Analysis: Can Abercrombie course correct with key strategic changes?
Abercrombie & Fitch has been on a steady decline. In November of last year, the retailer’s shares plummeted 10%, completing 15 straight quarters of company-wide comparable sales decline. In February, the company’s merchandising head, Fran Horowitz, was promoted to CEO, and tasked with reversing course. To do so, Horowitz will need to devise a strategy that leverages her past experience and redefines the culture of Abercrombie & Fitch. Moving in this direction requires instilling a corporate mindset that encourages accelerated go-to-market strategies and effective talent recruitment and development.
The following are key elements of a plan that Abercrombie & Fitch should embrace to push past its continued decline and bring the brand back to prominence:
Quickly adapt to change
Consumers are often fickle and can lose interest in a brand overnight. Abercrombie & Fitch has experienced this first hand, losing its younger customers to competitors like American Eagle, which is swiftly responding to a shift in the needs of this demographic.
In 2016, American Eagle recognized that their younger audience had become more socially conscience. As a result, the retailer enlisted influencers like actress Hailee Steinfeld to promote the brand on social media with meaningful hashtags like “#Icanbeheard” or “#IcanlovewhoIwant.” This willingness to embrace a critical change in the marketplace played a major role in American Eagle enjoying its eighth consecutive quarter of revenue growth in the second quarter of 2016.
Horowitz must leverage her merchandising background and her skills to understand what the customer wants to bring young customers back to the brand and improve the company’s financial standing. In addition, she must surround herself with a management team that can execute her vision. In doing so, the retailer will be able to effectively reach its critical customer base and be rewarded with an uptick in sales.
Identify the right talent to ensure cultural fit
Attracting and retaining talent that can execute the core beliefs of Horowitz’s vision will be key to the company’s success. To ensure that the right talent is brought onboard, Horowitz should be involved with the hiring process for her direct reports and more junior employees. In this regard, the new chief executive can feel more confident that prospective employees can implement her strategy and bring unique skills and knowledge to the table to improve that strategy along the way.
It can be costly, if Horowitz isn’t able to ensure a good cultural fit among her employees. In fact, the result of poor cultural fit due to turnover can cost an organization between 50- to 60% of an employee’s salary. Ultimately, questions like, “What type of culture do you thrive in?” and “What best practices would you bring with you from another organization?” can help identify whether a candidate will bring added value, collaborate with colleagues and stick around for the long term. In addition, using candidate assessment tools that unearth the motivational factors of candidates should be utilized extensively.
Embrace an omnichannel strategy
A quality brick-and-mortar and online shopping experience is crucial to success in retail. In fact, a survey conducted by Retail Systems Research found that 84% of retailers believed that that creating a consistent customer experience across channels is extremely important. Bed Bath & Beyond agreed with this sentiment and recently started to enhance its shopping experience. In fact, the company now offers conveniences such as “click and collect,” which is an option that gives customers the ability to reserve an item online and retrieve that product at the nearest Bed Bath & Beyond retail location. In addition, customers can return online orders to a store.
For Abercrombie & Fitch to succeed, especially with younger customers, the company must develop and implement a seamless omnichannel strategy. Customers that have the same experience with the retailer online and in-store will return to the brand and demonstrate greater loyalty. A failure to do so will erode the company’s market share even further.
If Horowitz considers each of these elements as part of her turn-around plan, we have great confidence that she will be able to develop a culture and approach that can help the brand survive and thrive.
Umesh Ramakrishnan is a founding partner and member of the office of the CEO at executive search firm Kingsley Gate Partners. He was most recently vice chairman and chief innovation officer at CT Partners, one of the largest retained executive search firms in the world. He is author of the There’s No Elevator to the Top published by Penguin Worldwide.