Abercrombie & Fitch looks beyond takeover rumors to an omni-channel future
- Summary:
- Rumor has it that A&F is about to be taken over by a rival after several years of decline. But in the meantime, CEO Fran Horowitz is still talking omni-channel customer-centricity.
We’d still characterize Abercrombie as a work in progress.
After 16 consecutive quarters of decline that progress at Abercrombie & Fitch (A&F) isn’t immediately obvious, atlhough there are now rumours of a takeover bid by rival American Eagle Outfitters which have cheered up Wall Street a little.
But until that’s confirmed, CEO Fran Horowitz is still trying to strike the right online/offline balance to appeal to the retailer’s youth target audience, an audience that’s been drifting off in the direction of the likes of H&M. Horowitz argues that there’s a set of macro-economic factors in play as well:
Store traffic headwinds and a promotional environment remains an industry challenge, so we remain focused on inspiring customers, innovating and developing leaders to strengthen our brand and adapt to the evolving landscape.
The objective now is around:
meeting our customers whenever, wherever and however they choose to engage with our brand. That means omni-channel must truly be seamless and frictionless, allowing customers to start in one medium, migrate to another and engage the brand in complete sales across platforms and locations.
Horowitz argues that A&F started down this route earlier than most of the competition and that there are demonstrable proof-points starting to show:
Understanding a fundamental shift in retail was underway, we were early to invest in building our Direct-To-Consumer (DTC) infrastructure. It is paying off with DTC now accounting for 27% of sales, up from 24% in the prior year period. We have now rounded out our omni-channel capabilities. We have fully integrated Abercrombie and Fitch websites. We’re optimized for mobile, including apps, payment and tracking across multiple social media platforms. We also tapped in an in-store reservation and online in-store return.
This full omni-channel offering has been successfully rolled out in the US, Canada and the UK across both brands [A&F and Hollister]. We are now planning to roll it out internationally, including local language app throughout the remainder of 2017.
Horowitz points to a recent study by Total Retail which ranked 100 publicly-traded retailers based on their omni-channel capabilities:
The survey showed Abercrombie & Fitch is in an excellent position, tied for fourth place overall. In a constantly evolving environment, we are confident we have invested in the right foundation and capabilities to allow us to stay ahead of the curve and to deliver the frictionless omnichannel experience that consumers demand.
Striking the balance
As noted across the entire ‘legacy’ retail landscape, a particular issue for firms with offline history is how to strike the right balance between offline and online and carving out a role - and synerigstic relatonship - for the bricks-and-mortar stores. It’s no diffierent for A&F, although it seems there has been some thinking going on around the topic. According to Horowitz:
It is clear to us there is an important relationship between our physical stores and our digital presence. The presence of the stores still acts as an important gateway to the brand, both as a physical store presence, but also as a local brand hub for online engagement. And [there is] direct interplay between the two, such as order-in-store, shop in and reserve in-store. This understanding shaped how we think about total store footprint to make broader regional perspective in our overall CapEx spending.
Our experience has shown that we are able to create inviting spaces, often on smaller footprints that encourage brand engagement and product trial, and drive conversion. Our first A&F prototype store is demonstrating improved productivity on a smaller footprint. This is an approach we’ll be extending to our prototype rollout this year. For example, we have one A&F location identified where we expect the prototype will be able to deliver similar or greater in-store sales and profit in less than half of the floor space than the store it’s replacing.
Meanwhile the focus remains on building and strengthening the customer relationship, using tools such as expanding the firm’s loyalty programs:
Loyalty programs have been a particularly important customer trust point for us. The successful rollout across the Hollister and Abercrombie brands is providing timely customer insights, driving customer engagement and a meaningfully higher average level of customer spend.
Our loyalty program, the A&F Club, had a strong start to its rollout, incorporating learnings from the Hollister Club Cali program. By the end of the quarter, it had more than 1.7 million members signed up, and we’re adding approximately 200,000 new members every month. We are encouraged by its performance, which is driving excitement and engagement with our customer. It is ahead of Hollister’s strong performance on the most relevant KPIs over that initial period, namely customer enrollment and identification.
Elsewhere, social media engagement is also a focus of attention, a priority for any retailer that seeks to appeal to A&F’s chosen demographic:
Our close partnership with Snapchat and Instagram have given us access to alpha and beta programs. These have led to our Geofilters and initiatives being some of the most successful on those platforms, resulting in high levels of brand engagement and additional opportunities to drive engagement around specific points in calendar, both traditional and nontraditional, which is Valentine’s Day and April Fools’ Day.
We’ve struck an innovative content partnership with AwesomenessTV, specialists in mobile video content specifically designed to engage with our teen Hollister audience. This initial year long partnership incorporates multiple experiential touch points, including music, concerts and opportunities for comprehensive, yet unobtrusive, product placement around a specially commissioned series called this is summer. The series premiered last weekend on its YouTube channel, which has more than 5 million subscribers, and it is off to a strong start.
The firm is even making a push into the gaming audience with the launch of the Holister Surf game on the Rovio gaming platform:
Designed for mobile phone play, it’s also accessible through our Instagram, Facebook and Snapchat assets. With more than 27 million impressions across the platform and significantly longer average viewing time, results far exceeded our expectations and Rovio’s. These types of initiatives are important drivers of brand consideration and engagement, and speak to the multifaceted customer journey for our core teen Hollister demographic as well as our 20 something Abercrombie demographic.
Whether all this is enough to win back that audience remains to be seen, but Horowitz is clear on the task ahead and what needs to be done:
We will deepen our customer connections. We’ll be ever more engaging storytellers, activating new campaigns and exploring innovative new ways to engage customers. We will be present wherever our customers are, continuing to build on our omni-channel capabilities, develop partnership and create new store experiences to engage customers whenever, wherever and however they choose to connect with our brand.
My take
Horowitz is saying all the right things, but A&F is a wounded beast and it’s debatable whether it actually has the time left to it to achieve the omni-channel objectives outlined. A takeover seems a far more likely future, at which point the attitude of the acquirer towards that crucial physical/digital balance will determine what happens next.