Compare and contrast Abercrombie & Fitch and the Gap – company overview

Abercrombie & Fitch and the Gap are premier men's and women's clothing retailers in the United States and around the world. Both companies possess long histories of success and have their fair share of failures. I will compare and contrast how each company has their own distinct characteristics that set it apart from the other, which allows each of company to target specific markets. Via my presentation, I intend to analyze for the reader how each company gains their customers through advertising, target markets, brand segmenting, and pricing strategies, so that the reader may gain a better understanding of each respective company. Marketing the Brands Abercrombie & Fitch Gap Target Market 18-24 year old segment General Appeal for whole family Advertising Images Very sexual, Young, All American Multi-cultural, Brand Segments Abercrombie & Fitch , Hollister, Abercrombie kids Gap Stores, Old Navy, Banana Republic Pricing Strategy Moderate Value to Moderate Chart 1 Criterion for Evaluation Abercrombie & Fitch Abercrombie & Fitch is a leading specialty retailer encompassing three distinct product segments: Abercrombie & Fitch, abercrombie kids and Hollister Co. The company focuses on providing high-quality merchandise that compliments the casual, classic American life style. The brand was established in 1892, and sold under the name David T. Abercrombie Co., a small waterfront shop in downtown New York City owned by David Abercrombie. Abercrombie, born and raised in Baltimore Maryland, was a true outdoorsman; as well as an inventor and an ingenious tent and rucksack designer. His love of the great outdoors inspired him to begin Abercrombie & Co., a shop dedicated to selling only the highest quality camping, fishing and hunting gear. His clientele consisted mostly of professional hunters, explorers and trappers, as well as a man named Ezra Fitch. Ezra Fitch was a successful lawyer in Kingston, New York, who loved to spend his free time hiking the Adirondacks and fishing in the Catskills. In search of exceptional outdoor gear, he had come to rely upon David Abercrombie's shop and became one of its most devoted customers. Fitch was so devoted to the brand that in 1900 he convinced Abercrombie to let him buy into the business and become a partner. By 1904, the store was incorporated and the name was officially changed to Abercrombie & Fitch. The store changed locations at this time moving from the waterfront to downtown Broadway, in the heart of New York City. David Abercrombie and Ezra Fitch were both stubborn, hot tempered men, who held vastly different views about the future of their business. Abercrombie was more conservative, he was content how the store was, selling professional gear to professional outdoorsmen. On the other hand, Fitch was more of a visionary; he believed that the two should take the business and expand, selling the â€Å"outdoorsmen† way of life to the general public. The two partners could never come to a conclusion about their business, inevitably the partnership came to an end, and David Abercrombie resigned in 1907 (www.yahooshopping.com). Under the sole leadership of Ezra Fitch the store's focus was expansion. Fitch decided to change the shop so that it would not be an ordinary sporting goods shop, he was determined that the store have an outdoor feeling. Through his imagination and creativity he set up a shop where stock was not hidden behind glass, instead it was displayed as if in use. Displays were set up to feel as if the customer were in the middle of the Adirondacks, with a campfire blazing in one corner and an experienced guide in attendance. The clerks hired by Fitch were not professional salesman, but true sportsmen who listened and talked with the customer, and who sold the products only on the customers' insistence. By 1913, the store moved again, this time to a more fashionable and easily accessible midtown address, off Fifth Avenue. At this time the store expanded its inventory to include sport clothing, becoming the first store in New York to supply such clothing to men and women. Fitch, shortly after Abercrombie's resignation, decided to begin selling merchandise through a catalog. This catalog featured 456 pages of outdoor gear and clothing as well as camping, hunting and fishing advice to over 50,000 prospective customers around the world. Orders started coming in across the globe, thus bringing international status to the store. As the store continued to expand, it needed more and more space to occupy its increasing inventory and product lines. By 1917, Abercrombie & Fitch moved to Madison Avenue and 45th Street, where it occupied an entire twelve story building. At this time A&F, had become the largest and most impressive sporting goods store