Abercrombie & Fitch Co.: A Comprehensive Business Analysis Report

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Abercrombie & Fitch Co.

Table of content
The structure of the industry............................................................................................................3
Market details (value; share)...........................................................................................................3
Current trends and key drivers in the market...................................................................................4
The key drives in current trend:.......................................................................................................4
Future trends and key drivers in the market....................................................................................5
Porter 5 force analysis.....................................................................................................................6
Competitor analysis.........................................................................................................................7
Current strategic position and tactics (SWOT Analysis).................................................................8
The resources and capabilities of the firm and impact on the success............................................9
KPI index and Balanced Scorecard...............................................................................................10
Conclusion:....................................................................................................................................12
References......................................................................................................................................13

The structure of the industry
Abercrombie and Fitch Co. has emerged itself as one of the most well-known women’s and men
retail clothing brand in the year 2012. They began their brand as a major supplier of excursion
and sporting goods, selling camping equipment, guns and fishing rods (Otterbring et al 2018).
However, the 2 strong-willed partners Abercrombie and Fitch saw their company going in a
different category. Fitch wanted the brand to be executed in a retail clothing line whereas Fitch
wanted to keep the brand as a sports gear shop. Later, A&F described their brand as a retail
clothing line of luxury and casual clothes.
In 1907, Abercrombie resigned from the company, but Fitch continued to work with other
partners. By 1910 A&F became the very first company to sell women’s and men clothing. After
that, there was no turning back for A&F co. They began to take off in the retail clothing sector
by becoming one of the most popular brands. Iconic Figure like Admiral Richer Byrd, Amelia
Earhart, Gerald Ford and President Theodore Roosevelt wore clothing from A&F brand. In
1928, the company was sold to Otis L. Guernsey and James S. Cobb. Over the years A&F Co.
has refined its ways to do business in the apparel industry. The A&F Co. is listed in NYSE and
has a market capital of 852.17 M USD (Cameron et al. 2018).
Market details (value; share)
During the Great Depression period, it was thought that sales would become quite hard for A&F.
However, during 1939 A&F benched their mark as the “greatest sporting goods store in world”.
During that time the company had the most valuable and greatest collection of widest assortment

such as, firearms and fishing files which was not obtainable anywhere. The company gained a
net profit of US $682,894 in all-time record.
By 1960’s, the sales went high up to the staggering rate of US$ 16.5 million. In the year 1968,
company started their first sale, which gave an immense attraction to more than 90,000 people.
The products ranged from cannons, goatskins, boots, surfboards, leather baby elephants and
sledges were the most popular attraction among the people.
In the year 1977, company closed their doors due to bankruptcy, but Oshman’s sporting
company very soon bought the trademark in year 1978. Passing the ups and downs, the company
net sales were estimated to US$48 million and profits were increasing up to $1.5 million.
Current trends and key drivers in the market
Abercrombie and Fitch Co. have invested tons of amounts in their brand advertising and
representation to ensure that their customer loves their brand. Although, even in their ups and
down A&F always had a clear target that was on positioning itself it the mind of their customers.
But, they have not been able to do so. Well, in the early ’90s, A&F toped in the market as well as
in creating awareness of their store (King, 2016).
But in the current scenario, A& F has lost its ‘hip’ and ‘cool’ appeal’. Though the company is
doing well in turnovers but the same pace they had in early days does not seem to grow in
today’s time.
In fact, in the year 2014, the brand has even posted a severe loss. They have lost their premium
position because the people do not feel they are connected with the brand.

The key drives in current trend:
BCG matrix in their marketing strategy: When the brand was plotted in BCG matrix in the retail
industry, they were the star in all kind so trend. The main reason for their loss in market share
and trend is dropping for a few years, is because of their low market share. To maintain its
market share, it is advised to promote and to advertise a lot (Linford, 2019).
Distribution of marketing strategy: The A & F Co. has a distribution of more than 400 stores in
US alone. It also has stores in European Union and UK. A & F get majority of their revenue
from other nation apart then US due to their low market shares within US.
Brand equity: The brand equity of A&F is dropping over the years even if their branding
activities are spot on. The brand is trying to overhaul the complete portfolio of products and is
also eyeing for expansion to increase its brand value and overall presence in the market.
Future trends and key drivers in the market
The Abercrombie & Fitch Co. is struggling in current situation. Though, the future strategy of
this company is to invest in omnichannel and supply chain agility as their turnaround strategy. In
the second quarter, A&F Co. has reported a loss of $3.9 million and on sale $842 million. But,
for future, the company is making its strategy to make progress (Hirsch, 2012). The company’s
transformation initiatives to increase sale and to build their brand through 2020 is by:
 Continuing global store network:
The continued global store network optimisation includes the shutting down the poor
performing stores of A&F brand. Also, they are aiming to adopt the evolving role of store in
the online commerce stores.

