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American Eagle Outfitters Swot Analysis

Essay by review  •  November 18, 2010  •  Case Study  •  1,683 Words (7 Pages)  •  2,860 Views

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American Eagle Outfitters SWOT Analysis

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 (http://www.hoovers.com/american-eagle-outfitters/--ID__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 (http://www.prism.gatech.edu/~gte201w/aeostrat.html). 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. (http://www.tcnj.edu/~keyser2/Strategic%20Management/American%20Eagle/Datamonitor%20Overview.txt).

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 (http://www.tcnj.edu/~keyser2/Strategic%20Management/American%20Eagle/Datamonitor%20Overview.txt).

. 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

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