in the world ( www.Yahooshopping.com). Both the inside and the outside of the store were amazing, a sign proclaiming â€Å"Where the Blazed Trial Crosses the Boulevard†, was placed in front of the shop and a log cabin was built on the roof, which Fitch used as his townhouse. Next to the cabin he had a casting pool installed where serious fishermen could sample the store's collection of rods and flies while in the basement he set up an armored rifle range for hunters. Fitch capitalized on all of his innovative ideas, a golf school was set up, a floor dedicated solely to completely set-up camps, and a dog and cat kennel as well. Not wanting to miss any opportunity to grow, Fitch decided to capture the more exotic sporting goods equipment; hot air balloons, yachting pennants, portable trampolines, treadmills for exercising dogs, throwing knives, and everything a person could possibly need for falconry, were brought into the store. This made Abercrombie & Fitch a true sportsmen's haven (Hoover's 10-15). Not only did Abercrombie & Fitch outfit the general publics' outdoor needs, it outfitted many great hunting and exploration expeditions, such as Theodore Roosevelt's trips to the Africa and the Amazon and Robert Peary's expedition to the North Pole. The famous clientele did not stop with these two men, Ernest Hemingway brought his guns there, Presidents Hoover and Eisenhower relieved on A&F for the best fishing equipment. Other famous clientele included Amelia Earhart, Presidents Taft, Harding and Kennedy, the Duke of Windsor, Bing Crosby, Howard Hughes, Katherine Hepburn, Greta Garbo and Clark Gable. After twenty four years creating and expanding Abercrombie & Fitch, Ezra Fitch decided to retire from the business to enjoy the outdoors life. When Fitch retired the store continued to grow, with stores opening up in Chicago and San Francisco. But by the late 1960's the store begin to falter and went bankrupt in 1977. A Houston, Texas based company, Oshman's Sporting Goods, brought the company but business was not good. The company eventually sold it to The Limited Inc, in 1988, which repositioned the company into a more fashion-oriented casual apparel business with around 25 stores. Michael Jeffries, the current CEO of Abercrombie& Fitch, took over the company in 1992 and transformed the still money losing chain into an outfitter for college students. He micromanaged the company, issuing a 29 page handbook on everything from how A&F salespeople must look to exactly how many sweaters can be placed in a stack. This strategy worked and the company began to see profits in fiscal year 1995. The company went public in 1996 with more than 110 stores (Hoovers, 1-5). Today, Abercrombie & Fitch has been repositioned as a lifestyle brand, targeted at college students and is focused on high quality casual apparel in a classic American style. It targets preppy college students and makes them feel at home in its stores by hiring a college aged sales staff and decorating its stores with posters of twenty-something models. A&F's image as the clothier for a social elite class has, in some circles, earned its clientele the nickname â€Å"Aber-Snobbies†. The concept behind targeting the college age student is that by doing so Abercrombie & Fitch will attain a much broader customer base. â€Å"The younger high school age children aspire to be college kids. And then if you are targeting a young, active lifestyle that attracts older customers as well, people want to think of themselves as active and young.† Seth Johnson, Executive Vice President and COO of Abercrombie & Fitch. The Abercrombie & Fitch lifestyle is portrayed not only through company management, but also through the celebrities that patronize the brand. Many high profile celebrities wear A&F, thus giving free advertisement to the brand. These contemporary trendsetters, in terms of sports personalities, actors, actresses and musicians wear the Abercrombie label and thus people see these trends and want to become a part of them. Since the retail outlets are easily accessible in major malls in every state, these â€Å"trendy† and â€Å"luxurious† are now readily available to common folk, at a premium market price. Abercrombie & Fitch sells the lifestyle across three distinct brands: Abercrombie & Fitch, abercrombie and Hollister. Currently there are over 597 stores throughout the United States across the three brands, and this number is increasing, in 2002 alone the company opened 112 new stores. Each brand is geared to a different age set, this way as the individual grows up, Abercrombie & Fitch is there to clothe all of the stages. The children's store, abercrombie kids (with a lower case A) was introduced in 1997 and targets the age group of 7-14 year olds. Today there are over 170 abercrombie stores located in malls throughout