"Digital innovator" GAP looks to data science to drive customers across retail channels

Stuart Lauchlan Profile picture for user slauchlan March 1, 2018
Multi-channel, multi-brand customers spend up to ten times more than single channel, single brand ones, so understanding how to influence them is crucial at The GAP.


Tracking the ongoing digital transformation work at The GAP can be a frustrating business.

On the one hand you have CEO Art Peck boasting about the retailer’s status as a “digital innovator” and hear him talking through some snazzy work with data analytics.

On the other hand, this is an organization that is still only piloting Buy Online, Pick-Up In Store - and even then, only in two cities and with one of its three brands - which seems ridiculously over-cautious.

So which is the real digital GAP? The firm had a publicly-stated goal for its online and digital business to generate $3 billion by the end of last year. That was actually over-achieved by $100 million, with the final quarter of 2017 reporting 30% year-on-year digital revenue growth. Digital is now the highest return business for GAP, says Peck, boasting:

We have a history of being a digital innovator and we will continue to invest in this area given the outsized returns. This year, we delivered capabilities that continue to more effectively monetize visits. That's such things as, first of all, driving traffic. Secondly, improved conversion across a number of different facets of technical capabilities that we have. And the third is bigger baskets, among many. This is part of creating a unique and differentiated customer experience to grow our loyal customer base and encourage cross-channel and cross-channel/cross-brand shopping.

That’s important as there’s more to play for in bottom line terms if that cross-channel mix can be achieved, explains Peck:

We know that customers who shop across channels in a single brand are worth eight times more than the customer who only visits us in a brand, and that multiplies to 10 times more when they shop across channels and multiple brands. We are very focused on migrating our customers from single brand connections to multi-brand, multi-channel connections. These intentional investments are already delivering a great return.

Peck talks about investment in native mobile apps driving “meaningful mobile revenue growth across brands”, while investment in improved website speeds is paying off:

Site speed is critical to monetizing visits. We improved our mobile page loads down to 3-second page load timing and estimate this has delivered approximately $300 million of sales growth. Really, this is only the beginning, and there's nothing but opportunity in front of us. Customer behavior and customer activities continue to evolve rapidly and we remain confident that the investments to deliver a truly-differentiated customer experience across digital, mobile and stores will continue to deliver strong returns.

Driving the customer

Understanding how those customer activities are evolving is critical of course and this is where the GAP’s focus on data science and analytics comes into play. Peck explains:

We have pulled together, as we built some pretty significant analytics capabilities here, and data science capabilities, a view of the customer longitudinally that we've never really had before. That is across brands, across channels, across categories and divisions. We have a much better sense of, as an example, what's the first purchase that brings a man into Old Navy? What's the time you have to bring him back in, in order to begin engaging him and maximizing his value as a customer? What's the value of a customer…10x that is rather than a single brand, single-channel customer, a multi-brand, multi-channel customer?

We are able to start pointing our investment dollars from the standpoint of our marketing spend much more surgically at those customer value profiles. It is a level of precision that we are continuing to develop in customer acquisition, customer activation and purchase frequency. It is a level of precision that we have not ever had as a company and it is super exciting to continue to push down this path.

Such precision data both helps the GAP to understand its customers better, but also to assist in shaping and influencing their actions. Peck explains:

We built into our transformational objectives this year, across the entire portfolio, a migration goal, which is to say, how do we move a customer from being, number one, a single brand, single-channel customer to a multi-channel customer to a multi-brand customer to a multi-brand, multi-channel customer?

We know today what the value is of that multi-brand, multi-channel customer and we increasingly know how to move them down that migration path and very few of our customers are in that sweet spot. So we see it as a very significant economic and loyalty and engagement upside opportunity for the company.

It’s early days for such a strategy so judging its success or otherwise would be premature at present. But Peck sees the multi-brand nature of GAP - Old Navy, Banana Republic and GAP itself - as facilitating this initiative:

It is, I would point out, a structural advantage that we have with multi-brands, multiple brands and multiple channels. We can monetize a customer relationship much more extensively than a company that is a single-brand company and that we participate in more parts of their life.

People talk share of wallet. I call it share of life. And with our brands that span the family, which span work, which span active, value and premium, we have an opportunity to have a much deeper share of life than many of our competitors do.

The data is not the end all and the be all because the data always has to blend in with the art of the business. But the art and the science coming together, we believe that the product of those two things coming together is way more than the sum of the parts.

But then...

All of that is, as Peck keeps saying, “super exciting” stuff if it comes off. But as noted above, there’s a ying to the yang when it comes to other digital retail practices that really should be second nature to a supposed digital innovator, most notably around Buy Online, Pick-Up In Store (BOPUS). On this front, GAP looks and feels like its dragging its heels, with Peck sounding cautious:

It's really been in two cities so far and constrained to Old Navy. We put no marketing against it other than the availability as we see people geographically where they're coming in…the encouragement is the uptake, number one; number two, obviously, the number of people who then come into our stores and build a basket around something that they've already bought online or are picking up in the store, that's very encouraging.

But however encouraging it might be, Peck’s not going to be bounced into rolling BOPUS out any faster than he wants to:

We are going to operationalize it, both at the store level and the technical operationalizing it, which we're still working on, but it's been pretty seamless so far. As we get to the middle of the year, we're looking at a broader-based rollout in Old Navy and then we consider when we go to the other brands.

I don't have a hard schedule yet because we're just not there yet right now. The biggest issue is you're connecting digital to physical. When you go from 2D to 3D, there are always challenges, just to make sure the customer's experience really delivers the way that you wanted to deliver, and that's what we want to make sure we get right before we present it to all of our customers.

My take

The data science programs underway inside GAP are excellent exemplars of behind-the-scenes digital transformation of retail, stuff that’s not seen by the customers. Previously I noted that Peck had a bit of Rodney Dangerfield thing going, unable to get no respect as a digital innovator. There is a lot going on that does indeed demand respect. But equally there’s a laggardly pace on front-facing stuff that should be in place, such as BOPUS. More to come in 2018.

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