12.182008

more power to ya, a&f

I was really pleased to read about apparel retailer abercrombie & fitch’s commitment to its brand in a recent LA Times article.

CEO Michael Jeffries told analysts during an earnings call, “We will use markdowns only to clear through seasonal product in a brand-positive way…It is clear to us that the short-term relief provided by the use of promotions is more than offset by the damage inflicted on the brand in the long-term.

I admire the company’s rejection of the temptation to let fear and market sentiment pull them down into the morass of apparel retailers that are dramatically slashing prices in a desperate attempt to maintain share,

It appears others are less courageous.  According to the article, A&F’s primary competitor American Eagle held a buy-one-get-one-50%-off sale on nearly everything in stores and online. Aeropostale Inc. posted a $10 off in-store coupon on its website and boasted markdowns of as much as 70% off select merchandise.

While such aggressive promotional tactics may generate short-term traffic, A&F is right to be concerned about their effects on the brand in the long term.  Some possible results:

  • Come the return to full-prices next year, some customers may bristle at paying a premium for products similar to those they saw priced so low just a month ago.
  • The category will become (more) commoditized — drawing so much attention to price causes customers to put more weight on the price side of the price:quality value equation.
  • Points for differentiating the brand may decline — after all, if “everyone” is running price promotions and you do too, then really, what makes you different from them?

Nonetheless some might call A&F’s strategy ill-advised at best, crazy at worst — particularly when their sales are so dismal.  But as a person who believes that a strong brand can ward off economic and competitive threats alike, I am optimistic about the chain’s future and look forward to seeing the results of their tenacity.

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