Abercrombie & Fitch woke up this past week to unpleasant news: Its stock was down almost 13%; total store sales fell -10% and international store sales fell -26%. The trap they fell into is an all too familiar story. Once a business discovers a successful model they stick with it longer than they should because they are afraid to innovate and change. No one wants to mess with success, but that type of thinking can blind the leaders to the need to continuously reinvent the business to stay relevant. Now with their back against the wall, Abercrombie has to scramble to reconfigure and reimagine their store experience and value proposition for the hard-to- please teen crowd. No doubt the internal dialogue is tipping in favor of innovation to stabilize the decline.
Abercrombie and Fitch stores stand out in shopping malls with their shuttered windows, that is absent any merchandise, the darkly lit cavernous interior to shroud the teen from the light and the overwhelming smell of fragrance that wafts out the front door to attract the attention of the young noses passing by. The store experience is pure sensory overload to appeal to the teenager who comes to the store to purchase a “cool” brand woven into premium-priced clothing. That description of Abercrombie stores was as true five years ago as it is today. Unfortunately, not much has changed.
Like many companies, Abercrombie relied on overseas growth to make up for a slow down in the U.S. market. Store expansion into new markets creates strong growth initially for a business and results in less pressure to innovate and develop the core business, even when it had clearly turned soft. In the last week, Abercrombie announced they would close 180 stores by 2015, on top of the 70 U.S. stores that were shuttered last year.
In stories like this, it is easy to blame a business downturn on the economy. But competitor American Eagle posted a + 11% gain in this same period with same store sales + 9%. Abercrombie shows all the signs of a calcified business that lacks the foresight to realize it is time to reinvent their merchandise and store experience. The same striped Henley shirts and grey t-shirts are sold in the store season after season with no exceptional merchandise that would excite the teen to send photos and text about the cool new thing they found at Abercrombie. The cultural heat that is so important to teen fashion has gone cold. Interestingly, J. Crew stores announced this week that they are headed back to Asia, this time to China to woo the sophisticated young shopper. Their e-commerce sales are strong in the region, indicating a demand for the unique style and flair of J. Crew merchandise.
What should Abercrombie do? Turn on the lights, open the front windows and signal as fast as possible that some important changes are underway in the store. Changes to their merchandise and assortment will take longer, but changes in the store experience can be accomplished quickly. Innovating the store experience into something that teens will flock to (and pop open their wallets) is the formidable challenge before their leaders.
image credit: abercrombie&fitch
Donna Sturgess is the President and Co-founder of Buyology Inc and former Global Head of Innovation for GlaxoSmithKline. Her latest book is Eyeballs Out: How To Step Into Another World, Discover New Ideas, and Make Your Business Thrive.