Analysis of Abercrombie&Fitch Casual Luxury Retail Company - Case Study Example

Abercrombie & Fitch case analysis Table of Contents Table of Contents 2 Introduction 4 About Abercrombie & Fitch 4 Products and Operations of Abercrombie & Fitch 4 Competitors and Markets of Abercrombie & Fitch 5 Market Opportunities of Abercrombie & Fitch 6 Target Market for Abercrombie & Fitch 6 Resources and Constraints of Abercrombie & Fitch 7 Information Systems use in Abercrombie & Fitch 7 Major obstacles for Growth in Abercrombie & Fitch 7 Future Strategic Planning and Implementation at Abercrombie & Fitch 8 Environmental Factors Influencing the Current Situation and Future of Abercrombie & Fitch 10 Future Business Strategy of Abercrombie & Fitch 10 Marketing 10 Competitive Issues 11 Technological Advantages 11 Internal Leaderships and Organizational Improvements 11 Conclusion 11 References 13 Introduction The paper aims to study the case of a casual luxury retail company, Abercrombie & Fitch. It would reflect on the different types of operational challenges faced by the company while tending to operate in the retail market. Effective recommendations are endeavored to be generated relating to different aspects to help augment the level of competitive business advantage for the company. About Abercrombie & Fitch Abercrombie & Fitch operates as an international retail in the fashion segment. The company sells products related to different categories like apparel, fragrance and other luxury items. Abercrombie & Fitch aims to create a niche market for its products which is termed as ‘Casual Luxury’. The retail company aims to create a strong brand image based on a dual mechanism. It tends to work both on the parameters of provocative communication, and also in developing an effective store experience for trendy and cool customers. Abercrombie & Fitch conducts its retail operations based on the incorporation of four different types of brands. Retail services are generated by Abercrombie & Fitch through operating based on retail stores in home country, United States and also through other international markets related to Canada, Europe and other Asian countries. Direct-to-Consumer experiences are generated by the company through the development of an online retail presence (Perrier, 2013). Products and Operations of Abercrombie & Fitch The operations of the retail company can be effectively analyzed along potential segments relating to its different brands, in-store experiences, direct-to-consumer, marketing and advertising, merchandising and distribution activities and also through effective information systems. Its premier brand, Abercrombie & Fitch reflects both trendy and causal luxury based collections. The collections reflected by this brand are both trendy and traditional based in nature. The kids’ brand of the company reflects a holistic product segment in terms of generating energetic and athletic product displays. Hollister as an effective brand for Abercrombie & Fitch reflects generation of cool products relating to beach wears. Finally, Gilly Hicks appears to be a trendy brand created to meet the needs of the stylish female customers. In terms of in-store operations, the company focuses on the generation of effective store atmospherics based on use of the right color, fragrance, and music and also needed customer services generated by its customer service associates. Direct-to-Consumer operations are carried out by the company in terms of creation of websites related to the different brands. Online retailing operations are carried out based on the different stores based regionally and internationally. Marketing and Branding operations of the company are conducted both on an in-store level and also through the use of social media and other online platforms. Merchandising, inventory and supply chain operations are carried out by the company based on the creation of an effective network of distribution centers, supplier bases and also based on the action of its different vendors (United States Securities and Exchange Commission , 2010). Competitors and Markets of Abercrombie & Fitch Abercrombie & Fitch tends to generate different types of retail products related to apparel, personal care and also accessories pertaining to women and kids in the retail market. The main competitor of Abercrombie & Fitch pertaining to the specialty retail industry is Gap. Other competitors relating to the discretionary product market relate to, Urban Outfiters (URBN), AEO or the American Eagle Outfitters and also the Buckle or the BKE (Forbes, 2012). Market Opportunities of Abercrombie & Fitch The luxury retail company trading in casual luxury products is observed to counter from potential supplies and inventory related problems while conducting its business in the United States retail market. Abercrombie & Fitch focusing on international expansion aimed to expand its retail operations based on an international market like China. The company is observed to have entered the retail market of China during 2011 in terms of carrying out its operation based on three initial stores. By the close of 2013, the company gained the potential of opening a total of five stores in China. The international market in China reflects growing opportunity in terms of rise of disposable income of the consumer profiles and also the growth in the middle class consumer segment. Moreover, the change in preference patterns of the Chinese consumers reflecting an interest in western brands is observed to largely contribute in generating greater market opportunity for expansion. Growing opportunities in the apparel market in China along the 2009 to 2012 period is reflected in terms of increase in $110 billion during 2009 to around $140 billion for 2012. Growth in internet shopping activities in the region is observed to largely encourage the development of Abercrombie & Fitch in the region (Trefis, 2014). Target Market for Abercrombie & Fitch The target market for the different brands of Abercrombie & Fitch reflects that, the company targets its products for consumers related to different age groups