Abercrombie & Fitch Market Entry in India - Proposed Plan

A&F
INDIA
MARKETING
PLAN
(PROPOSED)
USC Marshall
School of Business
Los Angeles, CA
Year: 2011

Executive Summary
1. Project Overview
• We are considering launching our brand, Abercrombie & Fitch, in India.
• Overall, we have two major goals in this project. The first major goal is to penetrate immature
India fashion market and preoccupy this incredible fashion market that is growing 20% a year.
The second major goal is to increase our brand sale, which is struggling in domestic market
(USA), and increase net income. At the same time, we can leverage brand awareness and
strengthen brand identity through efficient marketing.
• To sum up, short-term goal is to set up profitable business model and increase brand awareness.
Long-term goal is to be a leading lifestyle brand in India Fashion Market.
• Based on financial analysis, we can make positive NOPAT ($0.15 million) from first year but in
long term, we had better to spread more stores like other competitors of India market. With more
channels, we can increase our profit much faster.
2. Research & Analysis
Extensive market research was necessary to determine whether the launch is viable for a
global brand to enter India market.
• In Phase 1: Feasibility study was done to determine whether the launch is viable
• In Phase 2: A launch strategy with 3C, STP, and 4P was formulated
• In Phase 3: Financial statements were prepared and analyzed
3. Our Recommendation
Launching our brand in three big cities Mumbai, New Deli, and Bangalore based on highly
customized STP, 4P strategy is viable with a careful planning. Our brand will achieve
positive Net Present Value of $1.5 Million with three stores.
4. Our Findings
1. Customer: our target customers is 0.61 million (5%) of 12 million potential customers who are
from 15 to 35 years old. In the first year, we are planning to grab 61,000 (10%) of 0.61 million.
Based on our analysis, 42,000 (0.3%) of 12 million people are the break-even market share.
2. Price: we use relative price strategy based on items. For example, we will use same price in
T/shirts in India based in competitive analysis and we will lower price of jean by 20% and jacket
by 30% of original USA price.
3. Place: we will launch in 3 cities of Mumbai, New Deli, and Bangalore by setting the 1st
stores
there. By building a presence in these cities, we can build a strong brand identity and spread
brand awareness to upper level target customers faster.

INTRODUCTION
Abercrombie & Fitch Co. ("A&F"), a company incorporated in Delaware, is a specialty retailer
that operates stores and direct-to-consumer operations. Through these channels, the Company
sells: casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans
and woven pants, shorts, sweaters, and outerwear; personal care products; and accessories for
men & women. As of January 29, 2011, the Company operated 1,069 stores in North America,
Europe and Japan.
The Abercrombie & Fitch brand is believed to have reached its maximum growth potential in the
American market. International expansion began in 2006, with the long-term goal of opening
flagship stores for A&F (and eventually all its brands), in high-profile shopping centers
worldwide at a deliberate pace.
After delivering openings at a deliberately slow pace, the company accelerated its international
expansion. Noting the high profitability of its current international stores, A&F has plans to open
about 15 flagship locations in total throughout Europe and Asia up to the end of its fiscal 2012
year. The company expects 30% of its sales to be derived from international stores by 2012.
Total capital expenditures for the company on new stores is expected to be $215 million to
$225 million. Expansion into Asia, particularly India, holds a strong interest for the company due
to its growing economy.
SITUATION ANALYSIS
1. Market Analysis
1.1. Market Conditions:
India is considered an attractive market for luxury brands; about 50 premium and luxury
brands, including Zara, Tommy Hilfiger, Guess, Benetton, Levi’s etc, have opened stores in
India in recent years. The market in India is still in its early ages and is growing at a high
rate. A lot of other premium brands like Kenneth Kole, GAP etc are planning to open their
stores in India soon.
1.1.1.Size:
With a population of 34 million in its tier-1 three most populous cities namely Mumbai,
New Delhi & Bangalore, it presents a good market size to target the product at. A&F
targets young age people with its fashion brand. In India, too, customers in the age group
15-35, are more brands conscious. The percentage of people in this age group in India is
35%. So this population in the 3 cities: 35% of 34 million = 12 million
Those who earn more than $100 dollars to afford the A&F luxury brand is 5%:

