Abercrombie and Fitch: Brand Strategy, Controversy, and Market Position

History and Evolution

The rich history of Abercrombie and Fitch is more than four times older than the market it targets today. Founded in 1892, Abercrombie and Fitch originally manufactured clothes for the outdoorsman. Ernest Hemingway and Teddy Roosevelt were known to wear Abercrombie and Fitch clothing. The company began humbly, out of a small waterfront shop in New York City. The men responsible for the multi-million dollar business that exists today would be amazed to see how their venture developed. David Abercrombie, a true outdoorsman, offered a variety of gear catering to hunting, camping, and fishing. The store changed from Abercrombie & Co. to Abercrombie and Fitch when David met a lawyer named Ezra Fitch, who soon became his business partner.

Over time, the two men began to dispute the company's future direction. Abercrombie wished to remain in the niche market of selling to outdoorsmen, while Fitch dreamed of opening the store to the general public. The two never reached agreement, and David Abercrombie left the partnership in 1907. Fitch put his plan into action, transforming the store to serve everyone, both men and women. Rather than hiring traditional salesmen, Fitch hired outdoorsmen and revamped the store's image by placing a tent in the middle of the floor along with a real campfire. Inventory increased and sales flourished, in great part due to a new magazine the store published, featuring over 400 pages of outdoor clothing. By the early 1970s, Abercrombie and Fitch had become the largest sporting goods retailer in the world.

In 1977, Ezra Fitch retired from the company. Shortly thereafter, the company went bankrupt. However, the brand did not disappear. Abercrombie and Fitch was purchased by The Limited Inc., a parent company to trendy stores such as The Limited, Structure, and Express. This acquisition marked the beginning of a new era for the company.

Financial Performance and Market Analysis

Abercrombie and Fitch went public on September 26, 1996, at $16 per share. Historical performance indicates that A&F stock outperformed both the Dow Jones Industrial Average and the S&P 500. A&F reached an all-time high in the spring of 1999, when the stock was trading at over ninety-five dollars per share. In just under three years, an investor who purchased 200 shares at $16 each would have realized profits in excess of $15,000 if sold during that peak period. As of the writing of this paper, the stock was trading around eighteen dollars per share. Earnings growth over the past five years had been near thirty percent, and analysts predicted that earnings per share for the future would be around 18%, which was ahead of predictions for the industry and the sector.

Additionally, revenues were expected to reach $410 million for the year, up from $354 million the previous year, despite the failing economic condition of the retail industry. Sales were expected to grow almost sixteen percent during the fiscal year. Over the years, profit margin and revenues had remained steady for the company. Furthermore, the company boasted over eight hundred billion dollars in assets and a relatively small amount of liabilities.

Analysts expected good things from the company; A&F had been a mainstay in the retail industry. Even though profits from the upcoming holiday season were expected to be lower due to discretionary spending patterns and supply chain issues affecting specialty retailers, analysts believed the retailer would fare positively once the economy began to recover. Much of the dim outlook reflected skepticism about the country's political and economic future, which had little to do with the fundamentals of A&F itself. As Kurt Barnard, president of Barnard's Retail Consulting Group, stated: "Retail sales numbers reflect great consumer caution, to the point of being frightened about the economy and conditions in the world. After 43,000 people lost their jobs in the month of September, we are now dividing consumers into two groups: those about to lose their jobs and those who have lost jobs and can't find new ones." Abercrombie and Fitch, which catered to tweens, teens, and college students, would see numbers lower than desired until the parents and guardians of this group—who typically paid for these purchases—felt secure about the economy and their personal financial outlook.

Market Segmentation and Brand Strategy

Through the years, A&F sought to find its niche in the market. Following the acquisition by The Limited Inc., the company that once catered to the rugged outdoorsman began to reposition itself. Abercrombie and Fitch now marketed to college students, teens, and preteens. Additionally, the company attracted a significant portion of business from adults who were drawn to the image of youth and vitality that Abercrombie and Fitch clothing suggested.

The transformation of A&F accelerated in 1992 when the current management took hold of the company, headed by visionary CEO Michael Jeffries. Management wanted the products offered by Abercrombie and Fitch to be of the highest quality and reflect classic American style. The marketing strategies had proven to be a great boost to the company. By targeting college students—the epitome of youthfulness—the company also attracted younger children who strived to acquire the traits college students possessed and older adults who sought to feel youthful once more. While the company offered brands targeting tweens and teens, most marketing was aimed at college students, which in turn attracted a larger customer base.

The company had no plans to alter its marketing strategies despite criticism that some advertisements were sexually explicit and inappropriate for the target audience. The appeal of the company remained unhindered by allegations of racism and poor advertisements, though these topics would later become significant controversies.

Abercrombie and Fitch evolved its product offerings by serving subsets of its market base through a variety of brands. In the fourth quarter of 2001, amidst fears that an influx of teenagers purchasing Abercrombie wear would erode its most important customer base—college students—the company introduced Hollister stores in July 2000. Hollister was geared specifically toward the teen group who wanted to imitate the college crowd. To capture the teen market, which often had less discretionary funds than collegiate counterparts, Hollister stores sold items thirty percent less on average than traditional Abercrombie and Fitch stores. To differentiate Hollister from its parent company, the brand had its own design and merchandising team. Additionally, the brand relied mainly on word-of-mouth marketing, with many customers unaware that Abercrombie and Fitch was the parent company.

