A&F All About Full Retail Price

Discussion
Jan 26, 2006
George Anderson

By George Anderson

Nothing is on sale at Abercrombie & Fitch.

As a report in the Los Angeles Times last week pointed out, while other retailers were drastically cutting prices to move merchandise on the heels of the 2005 holiday season, nothing was on sale at A&F.

The retailer’s strategy has been to hold to full price on its goods, and analysts say it has worked to not only increase margins but sales, as well. Of particular note, the company’s determination to stick to its full retail-pricing model came after a number of years of flat or declining sales.

According to the LA Times report, same store increases of 23 percent in November and 29 percent in December compared to the broad specialty apparel retail business which saw a 3.2 percent and 1.5 percent increase during the same period.

Moderator’s Comment: Are retailers giving the store away and selling things too cheaply? How do retailers go about finding the “right” price to sell
goods?

George Anderson – Moderator

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8 Comments on "A&F All About Full Retail Price"


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Art Williams
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Art Williams
15 years 1 month ago

I believe that deep discounting or sales can destroy a brand’s price image and upset the consumer’s perceived value of that brand. I suspect that is a problem that General Motors is now having after their big price promotions.

Concerning AF’s success, I think it takes more than a lack of price promotions to achieve sales gains. The brand must a basic appeal that causes consumers to want to buy. It must be thought of as desirable and worth more than it’s competition. Evidently that is the case at AF and it seems to be working very well for them.

Ben Ball
Guest
15 years 1 month ago

I can’t help but wonder how this plays against some reports that A&F is viewed as being near the end of its life cycle and that other brands (Hollister) are being positioned to replace it in the portfolio. Either a) that simply isn’t true, or b) A&F’s holiday performance may be the surprise result of what is really a milking strategy.

Bernice Hurst
Guest
15 years 1 month ago

As Art has already pointed out, and we have all said many times in the past, perception is a major consideration when trying to decide how best to reach customers. There are many people who believe that a cheap price indicates a cheap quality. There are many people who are willing to pay more because they’re “worth it” as the ads repeatedly tell us. And there are people who are willing to pay more because they want to be seen to have something different/better than everyone else. I’m not overly familiar with Abercrombie & Fitch as they trade in the US but they have a strong reputation in England for quality and high prices.

Don Delzell
Guest
Don Delzell
15 years 1 month ago

This is an example of dynamic retailing. A&F is a destination store for the customer it targets. Destination stores, destination products, and any “must have” are in the enviable position of capturing a disproportionate share of the margin than other businesses and products.

Period.

The “take away” from this is that when you are hot, you don’t need to give it away. Consumers can and will pay full retail while the “need” cannot be fulfilled other ways. No one has been able to sustain this, in fashion apparel, for any appreciable period of time. Fundamental economic and industry variables argue against a long term stay in this high margin position. For the consumer who is identifying with the emotional connection created by the brand that is A&F, there is no effective substitute.

Warning: this is not an invitation to take advantage of the emotional connection and raise prices. That would inevitably damage the emotional connection and create an economic opportunity for a lower priced, similarly positioned brand.

Brian Numainville
Guest
15 years 1 month ago

A&F made a sound strategic decision in not engaging in deep discounting. Clearly, their merchandise has been on target as of late and has been compelling enough for consumers to pay full price. It is refreshing to see a retailer carrying the right merchandise instead of trying to push merchandise no one wants through a price-driven promotion just to get it out the door.

George Whalin
Guest
George Whalin
15 years 1 month ago

For a couple of years A&F struggled with the wrong merchandise and their customers didn’t buy. For all of last year they got the merchandise right and the customers returned to buy. There are powerful lessons here for every retailer. When the merchandise isn’t compelling enough for the customer to buy retailers nearly always resort to price-driven promotion to move the product. When the merchandise is compelling and customers see the value they will buy. I applaud A&F for their guts to sell their merchandise at full price this last holiday season. But, retailers can only do this when customers fall in love with the merchandise.

A&F has always pushed the envelope when it comes to innovation and their new Ruehl stores are among the best, most innovative apparel stores around. When you take this approach sometimes you’re going to miss and sometimes you’re going to get it right. Most of the time they get it right.

George Anderson
Guest
George Anderson
15 years 1 month ago

I still remember, way-back-when, listening to a top supermarket merchandiser talking about how absurd it was that everyone was discounting matzo at Passover. His logic was that Jewish people were not going to switch stores over a box of matzo and the vast majority didn’t even look at his price. Doing some checking myself, I went to one of his stores the next Passover season. Guess who had the lowest price out of three different stores where I did price checks?

Mark Lilien
Guest
15 years 1 month ago

Abercrombie has an assortment its customers love, as several writers noted above. They did 3 things right: great merchandise; firm prices; and appropriate quantities. If #3 turns into excessive quantities, then #2 becomes impossible. Most retailers can’t do #1 right, so #2 is impossible. A few retailers actually do #1 right, but get so excited that #3 goes wrong and then #2 collapses. The best Christmas would entail a shortage of the top 15 items at every major chain store. Post-Christmas markdowns would be minimized and people would shop earlier the following Christmas, minimizing markdowns both pre- and post-Christmas.

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