive. Expanding their current brands is always a way of staying competitive in today’s market. Overpriced and high cost of structure. save money and shop for bargains. the people who represent Abercrombie must believe in the brand itself. To maintain their customers and possibly gain more. sleep. shorts. Opportunities In light of the economy decreasing. It would be in A&F’s interest to branch out from the norm. and breathe Abercrombie. but add a line with a lesser price base. Now is the time for many to become conservative. A strong management team is the number one reason that Abercrombie and its brands are successful. They have been accused of racial profiling and discriminating against minorities that desire to work in their stores. people are not as willing to spend a large amount of money on clothes. Overall. skirts. Management is successful in continually creating a strong brand that will continue keep them in the lead for a specialized product. A&F can take advantage in creating a theme which is happening on t-shirt. polo shirts. Expand internationally by export or subsidiary Online shopping or E-commerce business to expanding their service lines . A&F could take advantage of the bargain hunter. They must eat.
Abercrombie and Fitch have four brands such as Hollister. fashion-conscious consumers with age ranging from elementary school to post-college.reflected youthful lifestyle of the East coast & Ivy League traditions): College students Abercrombie (1998): Age 7-14 with fashions similar to A&F line Hollister Company (2000 .e. Economic slowdown (cyclical economic changes) Rising cost of materials. relaxed PJ's and beauty things” and .inspired by lifestyle of New York City’s Greenwich Village): Post-college consumer at age 22-35 with more upscale and expensive casual sportswear.promoted the laid-back & California surf lifestyle): High school students with lower priced casual apparel.. Racial profiling. race. Gilly Hicks (2007 . attractive. gender. They were striving for a certain look and style. etc. By not being as diverse as many other clothing companies. The demographic segmentation of the industry includes segmentation by age. has also limited the type of clientele that frequents the stores. profession. education. it limits the potential income that the company could be earning. Targeting. Positioning) Analysis Segmentation Apparel is an already fragmented industry. sports preference. commodity prices Competition from other apparel players at the low & high end of the spectrum (i. A&F could stand the chance of losing business. Abercrombie and Gilly Hicks. JC) STP (Segmentation. which are served by four of their brands: A&F (1992 . It was mainly consisted of young white male and females with nice bodies. income level. AEOS. the market is segmented demographically and psycho graphically. Ruehl. The Psychographic segmentation includes segmentation by hobby. values. trendy apparel and leather goods. Targeting A&F targets are described as cool.inspired by the Australian theme of “Down Under”): A lifestyle brand specializing in women's “knickers from casual to sexy. A negative mark on one brand can possibly negatively affect all brands. personal care product and accessories Ruehl (2004 . GAP. sexual preference. beautiful hair and shapes that fit their tiny clothes. body profile.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 9 Threats Abercrombie & Fitch has been known for not being very diverse.
and their ability in serving the needs of their consumer. Furthermore. Standard Luxury apparel stores typically target customers in the highest income bracket who can afford to pay the highest prices for premium-quality merchandise. Models in the catalogs.and upper-middle class who desire to wear the latest fashions. magazines. The term used is for this type of retailer is a specialty retailer. Apparel retailers of “near luxury” or “inspirational” brands target customers from the middle. Finally. a love for outdoor and fun with friends. that is sensuality. A&F catered the needs of very niche market. Luxury (through the store concept and advertising) 4. Promotion & Communication The communication of A&F to their customer is translated into 4 main messages namely. being young adult. Positioning A&F aim to achieve the position as the coolest brand. Near Luxury vs. Uniqueness (through design & logos) 3. 1. 4P Analysis The main competitive strength of the A&F in maintaining their position in the industry relied heavily on their focus at the target market. website. The Abercrombie & Fitch person (through cutting or shape of clothes) 2. the brand with greatest quality. A&F promote the value they believe their target market can relate with.and lower-class customers with average incomes who purchase lower-priced merchandise and look for clearance sales. which in this market they aim to position themselves as a market leader.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 10 offers underwear and loungewear for women 18 and up. youthful lifestyle. and store posters appear to be in their early . the inspirational brand of college students. Gilly Hicks is officially labeled as “the Cheeky cousin of Abercrombie & Fitch”. but can not afford to pay premium. and the marketing strategies (marketing mix). Those values are communicated through their brand concept of “Casual Luxury”. Brand Positioning: Luxury vs. Exclusivity (through membership and promotional event) The most important aspects of the Abercrombie & Fitch person are the target age. luxury prices so they settle for these “near luxury” apparel brands such as Abercrombie & Fitch and Polo Ralph Lauren. standard-level apparel stores such as The Gap target middle. This is strategically done by continuously making effort to connect and get as close as possible to the consumer.
