160-Is The Mojo Coming Back?
In early February, we did a blog on Abercrombie & Fitch and its Leader’s Trap (see blog Here). The company refused to lower its prices for fear of damaging its high-end, exclusive image. (See “Audio Tip #134: What are the Objectives of Our Pricing Policy?” on StrategyStreet.com.) The blog predicted that Abercrombie would have to lower its prices anyway.
In late May, we wrote a second blog on Abercrombie & Fitch and its Leader’s Trap (see blog Here). By then, the company had reported a first quarter loss and said that it would have to reduce its prices. We noted in that blog that companies who let their prices stay high for too long take a long time to recapture market share lost in a Leader’s Trap.
The story goes on. In the third quarter of 2009, Abercrombie same-store sales plunged 22%, the eighth consecutive period of sales declines. Profits dropped 39%. The company’s pricing, and some fashion slips, have cost the company dearly. The company has marked down items by 30% to 40%. It is also adding lower-priced clothing and some trendier styles in its stores.
Leader’s Trap Examples – StrategyStreet.com
The problem now is the company’s reputation for high prices. By falling into a Leader’s Trap, the company sent some erstwhile loyal customers to competitors such Aeropostale and American Eagle Outfitters. Many of these defecting customers have not come back yet. Some might never come back.
If prices are falling in a marketplace, even high-end, Performance Leader, competitors have to go along, or lose market share. For example, in the tough automobile industry, even BMW and Mercedes have had to offer price and financing incentives to keep sales going. (See “Audio Tip #142: Defensive Pricing Guidelines” on StrategyStreet.com.)
After clashing with one another and suffering grievously in the process, Abercrombie, Aeropostale, and American Eagle have diverged from one another though all face continuing intense competition.
Abercrombie went through a tough period of closing stores from 2010 through 2018. It began to rebrand itself, moving away from Its former sexualized advertising and stressing more customer service. It now operates 729 stores worldwide focusing on a market segment of 21+ years. Today it is a near luxury brand selling high quality and high-priced fashions.
Aeropostale went through bankruptcy in 2016. It was unable to move away from its pricing strategy of constant discounting. It emerged from bankruptcy after a bid from former vendors and private equity companies. By 2019 it had over 1000 worldwide stores targeting a consumer in the age range of 14 to 17.
American Eagle Outfitters today is classified as a “retro/vintage” retail chain focused on consumers around the age of 20.
All 3 companies maintain a solid online presence. Abercrombie and American Eagle enjoyed something over 13 million online visits in February 2022, with American Eagle leading Abercrombie with 5.38 pages per visit to Abercrombie’s 4.95. Aeropostale trailed both of these competitors by a wide margin.
While the 3 companies are less engaged with one another than they were 10 years ago, they all face intense competition from the newer, fast fashion competitors such as Zara, H & M and Forever 21. Each of the three companies has many alternatives to develop new products and services as they consider what their final customers expect of them as retailers. HERE is an explanation of the many concepts and examples of product innovation that are possible. You can use these innovation concepts and examples to brainstorm improvements for your own company.
HOW CAN THESE BLOGS HELP ME?
If you face a competitive marketplace, read these blogs. We wrote them to help you make better decisions on segments, products, prices and costs based on the experience of companies in over 85 competitive industries. Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 270 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we updated each of these blogs to describe what later took place. You can use these updated blogs to see how the Strategystreet system works and how it can lead you to better decisions.