Abercrombie & Fitch And Vans Brand-Business Turnarounds Focus On The Core

A theme of recent business press writing is brand-business turnarounds. For example, Barron’s, the financial newspaper, points to the successful turnaround at clothing retailer Abercrombie & Fitch. The Wall Street Journal reports on the underway turnaround at VF’s Vans, the sneaker brand-business.

Brand-business turnaround strategies are not the same as conventional growth strategies. A conventional growth strategy is not appropriate for a brand in urgent need of a turnaround. A growth strategy is very different than a survival and revival strategy. A conventional growth strategy is for a brand that is on a sustainable upswing. Growth is a longer term outlook.

A conventional growth strategy is for going forward, full speed ahead. It is designed to accelerate quality revenue growth.

The principle components of a conventional growth plan are to:

  • Broaden the brand appeal to build a bigger customer base.
  • Focus on changing people’s attitudes to change their behavior – you have time to spend on slowly changing the way people think in order to make them use the brand.
    Expand and extend the franchise:
    1. Increase availability
    2. Expand to new geographies
    3. More customers (new customers, new segments of people)
    4. More occasions (new occasions)
    5. Extend the brand offers – new products that appeal to new customers and/or satisfy new occasions

Implementing a conventional growth strategy for a brand that is in need of a turnaround will only accelerate brand decline.

A turnaround plan is a business approach for a business that is going in the wrong direction at an accelerating pace. According to Barron’s, Abercrombie & Fitch has successfully navigated a turnaround. Vans is in the turnaround process. Both brand-businesses employed turnaround strategies.

A turnaround plan – survival and revival – is a short-term strategy. The brand-business is at a tipping point: if there is no short-term achievement, there will be no long-term. The turnaround approach has specific actions designed to achieve the specific short-term objectives. The turnaround plan has a specific timeline.

Abercrombie & Fitch was in trouble. Its CEO told reporters, “The brand health was declining tremendously. The business was double-digit down. It was going to be a true opportunity to brand build and bring it back. I just felt they were two iconic brands that deserved to live again.”

The first step in a brand-business turnaround is to stop the bleeding. But, there are two types of bleeding that must be stopped. One is financial. The other is the bleeding of the customer base.

Financially, to stop the bleeding, the goal is to restore positive cash flow, usually by reducing capital expenditures. Abercrombie & Fitch was lucky. The brand-business was able to close stores, open smaller stores and lower its inventories. Aiding the financial situation, Abercrombie & Fitch took advantage of reduced inflation. Wall Street and analysts are pleased with the way in which the brand-business has stopped the financial bleeding.

Vans is stopping the financial bleeding, too. Vans is planning to cut $300 million in costs primarily by eliminating 500 jobs globally. Vans plans to focus on plowing some of the savings back into innovation.

To stop the bleeding of the customer base, a brand-business must:

  • Stop the decline in average frequency
  • Focus on reinforcing the brand with the core customers
  • Focus on increasing frequency and loyalty, not on brand expansion
  • Build on brand strengths
  • Defend the core enduring brand truths
  • Focus on immediate behavior change
  • Shore up the existing business now instead of making a risky bets on the future

Abercrombie & Fitch recognized that its brand-business needed to evolve. The teen-based, hyper-cool, shirtless male chest imagery, “beachy” vibe was not working out. Teens are notoriously fashion fickle. As one letter to Barron’s stated, the younger demographic tends to be more “unpredictable” when it comes fashion. Focusing on a more “mature audience” that is also more “affluent” makes sense.

(it appears as if Gucci is adopting this more mature, more affluent targeting, leaving the “baroque, jewel-toned colors” that enticed younger customers. As written in The Wall Street Journal, Gucci has lost status and sales and is undergoing a “transformation.” To address its place relative to its luxury competitors, Gucci, “… while it continues to court younger buyers with ornate pieces, the brand is also trying to better reach other clients who want to buy clothes or accessories that are more timeless.”)

Abercrombie & Fitch did not abandon its core customer base: the brand-business evolved to meet that core customer base where it lives, that is, with more savvy adult clothing. As the teen audience aged, they aged out of Abercrombie & Fitch. To satisfy the needs of its now-older customer, Abercrombie & Fitch’s CEO told Barron’s, “We’ve evolved the purpose and promise of each of our brands.” But, just because the target audience is now slightly older – 20 to 40 years old, Abercrombie & Fitch is still seeking to be “cool.” Abercrombie & Fitch’s CEO indicates that the goal is to have a “more inclusive and modern identity.” This seems to be working.

Knowing the core customer is critical. According to online reporting, Abercrombie & Fitch’s former audience is looking for “affordable, quality and stylish” apparel. For women, dresses have been extremely successful, not just for the customer but for the image of the brand-business.

Abercrombie & Fitch’s women’s sales have grown almost 40% in the last three years globally and almost 60% in the US.

Abercrombie & Fitch is not shooting itself in the foot, however: the younger teen crowd is being “funneled” to Hollister, the company’s “teen-centric” brand. Younger audiences are too young to remember the what previously defined the Abercrombie & Fitch brand-business image. And, today’s teens seem to be accepting of where Abercrombie & Fitch has taken the brand-business. Importantly, Abercrombie & Fitch has now created a portfolio that allows younger teen buyers to seamlessly segue to the Abercrombie & Fitch brand-business as they age.

Vans has a similar problem. It has lost its “outsider mindset” that defined the skater brand-business’ target audience – and the internal culture of the organization. The cult-like Vans became more mainstream. The brand-business lost its mojo. Innovation came to a halt. Vans became comfortable riding on its previous momentum. Vans lived off of its successful, five “classic” styles. Furthermore, those five shoe styles are still made for skaters. Non-skater customers want a difference shoe feel. The Wall Street Journal reports that Vans fell into complacency. The past success of the skater shoe created a sense of risk aversion.

Organizational alignment between the VF center and Vans created bottlenecks and loss of resources and relevance. VF created a centralized organization. Instead of following the rule that the center provides leadership, the regions provide management, VF brought all meaningful responsibility and accountability into the center.

Under its new CEO, VF is changing the way in which the organization works. A goal is to re-instill internal excitement and commitment to the brand-business. At the same time, there is a focus on relevancy via innovation and renovation. Some of these innovations and renovations show up in Vans’ collaborations.

For example, Vans has produced a second shoe with pro skater Rowan Zorilla. The Rowan 2 has “… underfoot improvements and an upper with an appearance that’s more distinctly its own,” according to Footwear News online. The shoe has “ImpactWaffle tech” and other improvements that offer more whole-foot protection. Other innovations use Van’s “SickStick rubber for better protection and board feel and bringing an element of sustainability.”

Vans has also produced a shoe with BMX biker Parker Heath. Parker Heath is also an artist. The new shoe features Mr. Heath’s designs. Online Sourcing Journal reporting indicates that this new BMX shoe “… is part of a BMX-specific slip-on collection designed by BMX rider Dennis Enarson.” For example, the shoe has a waffle bottom “… designed to give BMX riders a better pedal grip.”

In a turnaround situation, the first goal is not to change the minds of the general population. It is first about stopping the bleeding of the customer base. Both Abercrombie & Fitch and Vans know this about a turnaround: the main core business must be protected and cultivated. But, this focus may need to alter to reflect relevant attitude and behavior changes. Devote all of our energies to the core. It is the core that will finance the turnaround profitability and provide the platform for the future. Focus on current customer retention and increasing current customer frequency. Core customers already know what is great about the brand-business.