Place Design of outlets is luxurious. This is an effort to reinforce the inspirational lifestyles represented by the brands. luxury. Consumers that identified with messages of the A&F image including the look. In addition. go against convention. models. The firm believe “to win teens” loyalty. or brand representatives. Each detailed is comprehensively checked during his regular store visit. or because they feel connected to the life-style images that is portrayed in A&F ads. the in-store marketing. The company uses the visual presentation of the merchandise. you have to speak their language” This means consumers relate to models. A&F is known for their eagerness in being involved on controversy. teenagers and young adult were thought to respond positively to the move.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 11 twenties. which alluded to a higher class than other retail magazines. While adults tend to react negatively to the company provocative move. uniqueness. In channeling their message across to the target market. The build of an Abercrombie & Fitch person is another predominant message communicated through catalogs. magazines. and appeal emotionally to its youthful customer. part of their competitive strategy is to stir up controversy. the product. shopping bags. As the matter of fact. and the website. and become part of the elite club. The Company views the customer's in-store experience as the primary vehicle for communicating the spirit of each of the brands. in-store brand representatives. This concept of exclusivity is reinforced with club membership (Hollister’s Club Cali). The Abercrombie & Fitch magazines and catalogs also communicated messages of luxury. Some observers assume that A&F intentionally create controversy to draw attention in hope that this will bring shoppers to the outlet. fragrances and the sales associates. mannequins. and sell more products. consumers. so the models must be like the target audience. . store employees and in-store brand representatives appear to be in their late teens and early twenties.such as when they issued after-hours parties invitation with the new bands to the shoppers during thanksgiving. employees. This is possibly as an act of rebellion against the traditional values. The magazines were printed on higher quality linen paper. The Abercrombie & Fitch person is not overweight. eventually were persuaded to purchase the clothing. the youthfulness and the sensuality which they endorse. and some of the brand promotional event. posters. music. models used for advertising & promotional items were notably thin. gift cards. CEO Jefferies himself examine the model closely to make sure the right messages are communicated in all stores across the nation. Each outlet was designed in one of several prototypes which are created at company HQ.
The market contain buyer that willing to pay a price premium for the very finest items available. or their symbol the moose. This is also done through the product they launched. However they categorize their price range with respect to the product line and the market segment. With all of the competition in the apparel industry. whereas the usage of the moose symbol was on the more luxurious clothing such as button up shirts and cashmere sweaters. As have been highlighted above. A&F occupy differentiation-based focus strategies targeted at young & teenagers buyers. Product Products sold by Abercrombie & Fitch send messages of luxury. Abercrombie & Fitch products are also shaped to continue the message of thinness as the build of Abercrombie & Fitch person. and selling a T-Shirt which promote underage drinking. Abercrombie & Fitch clothing always had something to identify the person as wearing its product. the words Abercrombie. Management feels discounts would cheapen A&F brand. or A&F. All messages communicated a build of thin and toned bodies. . 7 A competitive strategy concern the specifics of management’s game plan for competing succescully and securing a competitive advantage over rivals. such as the signature stitch on the back pocket to jeans. women’s sizes were XS to L in shirts and 00 to 10 in pants and men’s clothing was sized S to XXL in shirts and 30x30 to 36x34 in pants. Abercrombie & Fitch. and sweatshirts. launch thong underwear for girls ages 10 and up with sexual phrases on the product. Competitive Strategy Analysis We have analyzed Abercrombie and Fitch strategies and performances in order to evaluate their sustainable competitive strategy7. These in turn convince consumers that wearing the product make a person more attractive. A&F clothing is not made in large sizes. selling a T-Shirt with racist remark on the shirt. Some of the controversy they create includes. “Essentials of Strategic Management: The Quest for Competitive Advantage” Second Edition. The usage of word logos like A&F tended to be on the more relaxed clothing such as tshirts. sweatpants. p 97. A&F has a tendency to create controversy. Abercrombie & Fitch strategy could be considered as a focus differentiation strategy.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 12 Price A&F are usually able to sell the products at premium price without necessity for regular discounts. it differentiate itself from all other competitors through offering carefully designed products and services to appeal to the unique preference and needs of their narrow (niche) target market which is men and women of ages ranging from 7 to 22.
sponsoring college events. A&F could emphasize on online shopping.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 13 Conclusion and Recommendation xxxxx Future direction. It is ok to make a brand in a particular style and fashion that will fit a certain body type. And for the short term. in the long term A&F should continuously look for more opportunities to invest in overseas for expanding into the European and Asian markets. With such a dynamic management team and the desire to the specialty apparel by storm. improve its customer service and review the choice of magazine were A&F places ads. they can figure out a way to remain exclusive without being insulting and hurtful. . re-evaluating the needs and preferences of its target market. but it should to still be available to anyone. It shouldn’t be marketed to anyone who feels as though they can fit that mold. Executives must come together in become the leader in diversity without compromising their goals. The brand should not only have models of one race and color or associates of one race and color.
albawaba.org/wiki/Abercrombie__Fitch http://www. Thompson. Rovenpor. Online Sources: http://www. Manhattan College.cfm/going_global http://www.articlesbase. Gamble and Arthur A. Essential of Strategic Management: The Quest for Competitive Advantage. “Essential of Strategic Management: The Quest for Competitive Advantage” Second Edition.Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 14 References 1. McGraw-Hill International Edition 2.wikipedia.com/wiki/Abercrombie_Fitch http://globalization.abercrombie.com/article.wikinvest.com/entrepreneurship-articles/situation-analysis-ofabercrombie-and-fitch-uk .com http://en. Jr. Janet L. McGraw-Hill International Edition 3. John E.com/aber622 http://www.abercrombie. Case 11 “Abercrombie & Fitch: An Upscale Sporting Goods Retailer Become a Leader in Trendy Apparel”.suite101..com/webapp/wcs/stores/servlet/home http://blogs.