the United States. The newest concept, Hollister, is based on the West Coast lifestyle and is geared toward the high school age, 14-17 years old. It is also priced significantly less than its parent store, Abercrombie & Fitch. Introduced in July of 2000, Hollister already has 129 stores and Abercrombie & Fitch plans to open at least 70 more stores in the next year. In 2002, Hollister improved its sales productivity and gross margin, and the business is now making a solid profit contribution. Hollister is doing so well that projections indicate Hollister to be a 600-800 store business. As the individual becomes ready for college, Abercrombie & Fitch is there. Today the namesake operates 352 stores across the United States, gearing its brands, as mentioned above to the college age set, 18 years and older. Through the use of three separate brands, Abercrombie & Fitch is able to smoothly transfer brand loyalty and retain customers of all ages. Abercrombie & Fitch stores are placed amongst high end trendy stores, with established brand names. It would be unusual to find an Abercrombie store nestled in a far away corner of a mall, next to a food court. Typically it is located in a high customer traffic area, around other designer stores which also serve to enhance its reputation and face value. Placing its stores in these key areas brings Abercrombie & Fitch the exposure and type of customer it is targeting. Abercrombie & Fitch not only sells through its 597 stores, but also via the internet at www.abercrombie.com, as well as the A&F Quarterly. The internet and the A&F Quarterly made up 4.7% of 2002 net sales and have steadily been increasing since the introduction of the two sales mediums (A&F Annual Report, 6). The online experience for Abercrombie & Fitch not only offers e-commerce, but provides entertainment features that seek to mimic virtual store shopping. The website includes downloadable features including wallpaper and photos that can be found in retail stores as well as the ability to download songs that are heard in the stores. The online changing room allows for mixing and matching throughout the store without the hassle of real fitting rooms, hangers and lines. As far as payment is concerned, checkout is hassle free by using the A&F credit card or any variety of credit cards. Delivery is as efficient as payment, since teaming up with UPS; orders can be processed and delivered within 24 hours. The internet has proved an important medium for gaining and retaining customers for Abercrombie & Fitch, coupled with the A&F Quarterly, combined sales will steadily grow and become a significant amount of total sales for the three brands over the next ten years (A& F Annual Report, 8-11). The Company's catalogue, the A&F Quarterly, appeared in late 1997, and became an immediate success as a marketing tool. The first catalogue â€Å"Naughty or Nice† Christmas was so popular that sales rose by 27% (www.Youthtools.com). A&F sells around 300,000 copies a year charging around seven dollars an issue, the company is able to make a sale even if the customer only looks at the catalogue, which is also considered to be a magazine. The Quarterly is a mixture of feature articles, pages displaying the product and page upon page of nearly naked twentysomethings photographed by the famed photographer Bruce Weber. â€Å"Much like Vogue and GQ, the Quarterly serves as a means of aspirational and inspirational living for young men and women all over the country† (Johnson, 4). The company has created quite a stir with the introduction of the catalog as a marketing medium, when the Quarterly comes to circulation four times a year, it usually becomes the talk of parents, Religious Groups, the news media etc., bringing more attention to Abercrombie & Fitch. The company has found a way to combat this negative image, by only allowing persons over the age of 18 to purchase the magazine as well as producing a â€Å"cleaner† catalogue. This â€Å"cleaner†, free catalogue only shows the clothing in a straightforward manner, minus the photography of Bruce Weber and the articles. Abercrombie & Fitch uses both catalogs to gain customers and show the â€Å"lifestyle† through its models. â€Å"This publication is meant to be the voice of the American youth, a chronicle of the college experience. It conveys the image of the brand – it is sexy and beautiful and healthy and energetic†- Hampton Carney A&F spokesman (Nolan, 2). Spring Catalogue Cover 2002 Abercrombie & Fitch understands and is able to target its specific markets through a variety of ways. The company sends out around 30 staffers each month to visit college campuses to chat up students about what they play, wear, listen to and read, whereas store managers visit fraternities and sororities to recruit â€Å"brand representatives†, who work as few