Kudos to Abercrombie, Pure Digital, and Seoul

Kudos to Abercrombie, Pure Digital, and Seoul (with a heads-up to cost-cutters and bailers-out), by Mark Chussil

Kudos to Abercrombie for not slashing prices in the dismal retail climate. (“Abercrombie to Stick to Full Prices, Despite Bleak Outlook,” The Wall Street Journal, November 14, 2008.) Their sales are down — then again, whose aren’t? — but their margins are strong. Competitors that are cutting prices to maintain sales are suffering greatly reduced margins. As Abercrombie recognizes, today’s reduced margins are not the only casualty of price cuts; tomorrow’s reduced brand equity and reputation will take a toll too. Note, by the way, that we don’t know what the outcome of Abercrombie’s decision will be, though we predict it will be good. All we can do regarding them, and all anyone can do with any prediction, is to laud the quality of their decision.

Further reading: What You Pay For, Alignment, Making Competitors Intelligent.

Abercrombie update, May 17 2009. The Journal reported After Big Loss, Abercrombie to Cut Prices. Abercrombie has chosen to implement “meaningful reductions” in price. The result so far is that the rate of decline in Abercrombie’s sales has slowed: sales fell 22% in April, less than the decline in March. Meanwhile, gross margin dropped 3.5 percentage points. A good move? Depends on what you want, of course, sales or margin. And it depends on whether you believe that the price cut now will affect their brand and pricing power later. Apparently Abercrombie executives are concerned about downstream effects too: they concentrated the price cuts on just two of their brands.

Kudos to Pure Digital for their Flip line of picket-size camcorders. (“Gadget of the Stars” by N’Gai Croal, Newsweek, December 15, 2008.) They thought broadly and boldly, going from making disposable digital still cameras for drugstores and camera shops to a 32% share — versus Canon’s 10% and Sony’s 8% — in Flash-based camcorders. Not bad for a company that started in 2001. Note also how Pure Digital thinks differently from at least one of its competitors. According to Newsweek, Audiovox “plans more-aggressive marketing and pricing. ‘In this economy, people are looking for value,’ says [senior VP Ralph] Etna.” Meanwhile, Pure Digital’s CEO Jonathan Kaplan says “‘We want to show the world that we can innovate with tech and fun.'” (To be fair, that’s one sentence from Audiovox. Your voluble author remembers giving 45-minute interviews that were condensed into a single sentence.)

Further reading: You’ve Got the Data. Now What?, You Say You Want a Revolution, Exalted Numbers.

Kudos to Mayor Oh Se-hoon of Seoul for… well, we’ll just include several quotations from him in his interview with Newsweek Chairman Richard M. Smith (“A Young Mayor Pushes Reform,” Newsweek, December 15, 2008). “‘Korea heavily depends on trade with the outside world, and the products we export with a touch of culture will be sold at a more expensive price.'” “‘We already have 30,000 design students coming out of school every year. … Our goal is to have people say that if you want to see the latest design trend, you should go to Seoul.'” About making Seoul a global and business-friendly city: “‘We want to be friendly to foreigners, and that is probably the best advantage we can have.'” About being judged: “‘If I have created a working environment where public officials try new things, I should be recognized as a successful mayor.'”

Cost-cutters and bailers-out: notice the emphasis on investment, creativity, and vision. How different that is from budgets, giving the customer what they “ask for,” and defining success as a good quarter. Abercrombie, Pure Digital, and Seoul have a lot in common. Would you invest in them, or in their competitors? Further reading: The Good, the Bad, and the Lucky.

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