- Top 5% of 12 million => 610 thousand core targeting
- The first year aimed target is 10% (61,000 people) of 610 thousand.
1.1.2. Growth:
Consumer spending on fashion products has grown at 7.1% annually from 2002 through
2010. This segment as anticipated would grow to $60 million in next 3 years. Also, the
population growth rate of 3 cities is: Mumbai (4.2%), New Delhi (21.0%), and Bangalore
(46.7%)
1.1.3. Trends:
Rising affluence has increased brand awareness among Indian consumers. According to the
“Nielsen Global Luxury Brands Study”, India is among the most brand conscious countries
in the world, with 35% of Indian survey respondents reporting to buy premium brands.
1.2. Product Lifecycle:
The American apparel industry has matured is growing at only 1.5% annually. The Indian
apparel is still in young phase and is growing at 20%, proving huge opportunities to people.
Even the market for A&F in US has saturated.
2. Customer Analysis
2.1. Market Segmentation Analysis
2.1.1.Geographic Analysis:
In India, 28% of people live in the urban areas.
2.1.2.Demographic Analysis:
The target age group of this brand 15-35 is 35% of the entire Indian population.
2.1.3.Customer Survey Analysis:
According the survey done in India amongst the youth (Exhibit 6), it was observed that they
like to spend on an average $100 a month for apparel. Even though they consider look and
feel of the product the most important factor while deciding what they buy, price is another
important factor.
3. Company Analysis
3.1. Company Strategy and Objectives:

Company’s main objective is to capture emerging markets growth for new customer types. It
also plans to expand product/service lines outside US/Europe core market and their limited
store outlets across the world.
3.2. Company Resources, Capabilities, and Competencies:
Company derives its capabilities from its strong brand portfolio, loyal customer base, and
premium quality clothing.
4. Competitor Analysis
4.1. Identifying the Competitors:
A number of global luxury and premium brands have opened their stores in India, the most
recent one being Zara. The other preferred global brands as seen from the consumer survey
(Exhibit 6) are Levi Strauss and United Colors of Benetton. These are also the only
multinational apparel brands to have posted more than $100 million in annual sales in India,
a result of more than ten years of activity in the country in each case. Tommy Hilfiger and
Guess, which are also a recent phenomenon in India, are good competitors of A&F.
There are a number of Indian apparel brands like Shoppers Stop private label, Provogue,
etc, but most of them do not operate under the same luxury and premium brand segment.
Although a competitor in the apparel market, they are not direct competitors of A&F.
Please look at Exhibit 1 for details on sales for year ending March’11 for each.
4.2. Evaluating Competitors Strategies and Resources
4.2.1. Competitors Strategies:
Zara: In line with its unique business model, to keep its customers hooked, the stores in
Delhi and Mumbai had different merchandise every few days after it opened its doors.
Benetton: It believes that design is essential for brand differentiation and does not change its
product line geographically. It has positioned itself as a colorful brand, which has worked
wonders for the Indian market.
Tommy Hilfiger: Its strategy is to bring the same international shopping, the same
collection, the same store look, and the same service standards as one sees in any big city in
the world to any Indian city.
Levi’s: Although Levi’s positions its brand consistently as premium, how that is defined
differs across countries because the price bands change to keep brand relevant locally.
Guess: The one aspect of Guess that the company believes distinguishes itself is that the
entire outfit is designed from an integrated perspective. So one can go into a store and buy an

outfit and complete accessories that were specifically designed for that outfit, unlike the
others which sell disparate accessories. The target audience for the brand is those "in the age
group of 18-35 in the A to A+ income category.
4.2.2. Competitors Objectives:
Zara looks at earning revenues of $500 million in India over the next 10 years or so and
plans to open at least 100 stores in India.
Benetton plans to touch $250 million in revenues in the next 4-5 years, growth opportunities
coming from smaller cities also, where it is expanding.
Tommy Hilfiger hopes to double its current revenues from India to Rs 600 crore over the
next two years. This will involve adding 30 stores to the existing 80. Tier-2 and Tier-3 cities
will also get more attention. Similarly with the growing Indian fashion market, other
competitors are planning to expand their business in India.
4.2.3. Competitors Strengths:
Zara's strength lies in its ability to quickly bring the latest designs to its stores rests on its
unique business model. Levi’s and Benetton strength is now in its supply chain as they have
been in India for more than 10 years now. Shopper’s stop & Provogue being local and
available in more locations draw more customers.
4.2.4. Competitors Weaknesses:
Most of these global brands face these challenges and hence have these weaknesses:
1. Due to fewer seasonal variations driving new fashions, every season hasn't been easy
for most of the global brands.
2. The sales are still slow because customers do not visit stores many times to update
their wadrobe.
3. Except Benetton, most of other brands do not offer traditional (embroidery) and
colourful stuff, which Indians prefer more.
4. Some of the competitors do not have good distribution infrastructure.
5. Context Analysis
5.1. Political and Regulatory Environment:
In India Single Brand product retailing has a 51% of FDI Cap. There are several ways like
Franchising, strategic licensing agreement, etc., for a company to invest in India. A&F will
follow the strategic licensing agreement mode for entry. A&F already has a manufacturing
partner Texport Syndicate in India (http://www.texportsyndicate.com/clients.html). It will
open stores in India by entering into a joint venture with them.

