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The Silverman family first founded American Eagle Outfitters in 1977. They operated specialty clothing stores under the name Retail Ventures. In 1980 the Silverman's encountered financial troubles when the Schottenstein family bought out 50 % of the Retail Ventures. In 1991 the Schottenstein family bought the rest of Retail Ventures and opened 153 American Eagle Outfitters. By late 2000 the company had introduced 46 new stores in Canada. American Eagle had approximately $ 2 million in annual sales in 2003 and now operates over 800 stores in the United States and Canada (web 17231 -- /free-co-factsheet.
xhtml). Strengths: American Eagle Outfitters is a fairly new company but they are doing extremely well because they have a clear grasp of who their target market is. They posses a fresh new hip look with great quality clothing at a reasonable price for consumers (web). This is one of the main reasons why teenagers and young adults are so attracted to the company. American Eagle is aiming to appeal not only to the targeted 20 year old but also consumers between the ages of 16 and 34 years old.
This will widen the gap between their major competitors because they are trying to appeal to more segments than just one. American Eagle seeks to be assessable, fashion orientated, and has a strong value proposition, which has allowed the company to thrive and take shares from competitors over the past five years. Not only is their clothing line very comfortable, bold and fresh, the store layout and atmosphere is also major key factors in American Eagle's success over the recent years. AE also has a strong competitive advantage because of their short lead times and their ability to position themselves in high-visibility, high-profile locations in key markets. American Eagle's cycle time is about five months from design to delivery, versus about nine months for The Gap and six months for Abercrombie. AEOS minimizes lead times by maintaining sourcing relationships with a few key manufacturers and producing much of the merchandise in North America, versus 9 % for The Gap and a minimal amount for Abercrombie.
AEOS has the ability to quick-source some of its simpler product categories in order to react quickly to sales trends. (web). Weaknesses: American Eagle's weaknesses is that they are a relatively new business in the industry and do not really have an established customer base yet. They need to work on earning the trust of their customers with their affordable prices and good quality of the garments sold. In addition to customer loyalty, not enough time is spent on advertising of the company.
Because of the lack of advertising AE has experienced a loss of fashion sales in the recent years. The store needs to reach out to its target market by providing more commercial or doing more promotional work. American Eagle is challenged with determining what trends are appropriate for its customers and how to interpret thee trends. Over the past two years, competitors such as Abercrombie and Fitch have lowered their prices, which have created additional promotional pressure for American Eagle. Some investors believe Aeropostale has the value niche and Abercrombie has the high end positioning, so American Eagle is sometimes perceived as being stuck in the middle, without a true niche (web)... Opportunities: American Eagle still has a lot of room to expand throughout the united States, Canada, as well as the entire world.
The Northeast is the most penetrated area with American Eagle Stores. Most states in the West and Midwest have less than 15 American Eagle stores. There is an opportunity to move into the young professional demographic. American Eagle could use its strong domestic base to go into the international market.
Threats: A threat for American Eagle Outfitters is bankruptcy because they don't have many loyal customers and a great amount of stores to compete with many of their competitors. There is also the threat of rival Abercrombie & Fitch coming to Canada to establish a customer base in an area that is mainly American Eagle territory. Another threat to the company comes from the changes in consumer demand and fashion trends. American Eagle cannot be certain that it will be able to continue to develop appealing styles or meet the changing consumer demands in the future.
The retail industry is a very competitive market. American Eagle competes with other companies based on quality, fashion, service, selection and price. The company also competes with the casual apparel and footwear departments of department stores, often in the same mall as its stores. Many of the companies AE competes with have vaster resources and greater experience than the company in the apparel industry. American Eagle is fairly seasonal; any negative factors affecting the company could have a major affect on the company's financial condition and results of operation for the entire year.
Major Question and Immediate Problem: How will American Eagle gain more customer loyalty and become know better as a brand? What can American Eagle do to be one step ahead of its competition? Would it be beneficial for American Eagle to expand it stores? What can American Eagle do to its brand to attract a broader clientele? Alternative Solution # 1 To achieve maximum levels of customer loyalty American Eagle needs to market their clothing line more. If they were to advertise their line in television ads they would be able to reach a wider audience than what they have been reaching.
American Eagle should not only advertise their brand online but also in catalogs to show off their fresh hip look. The advantages of advertising on the television and in catalogs are that more customers will become aware of what American Eagle is and begin to shop at the store. Sometimes word of mouth is not enough to thrive. The disadvantage of this would be the cannibalism of the internet site because of AE advertising in many different ways. Also AE might not be able to position itself to be able to set itself apart from the competition. Alternative Solution # 2 American Eagle should continue to appeal to their targeted market of 16 to 32 year olds.
AE needs to remind their customers that their brand is comfortable, bold and fresh, and is unlike any of the competition. Store atmosphere is also very important when trying to keep loyal customers. American Eagle should hire fun and energetic employees to represent their company. Advantage of appealing to the 16 to 34 year old range is not many retailers in the market appeal to that wide of an age gap because is difficult. Customers being reminded of AE's comfort and freshness will in turn keep sales flowing. Although this could help American Eagle stay one step ahead of its competitors, it could also be a burden on AE because they must know what is appealing to a 16 year old and a 34 year old.
It is hard to appeal to that wide of an age gap and if it is not done with the proper resources the whole plan could fail. Alternative Solution # 3 Another solution American Eagle needs to venture into is the expansion of their stores in the United States, Canada, and the remanding parts of the world. Since most states in the Western and Midwestern parts of the United States have less than 15 American Eagles it would be best for AE to start in those areas of the region because consumers in the West and Midwest regions may identify strongly with the AE wholesome; 'all-American' brand image and moderate prices versus higher priced competitors and brands with more urban appeal. Also AE could expand into the international market along with its competition. The main advantage of this strategy is to get their apparel to more people in the US. This strategy could possibly increase sales for the company.
If AE was to expand into the international market they would join their competitors in a bid for market growth. The disadvantage is the more stores you have does not always mean you company will succeed. Having to many stores can lead to cannibalism of other stores in another area, which is not good for you company. Also, expanding internationally is very risk business. Instead of increasing sales and becoming more widely know the company could potentially go under because of the high failure risk involved. Alternative Solution # 4 American Eagle could come out with a professional line to appeal to the working class.
Since their clothing line is very casual right now this would be a great opportunity to attain some diversity in their line. American Eagle would benefit from a professional line because it will widen their target market scope, instead of just appealing to the casual side of its customers they now will have the benefit of appealing to the business man or woman who is looking for good quality at reasonable prices. There is less competition in the young professional segment relative to the teen segment, and 'young professional' would pose little risk of cannibalization to the base business. Merchandise geared toward the young professional segment could sustain higher price points and thus could lead to margin improvement. The downside to this solution is customers may not like the professional line and therefore American Eagle will not make any profit. Also, if the professional line is too price the customer might seek another retail location.
Recommended Solution, Justification, and Course of Action I believe American Eagle Outfitters should try to venture into the international market to increase their sales and become more known worldwide. It would benefit American Eagle to become an international company also to broaden their target market and customer loyalty. Introducing a business line in their company can also benefit American Eagle since some of their competitors have not entered into that arena as of yet. If American Eagle delivers a strong marketing campaign and increases promotion of their company this would definitely benefit the company in the ling run against the changing market. Bibliography o American Eagle Outfitters. 7 Apr. 2005 web o American Eagle Outfitters Strategy Analysis. 7 Apr. 2005.
o Bieseda, Alex. American Eagle Outfitters, Inc... 2005. 7 Apr. 2005. o Home Page. 7 Apr. 2005.
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