as five hours a week. These brand representatives, must all have the all American look, blond, blue-eyed and preppy, pervasive in its stores, catalogues and websites. â€Å"Brand representatives are ambassadors to the brand, we want to hire brand reps that will represent the Abercrombie & Fitch brand with natural classic American style, look great while exhibiting individuality, project the brand and themselves with energy and enthusiasm, and make the store a warm, inviting place that provides a social experience for the customer†- Tom Lennox A&F Communication Director (Greenhouse, 2). Abercrombie & Fitch is a lifestyle brand; it is targeted in such a way as to make people want to belong to it and show loyalty to the brand. â€Å"A&F shrewdly understands that teens want to belong, and therefore has captured their dollars by making sure they want to belong to the beautiful, exclusive world that the Abercrombie image projects† (www.youthtools.com). By continuously pursuing this marketing strategy it is clear to see that Abercrombie & Fitch will be in the marketplace for a long time. GAP Inc. Gap Inc. is a leading international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic and Old Navy brand names. The company's stores aim to offer a shopper-friendly environment with an assortment of casual apparel and accessories that emphasize style, quality and good value (www.Gap.com). Gap Inc. was founded in 1969 by Donald Fisher and his wife Doris. The couple named their store after the â€Å"generation gap† and concentrated on selling Levi's jeans. When Gap first opened its doors it was unique and new. It prided itself in having the â€Å"individual style†. At this time the Gap's hottest seller was its â€Å"basic look†, which consisted of its signature blue jeans and white cotton t-shirts. The first store was opened near what is today San Francisco State University and the second store was opened in San Jose, California, by the end of 1970 there were six Gap stores. The Gap went public six years later (Hoovers, 1). In the beginning the Fishers catered almost exclusively to teenagers, but in the 1970s they expanded into activewear that would appeal to a larger spectrum of customers. Nevertheless, by the early 1980s the Gap, which had grown to about 500 stores, was still dependent upon teenagers but less dependent on Levi jeans, because of its growing emphasis on private label makers (Levy, 1-3). In a 1983 effort to revamp the company's image, Donald Fisher hired Mickey Drexler, a former president of Ann Taylor as the Gap's new president. Drexler changed the old clothing lines of plain blue jeans and white t-shirts so as to concentrate on sturdy brightly colored cotton clothing. He also consolidated the stores' many private clothing labels in to the Gap brand. Lastly, Drexler replaced circular clothing racks with white shelving so clothing could be neatly stacked and displayed. During this time Gap Inc. bought Banana Republic, one its three distinct brands the company owns. At this time the brand was a unique chain of jungle -themed stores that sold safari clothing. Gap expanded the chain, which enjoyed tremendous success in the mid 1980s but slumped after the novelty of the stores wore off late in the decade. To counter this slump, Drexler introduced a broader range of higher priced clothing and got rid of the safari lines in 1988. By 1990 Banana Republic was again profitable. In 1985, the first GapKids opened in 1985 after Drexler could not find clothing that he liked for his son. During the late 1980s and early 1990s, the company grew rapidly, opening its first stores in Canada and the UK. In 1990 it introduced babyGap in 25 GapKids stores, featuring miniature versions of its GapKids line. Also during this time the Gap announced it would no longer sell Levi Jeans and would sell nothing but private label items (Hoover's, 2-8). During the early 1990s earnings fell because of Gap division losses brought on by low margins and high rents. The company rebounded by opening Old Navy Clothing Co., named after a bar Drexler saw in Paris. The company also opened two Banana Republic stores outside the United States in Canada. For the last couple of years, the Gap had begun to stray away from its former vision of classic clothing, and during this time the company had hit a record sales slump. Gap's CEO Drexler seemed to have lost his touch, since he did most of the merchandising for the company he choose clothing with flair and design: bolder colors, low rider jeans, small form fitting tops, and stretchy materials. Gap went from casual to very trendy, alienating and displeasing many of its core customers. In May 2002, Drexler decided to salvage the company and thus began a â€Å"Back to Basics† campaign. Drexler wanted to bring back the old apparel, the old ads, and the old management