The press covered extensively the charges against Abercrombie & Fitch to sell only “small” sizes to avoid getting obese clients among its customers. The famous American brand has recently opened a store in Brussels, which has reinforced the local impact of this news. The question that arises, however, is whether or not A&F followed the right strategy by focusing on a “thin” market segment. In other words is it better to sell only to a limited segment than to the entire population. More than half of the U.S. population is overweight, and the A & F marketing strategy seems indeed to address the minority of the market.
The segment of the “thin” actually tends to become increasingly tenuous in the United States where obesity problems are particularly widespread. The difficulties encountered by A&F on this territory pushed the brand to close numerous outlets and to accelerate its international growth (see for instance the post we dedicated to the opening of Abercrombie & Fitch store in Brussels in 2011). Those problems were probably less caused by the size of the targeted segment than by the marketing strategy as a whole and by the impact of the financial crisis. The overall context became indeed difficult to motivate consumers to pay a high price for a simple t-shirt that can be found for a fraction of the price at Zara or H & M.
Does the business model of Abercrombie & Fitch rely on the ego of its customers?
This being said the business model of A & F is actually based on the ability to sell high-margin products to a segment that can remain small. If you offset diseconomies of scale through a higher price and a higher margin, there won’t be any problems. You’ll sell more expensive products to a smaller population and you may assume that your revenues will remain constant.
A & F took advantage (ethical issues aside) of the decreasing rate of “thin” people in the United States. This segment showed “desirable” characteristics in the eyes of those who are not thin, and A & F was able to trigger envy (or jealousy) of obese and also managed to flatter the ego of the thins. Buying A & F was like claiming its membership in this desirable segment and display a kind of “superiority” on those who are obese.
As you realize, this subversive interpretation of A&F’s strategy is not without some ethical issues.
Advice for your marketing strategy
Addressing a niche is not necessarily synonymous of limiting revenues. Exploiting a niche is like mining a vein of ore. Sooner or later the vein runs out and you have to look elsewhere (another market segment or international expansion) or change method to better exploit the vein (change marketing strategy). Abercrombie & Fitch has exhausted its segment in the United States through practicing always the same approach. The business model and the financial crisis have led to decreasing market shares which in turn led to closing stores in the US. Do not fall into the same trap and make sure your client remain loyal on the long-term.Tags: marketing strategy