A&F’s Prices Not Cool with Teens

Discussion
Apr 28, 2009

By George Anderson

In a RetailWire poll
back in December, 45 percent of respondents said that Abercrombie &
Fitch would negatively affect its brand equity if the retailer followed others
and began heavily discounting its goods. Only 14 percent believed that discounting
would help to increase its equity.

At the time,
many gave CEO Michael Jeffries, an attaboy for
sticking with A&F’s strategic plan. Mr. Jeffries had told analysts
last year, “Promotions are a short-term solution with dreadful long-term
effects.”

Today, A&F’s intent
to stay true to its mission seems a bit out of step with the shopping behavior
of its teenager and young adult customer base. According to a report by
Piper Jaffray, teens are expected to spend 14
percent less this spring than they did in 2008. Those that are spending
are more likely to choose chains that have cut prices such as Aéropostale,
American Eagle Outfitters and Hot Topic.

Chelsea Orcutt,
a senior at the Mount Saint Mary Academy near Buffalo, told The New
York Times
, “Labels are becoming less and less of a priority for
people throughout my school.”

Mindy Meads, president
of Aéropostale, said her chain had benefited in recent months
because it has “the right looks,” and “we’re very mom-friendly
when it comes to the wallet.”

Discussion Questions:
Is pricing the primary issue behind Abercrombie & Fitch’s current
struggles? What do you see as the current keys to success in the teen
and young adult apparel market?

Please practice The RetailWire Golden Rule when submitting your comments.

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16 Comments on "A&F’s Prices Not Cool with Teens"


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David Livingston
Guest
13 years 24 days ago

Pricing surely plays an important role here, as in every place else in the economy. Houses are stuck on the market because sellers have them priced too high, unable to come to grips with the fact that the value has fallen. The same in retail. Kids are becoming smarter shoppers and finally learning when their parents cannot afford to finance their luxury spending. I think a new generation of value shoppers is emerging.

I just got back from South America, from a country where the average family makes about one-third the income of the average US family. They get by just fine, but you can see all the wasteful spending they have eliminated, like paying extra to have the name of some company printed on the clothing.

Max Goldberg
Guest
13 years 24 days ago

Teens are being hit by the recession, just like their parents. But it’s the overall change in consumer attitudes away from higher priced vanity brands that is having the biggest impact and this has hurt AF. Once teens discovered that their personal popularity was not impacted if they wore clothes from less pricey stores, AF sales were headed down. Would promotion have lessened the impact, I’m not sure. AF is a vanity brand and right now, vanity is not in style.

Dick Seesel
Guest
13 years 24 days ago

When higher-end competitors like J.Crew and others are taking steps to be more value-oriented (adjusting their regular prices, running more in-store promotions), A&F sticks out like a sore thumb. It may be noble to stand for “brand integrity” by failing to offer cash-strapped customers better value, but A&F has made a couple of strategic missteps as a result.

First, they have allowed most of their competitors to gain market share at their expense. Second, they have undermined their own message by painting their merchandise content as “too expensive” in the consumer’s mind. Third, they have done a disservice to their own shareholders by sitting on their hands, allowing a comp-sales and clearance meltdown to occur.

Bob Phibbs
Guest
13 years 24 days ago

It’s a far leap to say it is all price. I find the clue in the comment, “even more dimly-lit upscale store.”

Maybe, maybe customers are tired of the whole shirtless soft porn angle presented in a dimly lit cave. Like maybe people are tired of having to go to the top of an IKEA and walk past every display just to get to lamps rather than pressure from discounters.

Drawing conclusions is easy when you take the “conventional wisdom” of discounting. I think the trend is “been there done that” more than saving a couple bucks here and there and anecdotal quips from a few.

Marc Gordon
Guest
Marc Gordon
13 years 24 days ago

Sow what do higher prices get me? A&F have a great name, and the quality is good, but what if I don’t care about the name? Based on the article, neither do others. And we all know that in this economy, quality need not be expensive.

Keeping prices stable is fine if you have a dedicated client base willing to pay those prices. Otherwise it may be time to cater to the masses.

They should also keep in mind that there’s lots of ways to reduce prices without devaluing your goods. But I charge for that information.

Gene Hoffman
Guest
Gene Hoffman
13 years 24 days ago

The teen crowd tends to favor the “right looks” in clothes, favorable prices and a lively contemporary store ambiance. AF has a sophisticated, semi-dark store presentation, “close-in” vs. “far-out” clothes that seem more suitable for moms than maidens(?)…and their non-discount prices aren’t teen-cool today.

angiretlwire dixon
Guest
angiretlwire dixon
13 years 24 days ago

Recently I’ve been seeing more middle & high school girls wearing “Hollister” & “Pink” splashed across their clothing. Perhaps the customers are just tired of the “Abercrombie” label they’ve been wearing since they were 9 yrs old.

It might be worthwhile for some of the Abercrombie locations to be converted to Hollister stores.