The company is also required to give an application seeking permission for FDI in retail
trade of ‘Single Brand’ products to the Secretariat for Industrial Assistance (SIA) in the
Department of Industrial Policy & Promotion.
There is a 41.5% tax on income for corporates.
5.2. Economic and Financial Environment:
Factors those affects the purchasing power of the customers and company’s cost of capital
are high rental in upscale shopping malls, poor infrastructure which will limit people
reaching out to the stores, low income levels and cheaper alternatives available
5.3. Social and Cultural:
The demographics and cultural aspects of the country which will influence the customer
needs and market size are: more than 50% of population under 35yrs, more and more people
becoming fashion and brand conscious, exposure to international brands because of more
people travelling outside India, comparatively cheap and abundant labor.
5.4. Technological and Geographic Environment:
The market segment, to which the product is being targeted, has access to internet and media.
This will have impact on the promotional activities, including product range and price, and
hence must be chosen carefully.
MARKETING STRATEGY
1. Target Segment
Abercrombie & Fitch fashions are considered casual and are designed for the college-aged
lifestyle. Our target segment size is 0.61 million (5%) of 12 million potential customers from ages 15
to 35 years. In the first year, the aim will be to grab 10% market share from this 0.61 million market
segment size.
2. Positioning Statement
The company will position itself as an international near-luxury lifestyle brand and concept
by opening flagship stores in high-profile shopping centers in major cities first and then
nationwide at a deliberate pace.
For product differentiation, we will offer products as ‘Near-luxury’ and ‘Casual Luxury’. The
term ‘casual luxury, is a fictional dictionary term with multiple definitions such as "using the
finest cashmere, pima cottons, and highest quality leather to create the ultimate in casual,
body conscious clothing" and "implementing and/or incorporating time honored machinery
...to produce the most exclusive denim".

MARKETING MIX
1. Product
1.1. Product Offering:
The Company’s sales associates and managers are a central element in creating the
atmosphere of the stores. In addition to providing a high level of customer service, sales
associates and managers will reflect the casual, energetic and aspirational attitude of the
brands. The brand will display merchandise to ensure a consistent in-store experience,
regardless of location. Store managers will receive detailed plans designating fixture and
merchandise placement to ensure coordinated execution of the Company-wide
merchandising strategy. In addition, standardization of each brand’s store design and
merchandise presentation will enable the Company to open new stores efficiently.
1.2. Product Features:
Apparel of Abercrombie & Fitch has an essence of privilege and casual luxury for a clean
and rugged inspiration to the youthful lifestyle.
We will maintain the same product features as in the American market. These features
include:
- the soft, supple material used in shirts and sweaters, which make them a pleasure to wear
- durable denim fabric Jeans that is rugged, yet sexy
- vintage polo, for men and women, created in a variety of colors and with varying sleeve
lengths
- short and slimming dresses with flowing fabric, which is fitting but not clingy
- pajamas of suede cotton, for men and women, for comfort
1.3. The Product Line:
A&F offers designer apparel for men and women, as well as accessories to compliment
outfits for any occasion. From the comfortable cotton underwear to the luscious smelling
perfumes and colognes, we have all angles covered for a night out on the town. Jackets,
underwear, swim shorts, t-shirts, and just about any other article of clothing that can be
thought of are found among the many of the company’s products.
The weather is hotter in India than in US, so we will increase the ratio of T-shirts, shirts and
polos and decrease the ratio of jackets. Also, jeans are very popular among our target
customers, so we will increase the ratio of jeans (Exhibit 4.1).
1.4. Brand Image:
A&F will maintain its brand image of being rooted in East Coast traditions and Ivy League
heritage, and be the essence of privilege and casual luxury. It will brand itself as timeless
and always cool; a brand which is classic, casual, confident, sexy, intelligent, privileged and
possesses a sense of humor.