like children and teenagers. Abercrombie and Fitch brand tends to target its casual and luxury products for the teenager groups relating to colleges while the Hollister brand tends to generate products for the children communities. Relating to the Abercrombie brand, it tends to market products for the children consumers (Abercrombie and Fitch Co. , n.d.). Resources and Constraints of Abercrombie & Fitch Abercrombie & Fitch is observed to largely invest on the technological platform related to the development of digital marketing and e-commerce activities. Technological developments generated on the above platform are thus taken to help the company in gaining an international presence. The company is also observed to work based on an effective workforce reflecting needed diversity. Operating based on a diverse workforce contributes in understanding and meeting the needs of customers related to different regions (Lewis, 2014). Information Systems use in Abercrombie & Fitch The company works are based on the use of effective information systems pertaining to management of inventories, supply chain and sourcing activities and also related to merchandising and other financial reporting functions. This shows the effective use of information systems technology by the company. Major obstacles for Growth in Abercrombie & Fitch The emergence of the event of economic recession is observed to affect the operational activities and market growth for Abercrombie & Fitch. Emergence of economic recession is observed to potentially affect the sales and financial performance of the company. It is also observed that, the rise of economic recession also led to the laying off of staffs in the organization. Economic recession during 2008-09 periods is also observed to potentially reduce the retail sales of the company in the stated period. Changes in customer preferences and patterns in the target market for the company reflected decline in the sales for the luxury products marketed by Abercrombie & Fitch. The consumers reflected a change of interest in visiting H&M stores for purchasing of comparatively lower priced luxury merchandises. Similarly, the decline in the interest of the consumers relating to purchase of vintage and traditional wears is also observed to affect the growth of Abercrombie & Fitch (Darroch, 2014). In the same way, the existing business and retailing policies of Abercrombie & Fitch is also observed to affect the growth of the company in the target market. Firstly, the company focused on continuing with its branding and marketing activity based on the company logo thereby, enabling higher prices for the products. This contributed in loss of sales for the company in the larger target market. Secondly, the strategy of the company in potentially investing for generation of physical stores also led to reduction in market shares such that people reflected greater interest on online purchasing and digital marketing features. Thirdly, the company management of Abercrombie & Fitch reflects existence of internal conflict in transforming the image of the company as a fast-fashion retailer. Finally, the company management also reflects that, lack of effective knowledge relating to the demands and interests of the Generation Z consumers also counters a potential problem in generation of sales. The company management thus, reflects the need to understand the aspirations of the teenagers and children in the Generation Z category to help in generating needed growth in the sales of its products (Peterson, 2013). Future Strategic Planning and Implementation at Abercrombie & Fitch To regain its lost marketing and sales position, Abercrombie & Fitch’s management is observed to bring about strategic changes in its operational, marketing and promotional activities. The company is observed to generate applications for the mobile phones to help in conducting an effective survey of the changes in style and demand of the young teenage customers. Similarly, other mobile applications are strategized by the company to help in enhancing the parameter of customer loyalty. Further, the Hollister brand is being employed by Abercrombie & Fitch to largely help in transforming the image of the company to a fast-fashion brand. Generation of mobile application is conceptualized by the company to help in tracking the flow of inventory and also in generating effective customer services. The luxury retail company, to help in attracting a larger number of target customers, is also observed to generate an effective price mix of the products. This price mix would help the retail company gain larger penetration along the target consumer market in terms of gaining larger number of middle class consumers in addition to the niche premium customers (Johnson, 2014). Another potential retail strategy taken by Abercrombie & Fitch relates to the development of its online presence to generate its products for the teen customers. The company is also focusing on the enhancement of the sizes of the garments thereby, creating a larger appeal for customers other than the muscular type fits. Similarly, the company is also found to focus on being more responsive to changes in consumer demand by generating newer styles and also in the reduction of loud noises used in the store atmospherics. These parameters are observed to largely encourage the growth of consumers along its different retail stores (Rupp, 2014). Along with generating an effective modest image in the larger target market, Abercrombie & Fitch is also observed to bring about strategic changes in generating tighter controls on the operational costs while also focusing on the development of e-commerce. Potential investments are being planned by the company in terms of developing on the e-commerce platform while also generating effective control on the inventory stocking and reporting functions. Other strategies formulated by the company relate to the endeavor of the company to expand its market share to other international markets like China, Japan and United Arab Emirates. These strategies along with generation of greater focus of the company