GAP CEO sees his retail assets as digital, data and real-world stores

Art Peck has something he needs to get off his chest. The CEO of The GAP wants you to know he’s had enough of a particular retail fallacy:

It perplexes me to continue to hear over and over that stores are a liability. They are an asset, not a liability.

In reality, that’s something we’ve been hearing more and more from traditional retailers as they move past Amazon-myopia to realize that their real estate has a vital role to play in the omni-channel mix. But Peck is keen to emphasize the idea:

If you have got a store in a dying mall, that store needs to go away, and that's the work that we have got on early, and we will continue. But the simple factor is that most apparel is still sold in stores, and will continue to be sold in stores.

Which is not to say that online doesn’t matter of course. GAP’s own online business is on target to deliver $3.5 billion in revenues this year, notes Peck. But what’s most important to recognize that the definition of shopping continues to evolve, he explains:

[The customer] wants to do more than just walk in, pick a product, and exit. She wants to find something online and pick it up in a store, be checked out in the fitting room, will place an online order in a store. It's important to continue to emphasize that we are delivering a suite of capabilities for her to shop and engage with our brands today the way that she wants to. Stores are the deepest form of customer engagement. And one thing the industry is not talking about, which is super important to me is that they are source of an immense amount of customer data.

Data-driven

Data is something that GAP has a particular feel for, claims Peck, unsurprising given its San Francisco headquarters:

I sit here on the Bay Area surrounded by 'New Economy' companies whose entire business model is data. They know that data is a scalable asset and the more that you have, the more value you can extract. Because of our size and our scale, we have an immensely valuable data asset that we're just beginning to exploit.

We have two billion customer visits across our brands and channels. We have a co-branded and private label credit card that gives us great intimacy with those customers. We have customer information captured in our stores, and in the subset of our brands and stores, we have client telling. The value of converting all of this data to insight and action is huge. A simple example is that migrating just one percent of our single-visit customers to be multi-channel, multi-brand represents $200 million of top line on an annual basis.

One way we're doing this that is encouraging our customers to shop across our brands and channels is through a multi-tender loyalty built on the back of our data assets called BRIGHT. This quarter we expanded the program across all brands in California, and the early results have been very positive with over a million new members, and will continue to test and expand as we gain experience in how to best optimize and frankly monetize this program.

There have been a number of successful data-centric initiatives across the GAP portfolio, he adds, bringing demonstrable ROI:

We now have a longitudinal 360 view of our customers through data and analytics. We're leveraging this into personalization to create a more relevant digital experience. The rollout of personalization features across our brands is being staggered as we continue to learn more and operationalize it, but we have already deployed personalized experiences to over 250 customer segments, which has resulted in a 5% improvement in conversion when compared to a non-personalized experience.

We're also using data and knowledge of our best customers and have moved the majority of our marketing spend into digital channels where we can be surgical in acquisition, activation, retention, and frequency. It's driving a growth in our customer file, growth in our traffic and growth in our business. And it's improving the productivity of our marketing spend at the same time.

In-store

Back in the stores, tech investment is a priority, says Peck:

We are bringing technology to bear to solve some old-fashioned problems; simple things like I can't find my size, style, color combination. This ‘not being able to find your size’ is one of the customer's biggest frustrations, and to address it, we just rolled out what we call an In-Stock On-Shelf app, which informs proactively the store associates on their mobile device when items need replenishing. I think about it as getting the benefits of RFID without the expense and hassle of RFID. After deploying the solution in all US. GAP stores, the rate at which an item is available in the store but not on the floor, decreased from 40% to just 1%. This satisfies the customer, drives conversion, and increases labor productivity.

The mobile app is also delivering value as new functionality is added:

This is important, because [the customer is] not just using this at home, she's using it in our stores. We launched a scanning feature within the app that lets the customers easily scan a barcode to read reviews, find additional sizes and colors, and if the item isn't available in her size or color in the store, then have it shipped to her home. This work is driving increased customer engagement and sales via the mobile app in the first half of the year more than doubled compared to the first half of last year.

Meanwhile Old Navy, the GAP brand that’s had the least online activity to date, Buy Online, Pick-up In Store capabilities have now been rolled out, says Peck:

We have seen customers using it and, quite honestly, absolutely loving it. Early response has been super positive with about 20% of the customers making additional purchases once they are in the store. And nearly 20% of the customers using the service were customers new to a multi-channel experience, meaning they previously had shopped either online or in-store, but not in both. We know the value of a multi-channel consumer, and this behavior results in a more loyal, more valuable customer.

And it’s a customer who is both digitally and physically engaged, he concludes:

We are really super excited about the integration of the digital into the physical, and the fact that really one plus one is, we believe, way more than two, as those businesses come together and create converged experiences.

My take

Peck is preaching our omni-channel gospel.