2. Pricing
Pricing for A&F India will be based on a similar pricing model as seen in other countries and
will also be based relative to competitors’ pricing and our survey in India. Considering
A&F’s unique product and the income of target customers, prices for tops will be same as in
US market, which is 100% higher than the pricing points of Zara. Prices of bottoms should
be reduced by 20% from US market price, two-hold of the Levis price in India. A
price/marketing matrix for the introduction of A&F into India is found in Exhibit 4. The
initial market research and survey found in Exhibit 6 seem to re-affirm the price strategy.
3. Place/Distribution
A&F does not give franchise of its products. The first three strategic locations for flagship
stores will be – Mumbai (Palladium Mall), New Delhi (Select Citywalk Mall) and Bangalore
(Forum Mall), as these are the top three most populous cities in India, and also account for
most of the young Indian population. Delhi is the winter fashion capital of India whereas
Mumbai the summer capital. Bangalore, being the Silicon Valley of India, comprises of a
huge youth population and is the fastest growing city with more than 45% growth rate.
A&F will open its flagship store in the upscale shopping malls as listed in Exhibit 3, to
boost brand visibility to business people who have “global mind-set” and younger
generations who yearn for new lifestyle brand.
In India, mall culture has grown because people can now buy a variety of things from under
one roof. Many shopping malls have opened in the past few years which give customers an
international shopping experience. Many of the global brands and competitors of A&F have
opened their stores in big and small shopping malls in various cities.
A&F distributes through its 2 distribution centers, one in US and another in Europe. But
since A&F already has a manufacturing partner, Textport Syndicate
(http://www.texportsyndicate.com/clients.html), in India for both its men’s and women’s
segment in all its product lines, for the distribution of merchandise, A&F will use Textport in
Mumbai to save costs. It will strive to maintain sufficient quantities of inventory in the retail
stores and distribution center to offer customers a full selection of current merchandise. It
will attempt to balance in-stock levels and inventory turnover.
4. Advertising & Promotion
A&F will use customer’s in-store experience as the primary vehicle for communicating the
spirit of each brand. The store design, furniture, fixtures and music, as uaual, will be
carefully planned and coordinated to create a shopping experience that reflects the
Abercrombie & Fitch lifestyle. Our marketing strategy will emphasize the senses to reinforce
the aspirational lifestyles represented by the brands. A&F will also engage its customers
through social media and mobile commerce in ways that reinforce the aspirational lifestyle of
the brands.

4.1. Communication Mix:
A&F will pursue both mass markets (eg TV commercials, magazines, billboard) to build
brand awareness and target market (Direct mailing, launching show etc) approach to
accomplish aimed sales goal. Therefore, it will highly emphasize its brand identity to target
upper-class families. As it has created a lifestyle based on a preppy, young Ivy-league
lifestyle worldwide, its Indian retail stores will show this style through their luxury store
environment, admirable store associates (models), and their black and white photographs
featuring young people living Abercrombie lifestyle.
Since, for a fashion brand in India, TV and fashion magazines & newspaper are the best ways
of promotion, A&F will advertise through TV commercials, leading fashion magazines
(Vogue, Femina, FHM, The Times of India). Celebrities endorsing the brand will be young
models Ranbir Kapoor & Genelia d'souza (Exhibit 5). For efficient target marketing
approach, A&F will kick off “Special launching show” in hot spots. In tradition with its
opening and other events, the company will hire attractive male models during the opening
and holidays to stand at the store entrances shirtless to attract consumers inside.

Financial Business Analysis
1. Assumptions
1.1 Purchasing Amount & Number of Visits
Based on survey, the average visit per year for a person to buy clothes is 7.66 and half of
them said that they go shopping once a month. Our survey target was focused on future
potential customers, who are wealthy and have an experience to buy foreign brands. We
conclude that their visiting number is not small compared to western countries. (Exhibit 7)
Based on the above data and normal fashion brand experience, we assume that in first year,
visiting/year is regarded to 2 and average purchasing amount from $40 to $50 depending on
cities income status and our survey (Rs 2000~3000: 57.8%). Also, we calculated that sales
composition of men and woman’s cloth would be 53% vs 47% based on cities’ population of
15~35 years old customer. (Exhibit 8)
- Change of Visit number: from 2 to 4 (2013~2015)
- Average Purchasing: adapted of inflation rate of product in India (9.6%)
- Purchasing Power Difference: Mumbai > New Delhi > Bangalore (100 : 90 : 80)
1.2 Promotion
Our budget of first year will be $2,053 thousand that is based on following the detail-
marketing plan. With this budget, we are targeting to acquire 0.5% of $12 million in 2012.
Then, following each year we are planning to increase marketing budget 10% more than
previous year.(Exhibit 9)
1.3 Others
Based on our survey, we expect that the proposition of male customer would be 53% and
female would be 47%. This will decide how to prepare the quantity of goods and VMD.
Moreover, other accessary such as socks, mufflers, innerwear and perfume will consist of
10% of sales volume. In the point of variable cost, we applied 45% of total sales based on
Income Statement of 2010 Abercrombie & Fitch.
- Customers breakdown: Male vs Female = 53% vs 47%
- Other sales (Accessary, Perfume and etc.) is 10% of total sales
- Variable cost is 45% of total sales (based on I/S of A&F)
2. Analysis of NMC, NPV
2.1 Customer forecast
Based on our survey, we anticipate that our target customers, who are from 15~35 years old,
will be 12,188 thousand (35% of total population) in three cities. But since a good portion of
this population will buy from other brands due to image and price, we should focus on just
top 5% (Potential customers) who can afford to buy global brand. However, in the first year

