Photo: American Apparel
As we push into the final shopping week before that retail holy grail of Christmas, it’s time for retailers to take stock of their sins and wins – who’s been profitably good and (gross) marginally naughty. And for those retailers (and brands) that traditionally sell sex, this will turn out to be a nakedly bad selling season.In particular, 2 companies – Abercrombie & Fitch and American Apparel – will most likely be waking up to a wicked holiday hangover, the cure which does NOT mean more of selling of sex, but instead necessary (and unsexy) operational and product fixes.
The recent decline in marketshare for the two above-listed retailers has been well–documented. No longer catching the eye of retail-and-internet savvy Millennials by selling overpriced, disposable product in a fast fashion world, A&F and AA find themselves in the middle of retail wasteland, with no consumer oasis in sight.
These are but two of many retailers that have recently lost their edge and customer base, as a combination of passé scandalous ad campaigns and mis-priced merchandise have ceded their place in the white noise of social media, online shopping, and a revolutionised production process that’s dropped prices and made inventory turns more important than ever. After all, is it even news anymore that American Apparel’s offended someone, somewhere, with its ads of children (or models who look like children) placed in sexual poses? What worked before works no longer.
So what’s a retailer to do?
A&F and AA offer an illustrative lesson in the need to consistently change and evolve as retail continues pushing the boundaries of how and when and where to reach consumers. No longer are ad campaigns (or shock value) enough – instead of continuing its reliance on scandalizing and titillating, American Apparel, for example, must now focus on leaning up its operating, working, and structural costs, which will in turn compress costs and drive up margins (seriously – WHAT company needs 800,000 highly-priced square feet in downtown LA?).
A&F, in turn, has lost a third of its market value this year, as it continues to rely upon soft porn-inspired ads and bags to stimulate young shoppers who have already turned elsewhere for their faded t-shirt and slouchy boyfriend needs. The retailer must ditch immediately its stale product and slow-turning inventory, and decide whether it wants to compete with J Crew or H&M and produce, price, and market accordingly.
In conclusion, both A&F and AA must figure out what they want to be when they grow up. After all, the market has passed them by – and it turns out to be one made up of consumers that can’t be titillated, seduced, or otherwise aroused into buying $60 henleys or $50 bodysuits.
Margaret Bogenrief is a partner with ACM Partners, a boutique crisis management and distressed investing firm serving companies and municipalities in financial distress. She can be reached at [email protected]
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