Amina Sukhera

MGT 301
Heiser
Final Research Paper

Abercrombie & Fitch

Abercrombie & Fitch Company is a clothing retailer targeted towards children,

teens, and young adults. The company sells an assortment of products, such as
sportswear, knit and woven shirts, graphic T-shirts, fleece, shorts, jeans and woven
pants, sweaters, swimwear, and outerwear as well as personal care products and
accessories for men, women, and kids under the Abercrombie & Fitch, abercrombie
kids, and Hollister brand names. They are dedicated to designing and producing the
highest quality All-American clothing (Abercrombie & Fitch). Their main competitors
include: Aropostale, American Eagle Outfitters, The Gap, and J. Crew; these
competitors have a similar preppy style for the typical American University student.
With the highest prices in the youth-clothing industry, retail analyst Chris Boring
warned that if the company did not lower their prices or offer discounts, the companys
brands would be more vulnerable once a recession hit since they sold premium-priced
merchandise rather than necessities. Abercrombie & Fitch did indeed suffer once the
recession in the late 2000s hit because they believed that lowering their prices would
jeopardize their brand image (Wikipedia). The global economic recession had a
profound effect on consumer spending habits; consumers were not willing to

compromise on quality but would rather get their full value for their money. This resulted
in closings of two of their brands: Ruehl No.925 in 2009 and Gilly Hicks in 2012. 71
stores were closed in the US in 2011, 50% of which concerned the A&F brand (Bahri).
Due to their strict rules and beliefs, Abercrombie & Fitch Company faces many risk
exposures. The company faced many criticisms and lawsuits due to racial
discrimination, failure to embrace diversity, and an insensitive CEO, all of which
impacted the sales and reputation of the brand. One of the lawsuits in 2004 in which the
company was accused of discrimination against people of color and women, Gonzalez
v. Abercrombie & Fitch, became a major turning point for the company in the right
direction. Abercrombie & Fitch was primarily known for having only Caucasian males for
their store management positions and only hiring extremely good looking Caucasians
represent their brand. The company agreed to a settlement of the class-action suit,
which required the company to (1) pay $40 million to African Americans, Latinos, Asian
Americans, and women who applied and were not hired or worked in certain store
positions, (2) revise its hiring, performance measurement, and promotion policies, (3)
revise its internal complaint procedures, (4) appoint a Vice President of Diversity, (5)
hire 25 recruiters to seek out minority applicants, (6) discontinue the practice of
recruiting employees at primarily white fraternities and sororities, (7) include more
minorities in marketing materials, (8) report to a neutral court-appointed monitor twice
per year regarding its progress in those areas, and (9) report to the court once per year
(Wikipedia). Even though these lawsuits gave the company a lot of negative attention
and brought them off their pedestal against their competitors, it pushed them in the right
direction and helped them improve their brand reputation.

Abercrombie & Fitch describes their products as Casual Luxury and is heavily
promoted as an international near-luxury lifestyle concept. In the manufacturing of its
merchandise, they have used quality resources and have prices them at near luxury
levels, and for double the American price internationally (Wikipedia). But just this
previous year, the company dropped its logo-branded apparel line because it no longer
resonates with its target market. They are also focusing on faster production processes
and more fashion-forward trends to attract consumers who strayed away from the
brands repetitive style and who would normally shop at competitors such as H&M and
Zara, who provide trendier clothes. Ever since the clothing company started up, they
were known to carry similar trends season after season, they differentiated themselves
by not conforming to the fashion trends, but rather creating their own. The CEO,
Michael Jeffries, had a specific requirement for the people who shopped at and worked
for his company: Sex appeal is almost everything. Thats why we hire good- looking
people in our stores. Because good-looking people attract other good-looking people,
and we want to market to cool, good-looking people. We dont market to anyone other
than thatIn every school there are the cool and popular kids, and then there are the
not-so-cool kids. Candidly, we go after the cool kids. We go after the attractive allAmerican kid with a great attitude and a lot of friends. A lot of people dont belong [in our
clothes], and they cant belong. Are we exclusionary? Absolutely. Those companies that
are in trouble are trying to target everybody: young, old, fat, skinny. But then you
become totally vanilla. You dont alienate anybody, but you dont excite anybody, either
(Salon). Their attempt at exclusivity and differentiating themselves from the rest of its

competitors backfired and actually caused them to fall out of fashion with its target
market (Wikipedia).
Abercrombie & Fitch does not own the factories that their merchandise is
produced in. Their goal was to seek out the best suppliers with high quality, technical
expertise, competitive costs, on-time delivery and safe workplace conditions (ANF
cares). They maintain relationships with vendors in 27 countries and the U.S. and they
guarantee that the factories in which their clothes are produced in fulfill their
expectations and ensure their workers are also being treated fairly. Even though they
dont own the factories, they still require that all factories with whom they work to follow
the standards they have set in their code of conduct, in which they strictly do not
tolerate child labor, involuntary forced labor, harassment, or abuse, etc. They verify that
their product supply chains meet company standards by requiring the factories to go
through a difficult approval process before joining their supply chain and then doing
consistent evaluation updates to the U.S. Department of Labor's List of Products
Produced by Forced or Indentured Child Labor to closely monitor the factories.
Abercrombie & Fitch also hires independent, third-party monitoring firms to audit them
on a regular basis. The auditors do a walk-through and interview the workers to make
sure everything is meeting the companys expectations. They have a zero-tolerance
policy for involuntary labor, human trafficking, and child labor and all internal team
members and managers directly involved in Supply Chain Management were required
to take a training course on human trafficking and slavery that discusses the risks of
human trafficking for business, and actions that can be taken to mitigate the risks (ANF
Cares).