Kevin Sterneckert
Guest
13 years 24 days ago
On occasion there are articles that actually make me laugh. The respondents of the poll are clearly not the same group who frequent A&F. While I am sure promotions and other events will impact sales at A&F and customer expectations moving forward, A&F shoppers are similar to consumers in general. They are looking for value. Value may mean high quality merchandise at a fair price, it may mean pricing at lower than traditional levels. The key strategy that A&F should pursue relates right back to the consumer. What will motivate customers to buy or buy more? Surveys of retail analysts and industry experts will provide insight; however, these recommendations should not stand alone. If A&F customers want lower prices via promotions, or other vehicles then A&F will be well served to listen to their consumers. As much as the leadership believes in their strategy, the consumers will dictate if it will be successful. My recommendation is to focus significant attention on current and potential A&F consumers to better understand what they want in style, color,… Read more »
Don Delzell
Guest
Don Delzell
13 years 24 days ago
Success at retail, for apparel-dominated stores, has always been an alchemical mix of trend, brand perception, and pricing practices. The unfortunate reality is that the formula for those ingredients tends to be fluid, and right now, is heavily weighted toward price. At the core, I believe, of the A&F problem is the decay in brand perception. Always premium priced, A&F merchandise benefited from that position…in the reverse chic way of reinforcing the brand coolness by paying slightly more than market value for what was essentially a commodity. Subtle interpretations of highly accessible trends (the A&F positioning) do not play as well in recessionary times. As the one consumer quoted pointed out “labels don’t mean as much right now.” And that is true. Part of it is that aspirational marketing, the cornerstone for the type of brand A&F became, is not aligned with the current consumer consciousness. The majority of consumers are aspiring to live better or look like people who have perceived better lifestyles–they’re just looking to maintain the lifestyle they’ve got! Put that together… Read more »
Rick Myers
Guest
Rick Myers
13 years 24 days ago

Teens have always had limited income. I think what it comes down to is where do they go when they hit the mall doors? If ANF is more expensive, they hit American Eagle or Aeropostale first and have nothing left for ANF. Whereas before, they might have gone to AF first.

Marge Laney
Guest
13 years 24 days ago
Setting themselves apart as an aspirational brand has served Abercrombie well for years. Of course in these tough times consumer aspiration takes a back seat to survival in many cases. But should a brand like Abercrombie get caught up in the fray and slash prices? I don’t think so. The economy will rebound and it will be very hard for any non-discounter who has succumbed to price cutting during the downturn to reinstate regular pricing. And believe me, when things improve, teen opinions and allegiance can turn on a dime, returning the Abercrombies of the world to retail prominence once again. I do believe, however, that Abercrombie needs to rethink their value proposition. Many of us may not care for it, but their store’s dark, pub-like setting attracts teens and twenty-somethings and their clothes still appeal to a certain genre. Once inside, though, the experience falls short. Service is non-existent in many stores and inconsistent in most. It’s hard to pay full price when you feel like the people that work there couldn’t care less… Read more »
Doron Levy
Guest
Doron Levy
13 years 24 days ago

RetailWire should post some of the comments when this strategy was first discussed. Who would think that sales might soften if you don’t competitively price your merchandise? Brand equity is important but when your customers have limited spending power and you are competing for a shrinking pie, I don’t see any other choice but to compete on price.

AF would build bigger brand equity if they connected to their consumer. You can’t escape the laws of supply and demand. I think I even saw reduced financing at a local Bentley dealership. Bentleys are still bling.

Lee Peterson
Guest
13 years 24 days ago
Let me remind other commentators above of a famous quote from Henry Ford: “If I’d have given my customers what they wanted, I’d have given them a faster horse.” Point is, A&F and others like them LEAD the customer and that’s what makes them so great. They lead in store environment, product, music, graphics, magalogs, fake controversy (P.R.) and brand equity. They didn’t ask their customers if they wanted louder music and hot graphics, they just did it! And that’s why they’re THE premium youth brand today, and why we’re talking about them now. I don’t hear a conversation about American Eagle anymore even though their business is way off and they’re discounting to boot! I heard an A&F exec say the other day, “we’re sticking with our premium brand strategy, and we’re paying for it.” – right! That’s called LONG RANGE THINKING . . . why “sell” the brand name for a lousy blip in the economy??? There’s more at stake here than a couple of months’ comp sales. Stay the course, Mike Jeffries!… Read more »
Sid Raisch
Guest
Sid Raisch
13 years 24 days ago

I absolutely cannot believe the lack of support for ONE premium brand to remain in the adolescent clothing market space, or in almost any space. AF should hunker down as needed to keep this position. They have other brands for the other strata. Get it?

Here’s a good article in Business Week – An EXPERTS Guide to Discounting

Tim Henderson
Guest
Tim Henderson
13 years 24 days ago
Pricing isn’t the entire problem at A&F, but it is a big factor given the severity of the recession and how it has impacted consumer spending and shopping behaviors. What happened at A&F is that, prior to the recession and over a period of many years, the chain created a brand that, via the shopping experience and products, signaled to the targeted younger consumer that “This is a brand you can trust, a brand that understands your lifestyle, how you live and what you want.” But when A&F failed to create any offering to resonate with a changed recession shopper, the chain broke that trust. Essentially, they said to their consumer that “A&F no longer understands your lifestyle.” Trust has always been important in retailing, but I think it will be even more important going forward. Those brands that are currently helping consumers get through the recession are positioning themselves well for the post-recession. Trust can be won and lost in degrees. A&F lost a degree of trust, and it will hard to win it… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
13 years 23 days ago
I wrote back in December that sooner or later A&F would have to break price to move through inventory that was clearly backing up. It turns out I was wrong. I didn’t fully anticipate that the impact would be far more significant than inventory merely backing up. Certainly, A&F hasn’t responded to the new realities by improving the value they’re offering their customers, and their customers have responded accordingly. At the time, A&F maintained that they were focused primarily on maintaining their brand (read: pricing) integrity. But at what cost? It seems to me that A&F’s brand equity now has added a new component – arrogance. It may be that their sales have tanked because their merchandise suddenly turned sour, but I doubt it. When the economy went off the cliff and their customers looked to them to respond, as the rest of the retail world was doing, A&F turned their back on them instead. Nobody liked the idea of having to break price in the 4th quarter, and everybody now is looking for ways… Read more »
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