A recent article in the WSJ (“Abercrombie Fights Discounting Tide”) reported that clothing retailer Abercrombie & Fitch Co. was willing to accept lower sales volumes in order to protect profit margins and support their brand reputation. Abercrombie “has refused to join the rush to discount. And it says under no conditions will it reduce its prices for customers any more than usual.” Last month Chairman and CEO Michael Jeffries told analysts “We hear your concerns, but promotions are a short-term solution with dreadful long-term effects. Marking down clothes now could lead to the brand being seen as something cheap.” General counsel David Cupps added “We’re not going to follow the promotional pied piper.”
From a business perspective I appreciate and understand Abercrombie’s longer term focus on profitability and brand differentiation. The challenge is the current economy which is conditioning consumers to expect steep discounts as many retailers have cut pricing and now emphasize value instead of design. So far, Abercrombie has differentiated itself from its competitors by delivering what they feel is a unique atmosphere in their mall stores which feature dark, night-club lighting, along with racy ads where the women are young and men go topless. However, the article also states that the store’s image isn’t enough to lure Megan Tysoe, 20, who says she and her friends skip Abercrombie for cheaper chains like Forever 21 and H&M. Anecdotally, I can report that my children, ages 18, 21 and 25 have remarked that Abercrombie’s atmosphere isn’t particularly unique and have also been shopping at rival stores in order to stretch their hard earned money.
Do you think Abercrombie will be able to maintain their current strategy or will they eventually capitulate on discounting? When I consider the current economy through the eyes of their target market I’m not confident night-club lighting, loud pulsating music and racy posters will be enough to sustain a customer experience that justifies full-price. But that’s just me.