Abercrombie & Fitchs supply chain structure does support their competitive
strategy because they hire suppliers who provide high quality products for their
merchandise and also make sure their merchandise is sent and delivered on time to
make sure business runs smoothly. They have two distribution centers that are the main
centers for A&F merchandise. The two distribution centers total over 2 million square
feet and from here we ship to stores and also fulfill customer on-line orders. With the
DCs in our backyard, we are able to ensure that our customers only receive the highest
quality garments. The success of our brands relies on employing motivated associates
within all areas of the business. In Supply Chain, our hourly positions include
merchandise processors, power equipment operators, material handlers and clericals
(Customer Service- Abercrombie). They work hard to keep their customers satisfied with
their products through their supply chain. In 2013, A&Fs goal was to aim to keep the
number of high risk factories below 10% of the total active factory base. Also, on
December 14, 2010, a factory in Bangladesh that supplied to Abercrombie & Fitch and
many other US brands and retailers caught fire due to an electrical issue which caused
the death of 29 workers. On top of ensuring that the deceased workers families were
taken care of, A&F produced a fire safety video to train employees and prevent a
tragedy like that from happening again.
Their constant effort to stay at the top didnt do them too good beginning 2014
when the demand for their products weakened and their net sales decreased by 12%.
Abercrombies sales were going weak in August and sales trends worsened in the
subsequent months, despite the marginal improvement in the U.S. macro-economic
environment (Forbes). Their well-known logo products had very poor demand which

severely impacted their sales and as a result the company had to issue many
markdowns to compensate. While Abercrombie has been selling fashion at a rapid
pace, its logo products (which account for a bulk of its portfolio) have failed to attract
customers. In the present environment, buyers are preferring fast-fashion products from
brands such as Zara, Forever 21 and H&M, over basic logo bearing merchandise from
casual apparel retailers (Forbes). Abercrombie has since begun to progressively shift
out its basic logo merchandise and they expect their customer response to their more
fashion forward merchandise to eventually get better. Their target market has definitely
changed from when the brand first established its place in the teen world, teens
nowadays dont dress the way they did 10 years ago, and to be successful in the
fashion industry, you must give the customers what they want. Abercrombie & Fitch is
definitely taking steps in the right direction to attract their customers; they started selling
black clothing last year, a color they strictly did not sell which made customers question
yet another aspect of the company. All these little changes within the company give
them the opportunity to improve the effectiveness and efficiency of their operations
because if they start selling what their customers actually want, their sales and
company value will eventually increase. The company definitely needed to work on
building their reputation after given many criticisms, and these criticisms were steering
their customers away and bringing down their sales significantly.
Some of the disruptive technologies they could use to improve their effectiveness
and efficiency of their operations would be to advance in renewable energy and energy
storage. The company is, although, very committed to environmental stewardship. Our
common goal is to reduce waste through conservation, collaboration, and carbon

emissions programsWe are taking a look at the energy we use and exploring ways to
reduce our consumption, and we are advocating for similar change in our supply chain
(A&F cares). Their efforts to conserve fresh water are helping to keep their systems in
top efficiency which helps them use less electricity and natural gas. They are also
switching all their lights and lamps from incandescent to eco-friendly and compact
fluorescent bulbs to reduce their electricity usage. They have also added motion
sensors to their lighting so that energy is not being wasted when it is not needed. The
companys efforts to constantly store and renew energy are definitely making some
positive impacts to the environment; they could definitely do more in regards to reducing
the amount of pollution that goes into the streams.
Abercrombie & Fitch has been through many ups and downs, mostly because of
their CEO, Michael Jeffries. They have faced many criticisms and have had their
competitors surpass them in the fashion industry. They have been making constant
efforts to make their way back to the top by becoming more fashion forward and
incorporating things into their line that they never have before, for example the color
black. They are slowly gaining back their reputation, but the brand itself has changed for
the better. They are constantly pushing the importance of diversity and inclusion in the
workplace to their employees, which is a big step for them after having only hired
Caucasians. Their supply chain and distribution center strategies help them produce
high-quality merchandise and fast delivery to ensure customer satisfaction and smooth
business. They work hard to make sure the employees that work at their factories and
distribution centers are being taken care of and being treated fairly and do regular
audits to ensure that they live up to their strict expectations. I believe that even though

this company has had its share of negativity, they are definitely slowly moving their way
to a more stable position. It will take a lot of time, but they are moving in the right
direction.

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