 Investing in efficiency and supply chain speed:
Fashion is a hard term to be forecasted. But, the A&F Company is seeking to improve its
efficiency by leveraging its data analytics. The data analytics means to offer the right product
to the customer at the right price and at the right time. Not only this, the future strategy of
A&F Company is preparing to get the products ready on time to capture the sales eventually.
 Enhancing omnichannel and digital capabilities: By creating a world-class customer
experience and satisfaction the future strategy is to grow profitably around all the channels.
To do this, A&F Co, will invest $55 million this year to roll out their Omni channels and also
by including the IT systems and loyalty program.
Porter 5 force analysis
The porter 5 force analysis is a strategic management tool that analyses the industry and helps to
understand the underlying problems of profitability in any industry. The A&F co. Managers can
use the Porter 5 force analysis to know how the five competitive forces do influencing their
development strategy and profitable factors (Vredeveld et al. 2019).
The Abercrombie & Fitch Co. Porter Five (5) Forces Analysis:
The threats of new entrants
The new entrants in the apparel stores bring out new ways, innovation of doing things differently
and puts pressure on the A&F Co. by lowering down the price strategy, reducing the costs and by
providing customers with new value propositions. To cope out of this, A&F has to manage and
deal with all the challenges that can build an effective barrier to safeguard their competitive
edge.

Bargaining the power of suppliers
Most of the companies dealing in apparel stores buy their raw product from different suppliers.
In some cases, suppliers with dominant position may decrease the margins on A&F Co. so that
they can earn more (Walters, 2016). The powerful supplier uses its negotiation power that
extracts higher prices from the apparel stores. The overall impact of this high supplier bargaining
power has lowered the overall profit of A&F stores.
Threats of substitute service or products
When a new service or new product meets a similar customer needs in the market in different
ways, the profitability of an industry suffers. For example, if A&F store or any other apparel
stores are a substitute of clothing line it directly affects the value proposition of the industry
market deduct the same substitute products and service A&F managers can produce a unique line
of clothes where a customer can’t find at any other store.
Rivalry among the competitors
In cases where the rivalries among the existing industries are intense, it will eventually affect the
prices and the overall profit of industry. However, The Abercrombie & Fitch Co. operates in
competitive clothing stores industry. The competition level does take a huge toll on the long term
profitability of the organisation.
Competitor analysis
Abercrombie & Fitch Company competed with many brands such as Aeropostale, Victoria
Secret, Gap, American Eagle Outfitters and many other brands which targeted the younger
generation.

American eagle Outfitters: They are one of the strongest competitors of A&F which used their
marketing strategies against A&F Co. Though, A&F didn’t use any marketing strategy in history
to affect their industry. One of the man marketing tactics of American Eagle Outfitters included
was to place their service and products on television shows. It was a strategy because they fixed
a time slot so that when the advertisement is aired, it can be viewed by their target market.
Gap: Another major competitor for A&F Co. is Gap Inc. The company has grown its network all
around the globe by including 4 subsidiary brands that are: Piper lime, Old Navy, banana
republic and Athleta. This company’s main goal was to shut down all the apparel stores
domestically and expand their brand to become one of the top brands worldwide. They had the
same strategy that A&F Co. planned for its competitors.
Aeropostale Inc: This Company began themselves as a mall located a retailer of casual clothes
and accessories so that they can target the teenagers. The brand kept all the control over the
proprietary brands by sourcing, designing, selling and marketing their merchandise. Aeropostale
marked their name on the clothing line with promotions to increase their brand awareness (Ray,
2016).
According to the reports of A&F competitors, it has seen that A&F Co. has heavy-faced the
completion in the market by all these brands. However, in the second half of 2011, A&F Co. did
more than 19 per cent of sales than its highest competitor the American Eagle Outfitters.
Current strategic position and tactics (SWOT Analysis)
Like any other brand, the Abercrombie and Fitch have its current strategic position. Even after
this, the A&F Co. has a lot of potentials to expand its business in all the developing countries
with their resources and reputation. A&F has decided to take their business into market

