Can omni-channel save the day as GAP slips on a banana skin?

Profile picture for user slauchlan By Stuart Lauchlan November 19, 2015
Summary:
If we build it, they will come, reckons GAP CEO Art Peck, but will the firm's omni-channel strategy help turn around the ailing brand?

GAP
The GAP

When it comes to omni-channel retail, we’re forever being told how customers are going online to check out products, styles, reviews and so on, becoming more informed buyers before even beginning the purchasing transaction.

But there’s a flip-side to this as well of course, which sees the retailer going online to source knowledge of existing and prospective customers attitudes, needs and reactions to the products on offer. That can inevitably make for uncomfortable reading, as it most assuredly does for GAP CEO Art Peck.

GAP’s just turned in some pretty awful numbers. Overall sales were down 4.% last quarter. Only the Old Navy low-end brand managed growth of 4%, but this was heavily offset by a 12% decline reported by high-end brand Banana Republic.

It’s all a sorry tale for one of the US’s most iconic retail brands. The firm has already announced plans to close 175 stores and is looking to online sales for growth. But the major problem for the firm is that customers, particularly women, have fallen out of love with both GAP itself and Banana Republic and are turning to the likes of H&M and Zara for more fashionable clothing.

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What the customers say

That’s the clear message that Peck will be finding when he ventures online. He argues that this information is useful:

Let me make something very clear. We know what the issues are with our products and we’re addressing those pretty systematically. I spend a lot of time reading reviews of our product online. And our customers are very clear in telling us what we’re doing well and what we’re not doing well.

While efforts are underway to revamp GAP and Banana Republic’s styles, the group has been drawing in its horns. Last year saw a hugely expensive TV campaign to try to push the GAP brand. That won’t be the case this year. Marketing expenses have already been slashed by $34 million to a $142 million over the past quarter. Peck says:

I am a big believer in what history shows us. As we improve our products, we don’t plan on making huge marketing investments as we get into the beginning of next year. I think that’s imprudent. You improve your product, the customer discovers it; you start to see conversion move on the basis of the traffic that you have in the store.

If we build it, they will come? That’s a theory that belongs back in the early days of dot com version 1 surely? But Peck insists:

Word of mouth, these days, it’s a super powerful form of marketing. If you just think about Instagram and Pinterest and the other social media, that’s a very powerful form of marketing. And that will start to bring traffic in.

Omni-thinking

Peck does point to omni-channel success around the firm’s mobile initiatives:

To me the big issue and the big opportunity, and it’s both an issue and an opportunity, is the continued growth of mobile traffic. Anybody who is telling you the truth will tell you that it’s become probably a majority of their traffic, growing very, very fast. So we are really aggressively focused on making sure that as our traffic pivots from a desktop or a laptop or even a tablet onto a mobile device and that we’re able to monetize that traffic.

That means rethinking the customer experience, he explains:

We continue to push aggressively on, starting with responsive design that delivers a great mobile experience off of one website, but then making sure that the shopping experience is easy, greater use of imagery versus text, a great checkout experience, capital applied promotion capabilities which we put in place.

And so making sure that the experience is both emotional, immersive and aspirational on a mobile device as a brand experience, but also transactionally efficient as a customer buying on the mobile device. That’s probably the biggest opportunity that we’ve got right now, and we’re very aggressively focused on it.

It’s moving very quickly. We’re excited about it. Our traffic is growing but the mobile device experience is different than a desktop experience. And we need to make sure that we can make money there in the same way that we can make money on the other real estate.

But away from the omni-channel investment, there’s a deeper malaise troubling GAP. Peck insists that lessons are being learned and that there is reason to be hopeful:

We are essentially lifting processes and capabilities from Old Navy and installing them in GAP and Banana Republic. I’ve seen the product in spring now and in summer across all of the brands, and I’m really excited about how we’ll be back on track in spring and beyond, next year.

My take

As someone who can happily spend a small fortune in Banana Republic, the fact that GAP overall is slipping on this particular banana skin troubles me.

There’s a lot of work to be done to turn around the firm and I’m deeply unconvinced by the ‘build it and they will come’ philosophy espoused by Peck.