GAP's new CEO faces major omni-channel challenges - and that's before Coronavirus shut the offline stores

It’s fair to say that 2019 was a tumultuous one for The GAP. A plan to spin off its most successful brand, Old Navy, and set up a new entity called NewCo to deal with GAP itself and Banana Republic crashed and burned by the start of this year. The collapse of that gambit came after the sudden departure of CEO - and digital champion - Art Peck, leaving the firm in limbo as it entered 2020.

A full time replacement to Peck has now been appointed and, perhaps unsurprisingly, the company has turned to Old Navy to find the best candidate in the shape of that brand’s Chief Executive  Sonia Syngal. Syngal is a 16 year veteran of The GAP, having been MD for the European business and Senior VP for GAP Inc.’s International division and International Outlet division as well as her most recent role at Old Navy.

Prior to joining The GAP, her CV makes for interesting reading. For example, she headed up manufacturing, logistics and supply chain at Sun Microsystems and had various roles in engineering and product design at Ford Motor Co. So what makes her the right choice to turnaround The GAP? Interim CEO Robert Fisher points to her success at Old Navy:

Sonia led Old Navy from $7 billion to $8 billion in sales between 2016 and 2019, expanding its North American presence to over 1,200 stores in the US, Canada and Mexico, scaling its e-commerce site to the number 4 largest apparel site in the US and building competitive omni-channel capabilities. Sonia has a deep understanding of what drives performance and productivity, always focused on continuous improvement. This is why she is the right leader for this organization at this transformative time..Sonia is someone who can hit the ground running, and she already has.

OK…so what does Syngal intend to do to rescue an iconic US retail brand whose fortunes have been declined so badly? Peck understood the importance of omni-channel thinking and certainly never stinted on digital transformation spend and push. The problems the firm has faced aren’t down to lack of understanding what needs to be done on that front.

The new CEO begins with an attempt to spin the abandoning of the Old Navy spin-off and the creation of NewCo as a positive learning experience:

We've just come off completing a substantial body of work that began as we prepared for the separation, which will enable us to accelerate cost transformation. We're entering the year with the benefit of knowing this company better and more objectively than we ever have known. Culturally, we identified bureaucracy, complexity and misaligned incentives, and in some cases, lack of accountability. Across all facets of the organization, we now have a far more realistic assessment of how we can be more efficient, where we can be faster and where we may need to invest to win.

Tackling problems always requires acknowledging their existence in the first place, so there’s merit in what Syngal says here. But having accepted the shortcomings, what are the positives? She argues:

We have undeniably strong assets, and it starts with our brands. Old Navy is the Number 2 largest apparel brand in the US and Athleta is one of the fastest growing brands in the ‘athleisure’ sector. And we have strong brand equity in GAP and Banana Republic. Our customers and data: we have about 60 million known active customers, one of the largest customer files in the industry. Yet, we're early days in maximizing the value of these relationships. Our e-commerce business - we were early to e-commerce, and the global online business generates over $4 billion in sales. It's a profitable business for us, driving outsized growth with much runway ahead. And our sourcing, logistics and IT networks - they provide us portfolio capabilities and significant scale advantage

So what's gone wrong? 

But, but, but, with all those assets to hand, what’s gone wrong? Syngal states bluntly:

Simply put, we have fallen short in execution and have not fully monetized our brands, our assets and the capabilities we have been investing in.

On that basis, the e-commerce point is a case in point. Under Syngal, Old Navy, as noted, grew to become the fourth largest retail apparel site in the US. She also pushed through omni-channel capabilities that other parts of The GAP portfolio have struggled to deliver, such as Buy Online, Pick-up In Store capabilities. Expect her to focus on applying the lessons learnt at Old Navy to the rest of The GAP empire.

Also watch out for more emphasis on investing in data and analytics. Old Navy has data on 45 million customers that it has begun to exploit. Again, replicating this across the rest of the portfolio is likely to be a priority. The GAP brands need to get a lot better at segmentation and personalization. From a personal point of view, I get regular online outreach from Banana Republic, but most of it is very hit-and-miss when it comes to being appropriate. For example, do I really need to be sent excited missives about the latest Women’s sale offers? I’ve literally never bought anything from Banana Republic’s Women’s department. There’s a lot of catch-up work to be done here.

My take

Only weeks into her new role, Syngal inevitably talks up her confidence in what can be done:

The playbook for strong brands is clear. We know how to do this. We've done this for Old Navy with the clarity of the democracy of style and executing flawlessly at every touch point with the customer against that ‘North Star’.

That said, the challenge she faces is an enormous one - and not helped by the external pressures brought about by the Coronavirus. Getting online in shape takes on a new urgency - all GAP, Banana Republic and Old Navy stores have been temporarily shuttered in the US as of yesterday.  

As an aside, The GAP made another important appointment to coincide with Syngal’s new role. Starting next week, Bobby Martin takes on the role of Executive Chairman. He’s been a member of The GAP board of directors since 2002, but what’s most interesting is his retail sector background, most notably his time as President and CEO of Walmart International. His experience should in theory be a strong complement to Syngal.

One to watch across 2020 - as I said at the end of 2019, this is going to be tipping point year for an American retail institution…one way or another.