penetration and expansion. Although, they have to decide whether they want to make their brand
into a massive failing brand or like an up to date brand.
Franchising their brand is another strategic position which A&F Co. can consider as it is a
respected brand in all around the world. They must leverage their brand equity to expand at high
rate just like Adidas. A&F can consider entering into the franchise world by increasing its base
on sales.
Advertising in developing countries can also be considered as one strategic plan by expanding
their business not only locally but also in developing countries. Well, continuing into the same
legacy to sale in just US won’t increase their equity power or profitability (Ter har, 2019).
As, A&F home ground is Us and if the sales figure is dropping day by day, then A&F must need
to get on the top of their game by conquering their lost market share soon.
The resources and capabilities of the firm and impact on the success
As we talked earlier, Abercrombie and Fitch is a youth-targeted brand for young people who
want to stay young and look good. Although, their major revenue generation from the US only.
Still, they are planning to expand their brand to offer different regions across the world. The
capabilities and resources the company has impacted the growth of their firm in the apparel
industry (Harper, 2016). Below are the listed resources and capabilities of a firm that has given a
major impact on its success rate.
 Global presence: A&F holds a stronghold within the US by having more than 400 stores
and an excellent presence in more than 1100 stores globally. Hence, the revenue
generation of this brand is excellent.

 Design: No brand can become a popular brand as A&F without any special focus on
designing. All the three sub-brands of A&f- Hollister, Abercrombie & Fitch and
Abercrombie and Fitch kids are well known for their designs. The designs of them are
quite loved among the youngsters and kids that give a high road on the success of A&F.
 Complete retail portfolio: A&F has a well-developed portfolio which can be expected
from any other popular brand. They have an immense number of products of women &
men, apparels, footwear, perfume, tee shirts and kids wear (Gopura, 2019).
 Excellent quality: Providing excellent quality and service is one of the critical elements
that a brand may call itself in which A&F aces. A&F has a dedicated team of managing
quality in their showrooms as well as proper inventory management by proving the
highest quality of product to its customers.
 Strong brand protection and building over the years: The brand A& F is well renowned
and has a strong heritage behind them. They have spent a lot of time, resources and
strategies to build themselves as a popular brand in bold advertising. Also, the brand has
a well-developed team that ensures that they are protected and counterfeiting at its
minimum (Kaminer, 2017).
KPI index and Balanced Scorecard
Business
perspectives
KPI Measures
Financials 1. Low revenue
2. Low
1. Increase in net profit
2. Revenue generated across

profitability the globe
Customer 1. More options on
clothing.
2. More preference
to customer’s
choice
1. Focusing on every age
group.
2. Focusing on designs.
Marketing
process
1. Fast delivery of
products
2. Better quality
information
3. Strategies for
competitors
1. Keep a check on
availability
2. Check on
manufactured products
3. Implementing against
growth strategies
Organisational
Capacity
1. Better products
2. Elimination of
substitute
3.Brand awareness
1. Enhancing the quality
2. Bring out unique
products
3. New marketing
strategies

Conclusion:
By analyzing the report of Abercrombie & Fitch Co. it can be easily understood that the present
scenario of this company is adversely impacting its profitability in the apparel industry.
Although, by implanting proper strategies they can change their trend by shifting to emerging
opportunities. By understanding the Porter 5 forces, the Abercrombie & Fitch Co. managers can
shape their future in their favour.
Although, Abercrombie and Fitch co. has defiantly marked their spot h in apparel industry even
though fighting from the ups and downs their future is set to be one the top of industry. Well to
make this a massive reality, A& F has to meet the competition to the highest especially in the
youth segment where they have to meet a specific demand according to the needs of market.
Well, to differentiate the brand from other A&F has to build their designs that reflect their style
and can differentiate their customers from other brands.
Naturally, as competition is so high, Abercrombie and Fitch Co. has to be high in front of their
competitors. This can only be done by bringing out the unique styles and trends in the market
also by compensating in rate. By being service oriented for the customers not just being product
oriented will help out the brand to pick up its pace in the market.