we want to grab 10% of this market, based on other global brands (Tommy, Zara, Benetton)
market share in India (Exhibit 10). Hence, we have:
- 3 cities: 35% of 34 million between age 15-35 => 12 million
- Top 5% of 12 million => 610,0000 core targeting
- The first year aimed targeting is 10%(61,000 people) of 610,000 target
- Growth population rate of 3 cities: Mumbai (4.2%), New Delhi (21.0%), Bangalore
(46.7%) => applied to following year figure
2.2 Performance forecast
Based on above assumptions and analysis, we have the performance forecast index. Because
of initial high marketing expense, our NMC, ROS is low but in following years output is
getting better. If we acquire more than 0.3% of market share of total customers, we are far
above the break-even point under this marketing budget plan (Exhibit 11).
- Total sales: T/purchasing amount * Target customers ($5,579 thousand in 2012)
- Net Marketing Contribution ($1,015 thousand), ROS (18%), ROI (49%)
- B.E.P M/S: 0.3% (41,000 customers)
2.3 Net Present Value
Based on above assumptions and analysis, we figure out EBITA, EBIT, NPV, and IRR. Our
total initial investment will be $4.1 million (Rent Fee + Marketing Expense) and with 13%
WACC, 4% working capital and expected revenue, we anticipate that NPV of launching
project turns out 1.5M and IRR 19% which is 6% larger than WACC. Therefore, this
investment is acceptable in the financial point of view. However, besides financial meaning
now is the perfect time to penetrate into immature India market and can capitalize valuable
customers in advance. (Exhibit 12-15)
- Initial Investment: Rent Fee 3years ($2,1M) + Marketing Expense ($2,0M) = $4,1M
- Revenue: increase from $5.5M to 27.8M (5years/3stores) and expected perpetual rate
1.5% based on market average
- WACC: 13.0% (apparel sector average 9.25% (Exhibit 3) + additional risk 3.75%)
- Working capital: 4% of annual revenue and changed same rate as revenue growth
- COGS and Other Expenses calculation: based on 10K of Abercrombie & Fitch
(Below 36.2%, 45.8%, and 11.6%)
Timelines
In India, we are planning to launch A&F on November in 2012. For soft and successful brand
landing, we have a specific implication plan necessary to start our business:
1) Store set up: From Jan to Aug
- Main implication: Location scout / Sing lease / Build out
2) Marketing: From Jan to Oct

- Main implication: Scout agency / Web setup / Online MKTG / Pre-launch MKTG
3) Administration: From Jan to Oct
- Main implication: Team building / Hire & train staff / Other
4) Logistics: From Aug to Oct
- Main implication: Inventory
Among those activites, the most crucial thing is to estabilsh perfect interior and VMD in the
selected stores in the 3 cities. Moreover, based on our marketing plan, we select an agency which
can make the best performance for us. At the same time, we will build our Indian organization
and hire experts in marketing, sales, and merchandising part.
Conclusion
Project turns out 1.5M and IRR 19%, which is 6% larger than WACC. Therefore, this investment
is acceptable from the financial point of view. However, besides financial numbers, now is the
perfect time to penetrate into the immature India market and can capitalize valuable customers in
advance. In the long-term strategy point of view, we can leverage India market as a global
production and sales base camp in Asia, which means we can save distribution cost to Asian
countries store using our production manufacture line in India and we can trade off our stuck
domestic sales with success in sharply increasing market.

Exhibit 1: Competitors
* Sales and other data
Brand Annual Sales Point of Sales Entry Mode
Benetton 128 425 Franchise
Guess 24 24 JV Planet Retail group
Levi Strauss 125 250 India Ltd
Tommy Hilfiger 60 80 JV Arvind Limited
Zara 5 7 JV Trent Limited (tata)
Shopper's Stop 67 46 Local
Provogue 22 350 Local
Few sources for competitors’ data:
http://www.warc.com/LatestNews/News/Levis,%20Benetton%20enjoy%20success%20in%20India.news?I
D=25962
Benetton:
http://articles.economictimes.indiatimes.com/2010-04-15/news/27584311_1_brand-united-colors-sisley
Zara: http://www.forbes.com/2010/07/29/forbes-india-zara-business-model-tweak.html
Levi’s: http://business.in.com/printcontent/17422
TM: http://www.business-standard.com/india/news/qa-fred-gehering-ceo-tommy-hilfiger-group/448603/
http://www.moneycontrol.com/news/business/tommy-hilfiger-bets-bigindia-arvind-jvwin-win-
deal_592754.html
http://www.desicreative.com/?p=2270
Guess: http://in.reuters.com/finance/stocks/GES.N/key-developments/article/2330543
http://www.rediff.com/money/2005/sep/17spec1.htm
Provogue: http://www.thehindubusinessline.com/features/investment-world/market-
watch/article2540622.ece
http://www.sharekhan.com/stock-market/news/Provogue-India-Q1-net-profit-declines-9-/49ea9a8f-f339-
4ce2-9ab8-8e95fc265311/MustKnowNews/161/News.htm
http://www.fashionunited.in/news/apparel/provogue-indias-q2-profit-down-to-rs-891-cr-141120112731
SS: http://corporate.shoppersstop.com/investors/annual-report.aspx
0
50
100
150
Benetton Guess Levi
Strauss
Tommy
Hilfiger
Zara Shopper's
Stop
Provogue
Annual Sales ($ million)

Exhibit 2: Competitors Stores
Levi’s Store in Bangalore
Benetton
Zara @
Phoenix Mall in Mumbai Select Citywalk Mall in Delhi.

