Abercrombie & Fitch Case

Situation Analysis:

Abercrombie & Fitch (A&F) is a specialty retailer founded in 1891 by David T Abercrombie, originally an elite outfitter of sporting goods known for its expensive and exotic goods as well as for its affluent clientele.

A & F and similar retailers faced some business issues in 1900's. Early 1940, stores were low on inventory, commerce had been disrupted by the war effort, as it was difficult to import goods from abroad. A lack of manpower had overwhelmed the postal services and caused delays. Employee theft, shoplifting and bookkeeping errors in A&F resulted in inventory shrinkage. In 1976, A&F filed bankruptcy its difficulties were attributed to competition from mass marketers, the lack of professional managers and leadership turnover, high overhead costs and fewer customers who could afford its exotic, high priced items.

After several changes in ownership, it became a specialty apparel retailer catering to a teenage population. In 1992, Michael Jefferies became President and Chief executive of A&F, a new format was introduced, the chain began to carry casual classic American clothes for 20 years old men and women, it soon became the Limited's fastest growing division and the sales increased at a compounded annual rate of 40.3% from 1992 to 1996.

A&F saw a decline in customer traffic and sales, demographics began to shift from baby boom generation to older generation; competitors started targeting the older demographics, increase in competition from other department stores which started offering more fashionable and exclusive private labeled goods. A&F also generated lot of controversies; adults often reacted negatively to its catalogues, revealing clothes and racy slogans.

A&F catered to cool, attractive, fashion conscious consumers offering products to meet their needs through different life stages - from elementary school to post college. A&F saved money on promotion, relying frequently on word of mouth advertising, it also kept down its administrative expenses and negotiated lower fees from its suppliers and all these clearly worked for the retailer.

All A&F stores were designed in a specific model, it was able to have high levels of customer involvement, interaction and experience, evoke a shopper's curiosity to explore and experience the space, when customers walked into the store they were often greeted by a young, handsome salesperson wearing the latest fashion in casual attire and sales people were posted in every section. Loud music and sprays of men's cologne reinforced A&F's hip, trendy and 'All American' look encouraged teenagers to hang out and browse. It provided a sensual experience that appealed to shopper's sense of sight, smell and sound. Apparel was neatly folded and placed on long wooden tables. It created brand loyalty. It gave away gift cards,