style. He wanted to bring back everything that was once Gap Inc. and its identity (Gap Annual Report, 10-15). Today Drexler is no longer the head of Gap Inc. but his â€Å"Back to Basics† campaign still lives on through the current CEO, Paul Pressler, the former Chairman of Walt Disney's Global Theme Parks. The company is bringing back all of what made Gap unique when it first opened. It is reemphasizing the basics and promoting its classic fit jeans, signature khakis and cotton tops, as well as simplifying its mix of colors and fabrics and remembering that 90% of the tops it sold were the color blue. Through this campaign the Gap has regained some of its previous customers and plans to evolve from this point (Levy, 1-3). Gap Inc. must remember who its target market is, the family, and their market strategy is such that from babies to adults Gap has something for everyone. This target marketing is seen through the three distinct brands Gap Inc. operates: Gap, Banana Republic and Old Navy. All three brands target different price ranges and different styles; from chic stylish apparel to everyday relaxing pants Gap Inc. has a product for everyone. Banana Republic was bought by the Gap in 1983, and it is known for casual luxury with high quality apparel for men and women. It has also introduced a sophisticated line of seasonal collections of accessories, shoes, personal care products, intimate apparel and gifts for the home. Today there are over 430 stores in the United States and Canada. The brand caters to the 30 years and older consumer who is more affluent and fashion-oriented. Banana Republic stores are primarily located in major cities, however the introduction of the catalogue has enabled the brand to expand its consumer reach to cities without a store location. The brand also has its own website and high-image advertising that help promote the idea of the high profile Banana Republic lifestyle (www.Gapinc.com). Old Navy, launched in 1994, was created to capture an even broader audience then the Gap with its moderate prices. It has quickly become the Gap Inc.'s portfolio star. Old Navy's strategy differs from the Gap because it offers a product mix with an edgier fashion look but with a broader fashion range. Old Navy makes shopping fun and fashion affordable to the whole family. The stores sell everything from basic denim, khakis and graphic tees to casual clothing for work and play. Today the company has more than 840 locations in the United States and Canada and customers can also shop around the clock at www.oldnavy.com (www.oldnavy.com). The Gap stores sell through a variety of namesake stores including Gap, GapKids, babyGap and Gap Outlet. With 2,608 stores throughout the world, the company strives to be the world's headquarters for khakis. Customers expect classic styles from the Gap for the whole family, by having different segments of the Gap, the brand is able to grow up with the consumer and gain brand loyalty. The Gap is also easily accessible through its website www.gap.com, which only offers e-commerce (Brady, 112-113). Gap Inc. prides itself on the individual, and constantly challenging itself to think about what the customer wants instead of what other stores are selling. Under the guidance of Pressler, Gap Inc. is no longer targeting teens, who change their minds rapidly, but rather its initial target the family as individuals. Gap wants to win back the trust of the customers it had lost. Through advertising the Gap is emphasizing the individual and that everyone no matter what age, color, sex, or ethnicity the Gap has something for them. â€Å"Gap is a brand people can make their own, and now Gap Inc. is offering a chance for everyone to be in one of the Gap print ads. They are looking for individuals who personify the Gap brand-intriguing people with personal style† (Levy, 3-6). Gap Inc. is one of the most successful retailers in the world and now that it has gone back to its target market will continue to gain market share through its three distinct brands. Conclusion Abercrombie & Fitch and the Gap Inc. are both highly respected international brands that hold large market shares in the retail industry. Each company targets different markets through different mediums. Abercrombie & Fitch focuses on the younger age groups with sexy, more stylish clothing while the Gap targets to the family with basic, sturdy clothing. Both companies have three distinct brands which cater to individuals in their target markets, whereas A&F's segmentation is more age based, Gap Inc. is more monetarily segmented. Looking towards the future both companies seem to understand what they have failed to accomplish in the past and are looking toward the future on how to improve their marketing strategies to their target markets to gain sales and brand loyalty.