Tommy Hilfiger in New Delhi: Tommy Hilfiger in Bangalore:
Shopper’s Stop in Bangalore:
Provogue:

Exhibit 3: Shopping Malls
Mumbai – Palladium Mall
New Delhi – Select Citywalk Mall

Exhibit 4: Competitors’ price / relative price
Above
Matrix
US price for each Brands for each categories
Below
Matrix
From left to right
1 Indian Price from company web site
2 Price(Rupee) = exchange rate X US price
3 Rate = 1/2
Insight
a Zara gains higher profit because they sells well in Tops category
b Levis gains higer profit because they sells well in Bottoms category
c Tommy: they don't have company web site to show their price in Indian
Market. Just using distributer to expand its business
Pricing strategy
Short 1 A&F gains shres of Levis in tops category so soon, so we will set Indian
Price($)
Clothings / Brand Zara Tommy Levis A&F
T-shirt (M) 16.9 49(39) 28 30(20)
s
T-shirt (F) 19 30 28 38
Long shorts 25.9 59(39) 78 40(28)
Long shorts 17 59 64 68(34)
Jacket (M) 129 250(230) 78 250(175)
Jacket (F) 129 179(159) 88 170
Jeans (M) 79.9 59(58) 58 78
Jeans (F) 49.9 59 58 78
Price(R) exchange rate $1=R50
Clothings / Brand Zara ex rate *
price(R)
rate Tommy Levis ex rate *
price®
rate A&F
[Relative Price]
ex rate *
price®
rate
T-shirt (M) 1,690 845 200.00% 200 999 1400 71.36% 1500 1500 100.00%
T-shirt (F) 1,690 950 177.89% 799 1400 57.07% 1900 1900 100.00%
Long shorts (M) 1,790 1,295 138.22% 400 2,299 3,900 58.95% 2000 2000 100.00%
Long shorts (F) 1,990 850 234.12% 1,599 3,200 49.97% 3400 3400 100.00%
Jacket (M) 5,990 6,450 92.87% 650 4,599 3,900 117.92% 7500 12500 60.00%
Jacket (F) 8,990 6,450 139.38% 2,999 4,400 68.16% 6800 8500 80.00%
Jeans (M) 3,690 3,995 92.37% 650 6,000 2,900 206.90% 3120 3900 80.00%
Jeans (F) 2,290 2,495 91.78% 2,299 2,900 79.28% 3120 3900 80.00%

term price as same as in US in this category
2 A&F gains shares of Zara in Bottoms category, so we will set Indian
price as sama the in US in this category.
3 Due to weather condition, we assume that we will not sell well Jackets
in Indian market
4 TO boost revenue in Bttoms category, we set price lower than in US
market to gain short term revenue in Bottoms category
Long
term
1 After gaining share of Levis in Tops category, we can gain shares of
Zara
2 After gaining share of Zara in Bottoms category, we can gain shares of
Levis
Exhibit 4.1: Product Mix

Exhibit 5. Promotion
Male Model: Ranbir Kapoor
Female Model: Genelia d'souza

Exhibit 6: Survey Result
Total Surveyed = 75
1. Had you heard about Abercrombie & Fitch before?
Response Percent Response Count
Yes 58.70% 44
No 41.30% 31
2. A&F operates some 1,070 stores in North America, Europe, and Japan and also
sells via its catalogue and online. It is now planning to open its flagship stores in
India. Are you excited about this?
Extremely Excited 12.00% 9
Very Excited 17.30% 13
Moderately Excited 41.30% 31
Slightly Excited 17.30% 13
Not at all Excited 12.00% 9
3. The company plans to open stores only in the metros in the first year. Do you
think you will make special plans to visit the stores?
Extremely likely 10.70% 8
Very likely 20.00% 15
Moderately likely 36.00% 27
Slightly likely 16.00% 12
Not at all likely 17.30% 13
4. What is your expectation from this new brand in India?
Fashionable stuff 32.00% 24
Affordable price 36.00% 27
Buying experience 13.30% 10
Luxury & Brand name 18.70% 14
5. Which other brand(s) do you usually buy? (Answer as many as possible)
Levi Strauss 84.00% 63
Benetton 64.00% 48
Tommy Hilfiger 42.70% 32
Guess 22.70% 17
Zara 17.30% 13
Other (please specify which one) 11

