STRATEGY ONE  >  Volume IV  >  Number 2  >  Third Quarter 2006
 

New Abercrombie Flagship Gives Glimpse of Retailing’s Future

By Stevan Buxbaum, Executive V.P.

If you want to see retailing’s future, you might want to take a look at Abercrombie & Fitch’s new flagship store on Fifth Avenue in Manhattan.

There are no window displays outside to entice shoppers to come in. Inside, the store seems more like a dark nightclub than an apparel retailer. Music pounds and what little light there is focuses on the merchandise. There’s even a “jeans bar” – a glass counter that separates the customers from the products that lines the walls. The shoppers’ selections are handed to them by clerks modeling Abercrombie’s clothing.

Clearly, a new wave of store design is here, and it is being led by Abercrombie & Fitch. The New York store and the similar Los Angeles flagship, which will open soon at The Grove, are turning retail design on its head and offering customers something new, fresh and exciting.

There’s a big lesson for all of us in this new approach. Successful companies like Abercrombie have learned that retailing needs to go beyond simply selling clothing. Success these days means creating a vibrant store environment and a good buying experience, one that attracts shoppers and keeps them coming back.

In short, Abercrombie knows the value of selling a lifestyle, not just jeans. Retailers that want to keep up are going to need not just to spend more, but to innovate more.

Let’s take a look at how the Abercrombie flagship stores turn accepted thinking on its head.

First, there’s the lack of window displays. Abercrombie knows that its shoppers are coming into the store for the brand and the experience, not because of what’s in the window. Next is the darkness, which is different from what shoppers have seen before. It creates a “night-clubby” feel that is a perfect backdrop for the clothing.

 

Stevan BuxbaumThen there is the jeans bar. Separating the customer from the merchandise goes against the grain, since in the last few years the trend has been to give the customer access. It is miles apart from what everyone has accepted as basic store design.

Whether all or part of this design trend catches on is a big question. But some retailers are already responding. Aeropostale, for instance, has opened a new concept store that updates its design by using such novel features as dressing room doors that go from clear to opaque when the customers shut them. Other retailers like Metropark—the new and growing concept co-created by Hot Topic founder Orv Madden—are emphasizing music and lifestyle, much in the way Abercrombie is.

All of this will further separate the retailers at the top from all the rest. We talk about aspirational brands, and Abercrombie understands that in order to call yourself an aspirational brand you’ve got to go beyond the merchandise. In the end, it’s all about creating a clearer differentiation.

Lenders need to know that retailers will need to boost capital expenditures if they are to thrive. Chains need to increase the speed and scope of store remodeling programs if they are to keep up with the competition. Otherwise, the experience they offer won’t be as relevant to today’s shoppers.

What Abercrombie is saying is this: If you want to keep up with us, you can’t just copy our product. You can’t just knock us off and sell the product for a few dollars less. You’ve got to offer the experience. Ultimately, everybody sells jeans. You’ve got to separate what you sell from what the competition carries, not just by the label on the back but by the experience you create and the lifestyle you portray. The merchants who do that are the ones who will succeed. Abercrombie is sending a clear message that in order to win in retail today, you need to do more. ball



Buxbaum 'On Patrol' continued

Jim SiebersmaThe effort was led by Jim Siebersma, Executive V.P. and head of Buxbaum’s Asset Appraisal group. “We started by continuing to ship orders placed by Beach Patrol’s regular customers, while at the same time soliciting additional orders from those accounts and any other parties that were interested in buying goods,” he relates.

The project was complicated both by the nature of the swimwear business and by Beach Patrol’s history of operations. As a highly seasonal business, only a small window exists in which to sell inventory and get it into stores. At the end of the summer season, retailers convert their floors to fall product, and swimwear is typically taken off the floor until it re-emerges for the cruise season in the fourth quarter.

Although Buxbaum’s project began at the start of the peak season, a lot of goods were already on retailers’ floors and swimwear wholesalers were beginning to offer discounts.

“That was a major obstacle,” says Siebersma. “We weren’t able to sell a lot of inventory at regular price. We had to really start discounting the goods and get more aggressive incrementally with those discounts.”

The team was up to the task. “Our expertise is liquidating inventory and managing the process, while at the same time mitigating expenses and maximizing the value of the inventory,” Siebersma explains.

As for Beach Patrol itself, the manufacturer had reportedly been struggling for several years, Siebersma notes. It offered customers extremely lenient sales terms – shipping goods in May and invoicing 180 days later, with payment due 30 days after that. In addition, it allowed customers to return a percentage of their unsold goods at the end of the season. “With some customers it was a defacto consignment agreement,” Siebersma says.

 

 

Beach Patrol, Inc.To move as much inventory as possible at the best price, the team quickly evaluated Beach Patrol’s existing customers and the market as a whole, then sought new customers and aggressively negotiated not just price but terms.

By the time the project ended, the team had produced the best possible financial result for the lender, despite the difficulties presented by the condition of the manufacturer and the complexities of the swimwear industry. “While working within and around the unusual timing constraints associated with the swimwear industry, we stepped on the gas and got things done while it was still feasible to move the inventory,” notes Siebersma.

“Yet another challenge we faced,” he continues, “was that this project was taking place at a time when the company was winding down its operations. When we started on April 21, the company’s staff was pretty much intact, but over the next 10 weeks we had to work with a greatly diminished team, as employees moved on to other opportunities. In the end, we were down to a skeleton crew of people who worked their fingers to the bone to get the goods out the door.” ball

 

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