Even as companies like Walmart and Target are using the economic downturn to retrench and grow, others are finding themselves caught in failed business models that threaten their survival. Unwilling or unable to adapt with the times, they seem likely to become the recession's dinosaurs: once-magnificent beasts destroyed by an ever-changing environment.
The best candidate for extinction right now may well be Abercrombie and Fitch (ANF). The retailer, once the sixth-most popular brand for teenagers, spent much of the early 2000s engaged in massive expansion, adding sister stores Hollister, Ruehl, and Gilly Hicks. As the recession has advanced, it has watched its revenues plummet. In the second quarter of 2009, sales dropped by 30 percent, as it lost $26.7 million.
Abercrombie's biggest problem is its unwillingness to compromise on price. Over the last year, amid dropping sales and anemic revenues, high-end retailers from Saks to Coach to Barneys have offered big discounts, developed cheaper brand lines, and opened outlet stores. Faced with consumers demanding more quality for lower prices, they have tried to find ways to maintain their brand identity while dropping their costs.
Not Abercrombie. Claiming that sales and discounts would "cheapen" the brand, the chain has maintained its high prices, even in the face of plummeting sales. While this has been terrible for revenues, it has been great for brand identification: where Abercrombie and Aeoropostale were once almost identical, they are now clearly differentiated. Aeropostale -- which has dropped prices -- is the store with customers in it.
Given the history of the brand, Abercrombie's stand is hard to understand. After all, in its earlier incarnation as an expedition outfitter, it was the clothier of choice for Amelia Earhart, Ernest Hemingway, Teddy Roosevelt, and John F. Kennedy. Following declining fortunes, bankruptcy, buyouts, and rebrandings, it found itself transformed into an ersatz-preppie mall brand, characterized by loud music, atmospheric photos, and half-naked would-be models hawking generic hoodies and ripped jeans.
Thousands of consumers have learned that recessions are a great time to reassess needs and reconsider spending habits. If Abercrombie fails to do the same, it is likely to find itself transformed into a cautionary tale of a store that was left by the wayside when it declined to change with the times.
15 Chains That Keep Growing
While Abercrombie and Fitch is in trouble, other stores are growing, even in a bad economy. Click through the gallery to see which retailers and restaurants are adding new locations despite the recession.
Geert Vanden Wijngaert, AP