6. Which is your favourite global brand in India?
Levi Strauss 40.00% 30
Benetton 18.70% 14
Tommy Hilfiger 16.00% 12
Guess 2.70% 2
Zara 9.30% 7
Other 13.30% 10
7. What is your biggest concern when you buy apparel?
Price 20.00% 15
Brandname 10.70% 8
Feel and look 58.70% 44
Fabric quality 10.70% 8
8. Where do you often go for your apparel shopping?
Shopping malls 69.30% 52
Retail outlets 30.70% 23
Online 0.00% 0
9. How much do you usually spend on clothing every month?
Rs. 2,000 - 3,000 58.70% 44
Rs. 3,001 - 4,000 14.70% 11
Rs. 4,001 - 5,000 12.00% 9
Rs. 5,001 - 6,000 10.70% 8
Rs. 6,001 - 7,000 1.30% 1
Rs. 7,001 - 8,000 2.70% 2
10. How often on an average do you buy clothes?
Once a month 42.70% 32
Twice a month 17.30% 13
Once in 2-3 months 29.30% 22
Once in 4-5 months 10.70% 8

Exhibit 7: Average Store Visit
(Unit: Visit)
Average Visit Number Response Average
Once a month 12 42.7% 5.12
Twice a month 6 17.3% 1.04
Once in 2~3 months 4 29.3% 1.17
Once in 4~5 months 3 10.7% 0.32
Total 100.0% 7.66
Exhibit 8: T/purchasing of 3cities
(Unit: US $)
Year 1 Visiting/year A/Purchasing T/Purchasing Men's Woman's
Mumbai 2.0 50 100 54% 46%
New Delhi 2.0 45 90 53% 48%
Bangalore 2.0 40 80 54% 46%
Total 6.0 135 270 53% 47%
Mumbai 3.0 55 164 54% 46%
New Delhi 3.0 49 148 53% 48%
Bangalore 3.0 44 132 54% 46%
Total 9.0 148 444 53% 47%
Growth Rate 50% 9.6% 64%
Mumbai 4.0 60 240 54% 46%
New Delhi 4.0 54 216 53% 48%
Bangalore 4.0 48 192 54% 46%
Total 12.0 162 649 53% 47%
Growth Rate 33% 9.6% 46%

Exhibit 9: Marketing Budget & Expenses
Year Budget Target M/S share
Year 1 2013 2,053,000 0.5%
Year 2 2014 2,258,300 0.7%
Year 3 2015 2,484,130 0.9%
(Unit: '000 USD)
Method How T/Price Remarks
Mass TV Commercial Star / S.E.T 1,080 20sec ($9,000) * 5time/Week* 3 Months
Magazine Fashion / News 500 Vogue, Femena, FHM, The times of India
Celebrity Marketing Ranbir Kapoor 250 250 / Year - Male Model
Genelia d'souza 150 150/ Year - Female Model
Outdoor Billboard 1Year Contract 19 2 Wide Billboard / Each city (16ft*16ft)
= $277 *2*3*12
Target Store Direct Marketing 15 5/One Shop (Free gift, Model)
On-Line Marketing
A&F
Homepage
5 India Version
Launching Show Hot Spot 30 Hotel. Club
Direct Mailing Catalog 4 Expected customers (61,000)
Initial Marketing Expense 2,053
Exhibit 10: Target Customers
(Unit: '000 people)
2013 2014 2015
Mumbai 4,841 5,044 5,256
New Delhi 4,398 5,320 6,435
Bangalore 2,949 4,326 6,345
Total Customers 12,188 14,689 18,036
Target M/S % 0.5% 0.7% 0.9%
Mumbai 24 33 47
New Delhi 22 35 58
Bangalore 15 28 57
Target Customers 61 95 162

