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Abercrombie’s “Terrible, Terrible News”

by Elaine Schwartz    •    Aug 18, 2011    •    251 Views

Sometimes the wrong people wear the right products. It just happened to Abercrombie & Fitch.

Here is the story:

According to the NY Times, it all began when an employee conveyed to A & F’s CEO the “terrible, terrible news” that Mike “The Situation” Sorrentino had been wearing bright green A & F sweat pants on the previous night’s MTV Jersey Shore episode. A & F’s response?

This press release:

“We are deeply concerned that Mr. Sorrentino’s association with our brand could cause significant damage to our image. We understand that the show is for entertainment purposes, but believe this association is contrary to the aspirational nature of our brand, and may be distressing to many of our fans. We have therefore offered a substantial payment to Michael “The Situation” Sorrentino and the producers of MTV’s The Jersey Shore to have the character wear an alternate brand. We have also extended this offer to other members of the cast, and are urgently waiting a response.”

So funny. Great PR.

The Economic Lesson

Abercrombie & Fitch competes in a monopolistically competitive market. The characteristics of monopolistic competition include many sellers with a similar product, sellers creating an individual, unique identity, and sellers having some control over price. The competitive behavior of beauty salons, supermarkets, and clothing manufacturers is also shaped by a monopolistically competitive market structure. With many sellers having a similar product, Abercrombie can make itself unique through its aspirational identity.

From most competitive to least competitive, the four basic competitive market structures are: perfect competition, monopolistic competition, oligopoly, monopoly.

An Economic Question: Thinking of Abercrombie & Fitch and identifying its competitors, large and small, state how each firm tries to make itself unique.

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