A&F – getting close to the 18-34 demographic via digital

SUMMARY:

Abercrombie & Fitch CEO is looking to a combo of digital and stores to appeal to the core customer base.

While we’re used to retail sector CEOs bigging up their omni-channel strategies as being the enablers of corporate turnaround, in all too many cases there aren’t that many proof points on offer to back up the claims.

So when Fran Horowitz, CEO at Abercrombie & Fitch (A&F), says:

I can confidently say that we’re increasingly effective at engaging our customers whenever, wherever and however they choose to shop.

the initial temptation may be to nod knowingly and somewhat sceptically. But Horowotz reckons she has some third party validation to hand:

Last week, we saw another proof point in a study by YouGov BrandIndex, which continuously measures public perception of thousands of brands. According to YouGov, millennials are more likely to recommend our brands now than any time in the past decade. Its data also shows that US adults aged 18 to 34 now have a better impression of both A&F and Hollister than at any point in the past several years.

In the last few months alone, both brands’ impression scores have improved by double digits and moved from negative to positive, meaning that more young consumers have an overall positive impression of the brands as opposed to negative. We know we still have a ways to go. However, this is an important threshold for brand perception.

That core demographic of 18-34 year olds is crucially important to A&F and it’s one that is particularly drawn to the Direct-to-Consumer (DTC) model. Or as Horowitz puts it:

DTC is our largest store. That’s how we view it.

She expands:

That channel links to omni, which is really important for our customer to be able to shop whenever, wherever and however they want to shop. We continued to make progress in DTC with an 11% increase in sales over last year. The shift to mobile continued, particularly with our customer. More than two-thirds of our DTC traffic comes from mobile. The investments we’ve made here are paying off, as phone and app productivity growth continues, driven by double-digit improvement in conversion on these platforms.

A rigorous pursuit of the omni-channel is hardwired into the corporate DNA now, she adds:

We continue to build on our strength in omnichannel, with ongoing international rollout of capability. In concert with these investments, we have made further strides with our physical stores, driving improved productivity from our new prototype and remodeled stores. We continue to retain flexibility to allow for the most effective melding of the physical and digital worlds, optimizing our customers’ engagement with our brands.

Overall, our continued focus on staying close to our customer means we must be highly responsive and adaptable. This quarter, the team continued to spend significant time in stores across the brands, leading to better testing, sharper insights and faster responses. Our Read-and-React programs ensure we have our must-have items and categories available in just in the colors and sizes we need and that we do not disappoint our customers.

Stores

Horowitz sees digital investment as a priority that is delivering returns, particularly when married to the offline store network:

Our digital engagement with our customers continues to be a core strength, with the investments we’ve made early and continue to build on bearing fruit. Our Purchase Online, Pick-up In Store is performing particularly strong. With 75% year-on-year growth this quarter, more customers are taking advantage of this and other aspects of our omni-functionality, such as order-in-store, which is also showing a strong customer response.

These digital store-centric capabilities have the added benefit of driving its constant purchases and productivity in stores. It’s a great example of how we’re effective at blending digital and physical store environments, mirroring the way our customers live their lives.

The CEO points to the performance of the Hollister brand as a case in point:

Hollister streamlines mobile checkout…as an example of advanced mobile optimization that few brands have mastered yet and which [is a prerequisite to driving conversion on mobile. There is no room for complacency though, and this is an area we’ve retained a laser-like focus to ensure we are attuned to our customers’ needs as their behavior and use of technology continue to evolve.

Another asset is the loyality card initiaitives around the A&F brands:

Our loyalty programs across the brands have also grown in scale and strength with a successful rollout in EU during the quarter, bringing Club Cali’s members to more than 8 million by the end of the third quarter. The A&F Club reached 3 million by the end of the quarter, in line with our original expectations for the full year. In addition to providing a virtual platform for engaging customers in innovative ways and driving both physical and digital stores engagement across the brands, we consistently see members spending more and more often. We’re seeing high levels of engagement online and in-store from our members, and our Loyalty Clubs continue to provide a wealth of insights and opportunities to engage directly with our customers and better understand and meet their needs.

My take

Given its core age demographic, A&F needs to be on top of its digital thinking. The signs are that it’s putting the right pieces in place, even if, as Horowitz notes, there’s still a way to go.

Image credit - A&F

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