Exhibit 11: NMC, B.E.P M/S%
(Unit: '000 USD)
2013 2014 2015
Mumbai 2,420 3,953 6,875
New Delhi 1,979 3,752 7,576
Bangalore 1,180 2,712 6,640
Total Sales 5,579 10,416 21,091
Variable cost 2,511 4,687 9,491
Variable cost/Customer 0.09 0.11 0.13
Marketing Expense 2,053 2,258 2,484
Total cost 4,564 6,946 11,975
NMC 1,015 3,471 9,116
ROS (NMC/Sales) 18% 33% 43%
ROI (NMC/MKTG) 49% 154% 367%
Average Price 92 109 130
B.E.P Customer 41 38 35
B.E.P M/S % 0.3% 0.3% 0.2%
Exhibit 12: Net Present Value
(Unit: in thousands of USD) Perpetual
Year 2013 2014 2015 2016 2017
Revenue 5,579 10,416 21,091 25,309 27,840
87% 102% 20% 10% 1.5%
Store Operation Plan 3 3 3 3 3
Sales/Store 1,860 3,472 7,030 8,436 9,280
Less:
Cost of Goods Sold 36.2% 2,020 3,771 7,635 9,162 10,078
Stores and Distribution Expense 45.8% 2,555 4,771 9,660 11,592 12,751
Marketing, General and Administrative
Expense 11.6% 647 1,208 2,447 2,936 3,229
Cash Operating Expense 93.60% 5,222 9,750 19,741 23,689 26,058
EBITDA 357 667 1,350 1,620 1,782
% 6.4% 6.4% 6.4% 6.4% 6.4%
Depreciation 100 100 100 100 100
EBIT 257 567 1,250 1,520 1,682
Tax 41.2% 106 233 515 626 693
NOPAT(Net Operating Profits After Taxes) 151 333 735 894 989
* Working Capital
Working Capital 4% 223 417 844 1,012 1,114
Change of WC 223 193 427 169 101

* Un-Leveraged Free Cash Flow
NOPAT 151 333 735 894 989
Depreciation 100 100 100 100 100
Working Capital (223) (193) (427) (169) (101)
Un-Leveraged Free Cash Flow 28 240 408 825 988
Total Cash Flow (4,159) 28 240 408 825 988 8,717
WACC (9.25+3.75) 13.00%
Time Period 0 1 2 3 4 5 6
Present Value (4,159) 25 188 283 506 536 4,187
NPV 1,565
IRR 19.90%
Exhibit 13. Store Size and Expected Rent Fee
Mumbai New Delhi Bangalore Remark
Store Size 12,000 10,000 15,000 Square Feet
RENT/Square feet 3.0 1.5 0.5 $/Monthly
RENT/Month 36,000 15,000 7,500 $/Monthly
RENT for 3years 1,296,000 540,000 270,000 $ for 3years
Total of 3cities 2,106,000
Exhibit14. INCOME STATEMENT (A&F_10K_34Page) 2010 2008
NET SALES 100.0 100.0
Cost of Goods Sold 36.2 33.1
GROSS PROFIT 63.8 66.9
Stores and Distribution Expense Other Operating Income, Net 45.8 41.2
Marketing, General and Administrative Expense 11.6 11.6
Other Operating Income, Net (0.3) (0.3)
OPERATION INCOME 6.7 14.3
Interest Expense (Income), Net 0.1 (0.3)
INCOME FROM CONTINUING OPERATIONS BEFORE
TAXES
6.6 14.6
Tax Expense from Continuing Operations 2.3 5.8
Net Income from Continuing Operations 4.3 8.8
LOSS FROM DISCONTINUED OPERATIONS, NET OF
TAX
0.0 (1.0)
NET INCOME 4.3 7.8

Exhibit15. Cost of Capital in Apparel (JAN. 2011)
Industry Name
N/
Firms
Beta
Cost of
Equity
E/(D+E)
Std Dev in
Stock
Cost of
Debt
Tax
Rate
After-tax Cost
Debt
D/(D+E)
Cost of
Capital
Advertising 28 1.79 12.26% 73.23% 97.15% 6.29% 12.86% 5.48% 26.77% 10.45%
Aerospace/Defense 63 1.15 9.04% 80.88% 63.51% 4.79% 21.10% 3.78% 19.12% 8.03%
Air Transport 40 1.21 9.32% 65.51% 69.26% 5.29% 22.30% 4.11% 34.49% 7.52%
Apparel 48 1.35 10.05% 86.36% 77.62% 5.29% 20.86% 4.19% 13.64% 9.25%
Auto Parts 47 1.78 12.17% 80.21% 85.62% 5.79% 13.45% 5.01% 19.79% 10.75%
Automotive 19 1.5 10.79% 47.94% 56.57% 4.79% 20.43% 3.81% 52.06% 7.15%
(Source: Cost of Capital by Sector: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm )
References:
http://www.censusindia.gov.in/2011-prov-results/census2011_PPT_paper1.html
http://www.davp.nic.in
http://www.dnaindia.com/india/report_35pct-of-urban-youth-spend-rs5000-a-month-on-apparels-
assocham_1569023
http://www.acnielsen.co.in/news/20080326.shtml
http://albertaretail.blogspot.com/2010/03/abercrombie-fitch-casual-style-for.html
http://www00.homepage.villanova.edu/anthony.bisnath/anfbusndescript.htm
http://albertaretail.blogspot.com/2010/03/abercrombie-fitch-casual-style-for.html
http://www.ice.gov.it/paesi/asia/india/upload/182/Textile%20Apparels%20%20&%20Clothing%
20in%20India.pdf

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