Abercrombie and Fitch also adapted to address the needs of younger children. abercrombie, another brand of A&F, served the 7-14 year-old market. The website featured not only clothing but also articles about things kids were interested in, as well as printable pictures, wallpaper, and screensavers. The site provided links to "cool" destinations such as ski camps, snowboarding, the NHL, and other things that young abercrombie customers found interesting.

Technology and E-Commerce

Abercrombie and Fitch seemed to have covered the market, targeting children barely out of diapers and attracting adult clientele well into their fifties. While the company boasted a roster of world-class managers, it also leveraged the latest technologies to its advantage.

In order to enhance the internet presence of the company, Abercrombie and Fitch enlisted IBM e-business executives to launch its online storefront. Up and running since July 1999, the site allowed customers the opportunity to shop online while also giving them a taste of the Abercrombie and Fitch lifestyle through downloadable MP3s, calendars, and desktop accessories. Abercrombie wanted to extend the reach of its popular A&F Quarterly magazine to the internet, using the same appeal that lured college students into physical stores to draw them to a virtual Abercrombie experience that would parallel reality.

Marketing, Advertising, and the 'Fitchness' Concept

Abercrombie's design team partnered with IBM consultants to turn this vision into reality, and the results proved stellar. The revamped A&F website was designed to look like pages torn out of the A&F Quarterly, reflecting the company's integrated approach to brand experience. Customers responded positively, as the site received millions of hits per day, demonstrating the effectiveness of this strategy.

Now that the target market of Abercrombie and Fitch had been identified, understanding how the company reached its audience became crucial. Abercrombie and Fitch relied heavily on print campaigns, with trendy magazines aimed at youthful readers frequently featuring Abercrombie and Fitch advertisements. The company also used the physical store itself to attract customers. The unique store design was designed to appeal to potential customers who happened to be walking by. This strategy explained why many A&F stores were located in shopping malls and strategically positioned around major college campuses.

Those who believed that A&F sold only clothes and accessories were mistaken. Abercrombie and Fitch did not simply sell clothes; it sold a lifestyle. The company's marketing approach could best be described as "atmospherics," where the company represented a way of life rather than just articles of clothing. The atmosphere that an A&F store conveyed was called "Fitchness." Fitchness was not just a look; it was an attitude, a psychological state, and a suggestion of belonging to a particular social and economic class of people. A&F provided people an entire way of defining their identities.

The key ingredients necessary to achieve Fitchness included the store itself, its employees, and the catalogue. All were fine-tuned to represent a particular image. The majority of Abercrombie and Fitch advertisements depicted pictures of good-looking men. Very few ads featured women, and those that did also included men. Much of the company's advertising was very sexual, depicting young women and men in intensively suggestive positions. Photographs were not the only way the company seemed to promote sexuality. A&F's Spring 2001 Quarterly featured an article from a reader seeking tips on games to play while naked, and A&F suggested Monopoly, Scrabble, Twister, hide-and-seek, tag, and touch football, noting that "Nudity can give a whole new meaning to your favorite childhood games."

Controversies and Public Backlash

Additionally, the catalogue contained a book list including titles such as The Story of O, a work of explicit content, and Imajica, described as sexually provocative. The catalogue also featured an interview with cultural critic Camille Paglia, in which she discussed the need for Americans to expand their cultural boundaries and explore bodily autonomy.

With Abercrombie's racy advertisements, the company became the target of much controversy and protest. Many parents were appalled at the sexually explicit advertisements targeting their children. Abercrombie ads were exactly the type of images that parents insisted had no place in campaigns targeting youth. Additional controversy arose over past catalogue issues depicting college-age or younger individuals kissing nude and fondling one another. Despite the uproar, the company expressed no regrets. A company spokesman was quoted as saying the content represented a "celebration of a youthful and spirited yet responsible lifestyle."

Earlier that year, the company rolled out a new line of thong underwear for teen girls in their abercrombie store, whose target market was children 7 to 14 years old. Company spokesperson stated about the skimpy underwear: "It's cute and fun and sweet." However, much of the public disagreed. One mother called the new product "disgusting," while another parent proclaimed that it was "Fredrick's of Hollywood for preteens and teenagers." Many parents echoed the same sentiment, claiming that Abercrombie had gone too far. The thongs were made to fit girls ages 10-16, but critics noted that the smallest size could fit girls younger than that. Abercrombie believed the thongs were simply the modern-day version of "Underoos."

Abercrombie and Fitch came under attack again when the company released a new T-shirt line featuring Asian Americans in April of that year. The T-shirts depicted cartoons with Asian features, with one shirt's caption reading "Wong Brothers Laundry Service—Two Wongs Can Make It White." Some Asian Americans and others were outraged at this depiction. Following protests by student groups, the company pulled the line from its stores, and the shirts were no longer offered for sale on the company's website. The company apologized for offending anyone but stated that it was never their intention and that all was in the name of fun, asserting that it poked fun at everyone and that Asians were not singled out.