The Gap in trouble - can digital fashion a new future?
- Summary:
- Can omnichannel and digital investment help to turn around fortunes at the Gap? The group's various brand owners think it can
After 13 straight months of declining same-store sales, the Gap this week bowed to the inevitable and announced it will close 175 of its 675 name-brand stores in North America and cut about 250 corporate jobs.
When the cuts are complete, Gap will retain about 500 specialty stores and 300 outlet stores as well as a significant investment in omnichannel retail.
As the news sank in, the retailer’s senior management spoke to analysts in a bid to calm nerves and articulate its turnaround strategy, a session that began with the inevitable ‘sorry’ as CEO Art Peck said:
I hate closing stores, I hate the idea of closing stores, because I hate the idea of denying our customer the opportunity to shop in their favorite Gap store.
But he admitted:
Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers.
We have a terrific global platform from brands, across geographies and channels, specialty, digital and outlets, and is something that we remain committed to.
We are a fashion apparel company and we are a retailer. And today the conversation is going to be distorted towards us as a fashion apparel company, because frankly, all the rest of it, global growth, digital, everything else that we are doing doesn’t matter if we aren’t better and more consistent at the product that we put in our stores.
A key part of this will be a continued focus on digital transformation of the firm’s retail business model. Peck said:
We are heads down on continuing to pursue our omnichannel initiatives. They continue to pay for us across our stores in North America. This is something that is really on my mind, which is mobile. To me mobile is really the most profound change in the digital space that maybe any of us will ever see as we work in retail.
That’s because mobile technology is both pervasive and persistent, he added:
Five years ago [our customer] wasn’t carrying a desktop or a laptop computer into our stores and so her digital experience was fundamentally separate from her physical experience.
Today the opposite is true. She is bringing those two experiences together and it creates for us the opportunity to allow her to create customer experiences that are different than has ever been there before. This device is profoundly connected to an infinite amount of information and to be able to bring that together with the traditional store experience really has tremendous opportunity for us.
Our strategy has been to build capability to allow us to zig and zag with the customer as she discovers what those experiences are as digital and physical bang together.
Across the Gap
Gap is of course made up of a number of different brands, ranging from Banana Republic at the high end through the main Gap brand down to Old Navy at the basic end. Each has its own customer demographic to target and as the group looks to reinvigorate its fortunes it’s drilled down on understanding more about the various customers.
Jeff Kirwan, Global Brand President, Gap, explained who his targets are:
The 25 to 35-year old female customer for Gap thinks that she has got her style pretty well down. She feels pretty, she feels feminine, she knows how to shop and she wants to be taken a little bit more seriously. The 35 to 45-year old female who wants to participate with our brand when we are at our best. She is already taken seriously, but she wants to feel feminine and pretty.
Customers who are in that age group and we want to go after and acquire, they’re evolving their own kind of individual style. So they’re getting inspiration from everywhere, from friends, socially, digitally, globally now and they are pulling in all of this inspiration. But what they want to be able to do is express their own individual style.
Up at Banana Republic, Global President Andi Owen is also focusing on customer inspiration:
Our customers are moving a lot in their devices and we are all moving online on their devices to clearly go for inspirations as how to connect with our friends and family, as how to connect with their brands and how to get earned promotions. So to us, shifting our marketing mix into digital isn’t a choice. We have to use it only to talk to our customers that are more accessible and most meaningful and the most immediate.
That’s why we think a digital first mindset is really more to us as about marketing. It’s really changed the way our design team is thinking. It’s changed the way our merchants have been thinking and it’s changed the way our marketing teams is thinking. All feel good.
Work has also been on the various Banana Republic sites, added Owen:
What we’ve done is to support continuity across devices. We made it so that no matter what device you have, all your information and all your shopping bag items are there. We made it easier for you to capture price and credit cards benefits or points that you might have.
We have definitely seen an increase in conversions, we have an increase in online revenue, and we have seen an increase in online orders. So we are super excited about that.
But of late the one part of the Gap empire that’s working is the low cost Old Navy division. In 2014, Old Navy boasted nearly $6 billion in US sales , almost the combined sales volume of Gap and Banana Republic put together.
Old Navy’s Global President Stefan Larsson also highlighted the importance of digital, insisting that his team is aligned to ‘digital first’ across the business:
Our customer loves to shop us online. She loves the experience of browsing products, going on and off our site and finding the aspirational trends and then buying that from us. So, we are building out the product experience and the product and value stories and she responds really well to it.
Larsson make an interesting point about how digital has changed the way the fashion industry works:
It used to be an industry where there were a few editors in New York that went to the Paris runways. Then if you were lucky as a value customer two to five years later, the trends trickle down to you. I remember growing up in the small town in Scandinavia ad I was two years behind the trend. I went to the closest big city and walked around and I knew I was two years behind the trend, they knew I was two year behind the trend and we were perfectly fine.
What’s changed that scenario is mobile technology and social media, he explained:
Social media in general is changing everything. Suddenly the value customer is more on trend than any of the brands out there. [I have] an eight-year old daughter who is more on trend than anybody that runs a big fashion apparel brand just because she in on Pinterest everyday. And that means that the blogger outside Chicago today has more followers than some of the fashion editors.
My take
Gap is in trouble. There’s no two ways about that. Whether store closure is the right way to address that remains to be seen. A bigger problem is whether its products are sufficiently attractive and enticing to lure customers in.
I’m a big fan of Banana Republic and find its online shopping experience to work well. I also open up all its promotional emails to me, although I remain disconcerted that I keep being sent women’s sale offers. Some work needed on customer profiling there perhaps…
At the other end of the scale, the success of Old Navy for basics and commodity clothing reflects the rise of low cost fashion outlets in Europe such as Primark.
But stuck in the middle is Gap. Is it mid-market or is it limbo?