are taken to generate greater returns to the shareholders ,to help in enhancing the awareness of the company in the target market (FashionUnited , 2014). Environmental Factors Influencing the Current Situation and Future of Abercrombie & Fitch On the political and legal side it is observed that, alterations in the existing regulations and legislations relating to online trading activity and also related to safety of products and other labor regulations would vehemently affect the operations of Abercrombie & Fitch. Similarly, change of environmental regulations with greater focus on the reduction of greenhouse gases is also taken to affect its retail and logistics operations. Rise in the insurance costs relating to the products and services offered, are taken to increase the cost of operations for the company. Likewise, the disruption in the computer based operations in the company owing to the incident of virus attack would make the company loose business. On the economic front, emergence of issues like economic depression and also the reduction in the disposable income of the population affects the business of the company in world markets (United States Securities and Exchange Commission , 2010). Future Business Strategy of Abercrombie & Fitch Marketing On the marketing front, the company management needs to adequately focus on the use of social networking activities, website marketing and also the generation of blogs and forums to effectively communicate with the larger customers. Development of internet based applications, promotion and loyalty schemes would contribute in attracting larger number of teenage customers. Competitive Issues Fashion retailers like H&M and Forever 21 are observed to generate potential challenges to the retail company in terms of providing low cost alternatives to the consumers. Similarly, retail companies like Urban Outfitters are observed to generate creative and innovative products for the consumers. These issues create challenges for the company thereby, requiring the business to generate cheaper and newly designed products (Lutz, 2014). Technological Advantages Developing an e-commerce platform with the development of digital marketing activities, is taken to help the company in penetrating a larger consumer market. This would help in generating large scale awareness for the company and its products and customer services in the larger consumer market. Use of merchandising and inventory software would also contribute in tracking of inventory movement and thus, would help in meeting the objectives of fast fashion. Internal Leaderships and Organizational Improvements Internal leaderships and organizational improvements in the company relate to the effective inclusion of a diverse workforce through the generation of internal communication activities like training and consultation with staffs. This strategy would contribute in generating effective tolerance of workers for people relating to different religious, ethnic and cultural backgrounds. Conclusion Abercrombie & Fitch is required to revamp its brand image in terms of generating fashion and luxury products in a consumer responsive manner and also at lower prices. Greater investments made by the company relating to the development of e-commerce platform are also reflected to help in generating needed sophistication in the existing retail paradigm. Implementation of the above strategies through development of the technological base is taken to contribute in enhancing the level of competitive advantage of the company. References Abercrombie and Fitch Co. . (n.d.). Abercrombie and Fitch Co. . Retrieved October 22, 2014, from http://www2.cob.ilstu.edu/kahlgri/fil242/stock%20reporter%20project/ANF.pdf Darroch, J. (2014, September 2). Abercrombie & Fitch: A Sad Lesson In Branding. Retrieved October 22, 2014, from http://www.huffingtonpost.com/jenny-darroch/abercrombie-fitch-a-sad-l_b_5749650.html FashionUnited . (2014, March 5). Market nods to Abercrombie & Fitch turnaround plan. Retrieved October 22, 2014, from http://www.fashionunited.co.uk/fashion-news/fashion/market-nods-to-abercrombie-fitch-turnaround-plan-2014030520329 Forbes. (2012, November 5). Forbes Earnings Preview: Abercrombie & Fitch. Retrieved October 22, 2014, from http://www.forbes.com/sites/narrativescience/2012/05/11/forbes-earnings-preview-abercrombie-fitch-3/ Johnson, L. (2014, March 12). Abercrombie & Fitch aims to recoup losses with new loyalty, merchandising strategy. Retrieved October 22, 2014, from http://www.mobilecommercedaily.com/abercrombie-fitch-aims-to-recoup-losses-with-new-loyalty-merchandising-strategy Lewis, R. (2014, July 11). Abercrombie & Fitch’s chief diversity officer has quit. Retrieved October 22, 2014, from http://www.humanresourcesonline.net/abercrombie-fitchs-chief-diversity-officer-quit/ Lutz, A. (2014, January 28). Abercrombie & Fitchs New Board Desperately Needs To Fix 3 Problems. Retrieved October 22, 2014, from http://www.businessinsider.in/Abercrombie-Fitchs-New-Board-Desperately-Needs-To-Fix-3-Problems/articleshow/29509087.cms Perrier, M. (2013). Abercrombie & Fitch . Retrieved October 22, 2014, from http://fisher.osu.edu/supplements/10/9160/Stock%20Report%20Abercrombie%20%26%20Fitch%20-%20Martin%20Perrier.pdf Peterson, H. (2013, November 7). Four Signs That Abercrombie Is Completely Out Of Touch With Its Customers. Retrieved October 22, 2014, from Business Insider : http://www.businessinsider.com/abercrombie-is-out-of-touch-2013-11?IR=T Rupp, L. (2014, May 22). Modesty Is the New Abercrombie. Retrieved October 22, 2014, from http://www.businessweek.com/articles/2014-05-22/abercrombie-and-fitch-tries-to-win-teens-back-from-online-retail Trefis. (2014, April 30). Abercrombie & Fitch Plans To Add 100 Stores In China Over The Next Decade. Retrieved October 22, 2014, from http://www.trefis.com/stock/anf/articles/236214/marypublish-timelyabercrombie-fitch-plans-to-add-100-stores-in-china-over-the-next-decade/2014-04-30 United States Securities and Exchange Commission . (2010). Form 10-K. Washington, D.C. : United States Securities and Exchange Commission . Read More