As the Vaccine Economy continues to evolve, retailers are learning lessons from the COVID crisis and its enforced digital acceleration, as can be seen at two bellwether brands - Gap and Abercrombie & Fitch.
At Gap, it’s all about the highest Q2 sales in over a decade - that’s the boast from CEO Sonia Syngal. After the ups and downs of recent years, she’s entitled to point to some success stories at last, not least in terms of fleshing out its digital portfolio yet further.
For Q2, Gap turned in revenue of $4.2 billion, up 29% year-on-year. Online sales grew 64% compared to 2019 to now represent a third of the total business. That growth is mirrored by an 11% decline in in-store shopping over the same period, a figure obviously impacted by COVID closures.
The latest addition to the arsenal is virtual try-on company Drapr which is intended to enable shoppers to find their best clothing sizes to fit their personal body shape. Sally Gilligan, Chief Growth Transformation Officer at Gap, said in a statement:
Fit is the number one point of friction for customers and, through their advanced 3D technology, Drapr has shown it can help shoppers efficiently find the size and fit they need. We plan to leverage Drapr to help Gap improve the fit experience for our customers and accelerate our ongoing digital transformation.
Brand health is improving overall, said Syngal, pointing to growth of the customer file and the biggest ever spend on digital transformation:
Since moving to the cloud last October, every dollar we spend goes further toward growth and innovation versus modernization. Innovation that could impact our entire portfolio of brands. And that speed of our technology deployment has increased our confidence to invest further. We are digitizing operations and increasing automation across inventory management, stores, and key areas of the value chain to unlock costs in margins. We're prioritizing work that will have a long-term impact end to end. We believe this will radically redefine our operating cost structure and create an operating machine to support our long-term ambition for growth.
Digital holds steady
Meanwhile over at Abercrombie & Fitch, Vaccine Economy learnings are being taken on board as stores re-open, but digital stays steady in terms of its contribution to the bottom line, now making up 44% of the total revenue. CEO Fran Horowitz noted:
Even with aggressive store sales growth, digital did not skip a beat and remained a solid as stores reopened. Digital sales held steady to 2020 levels and grew 52% from 2019. Results are further proof of our ongoing evolution into a digital-first global omni-channel retailer and should yield sustainable operating margin benefits.
CFO Scott Lipesky expanded on the theme, saying:
We are very happy with the digital sales hanging up. That was one of our first big learnings coming through as the world kind of re-opens, specifically here in the US, is what was going to happen to digital whenever the stores re-open? So, with the fleet work that we did last year and the huge jump that we saw last year in digital sales because of the COVID-related closures, it was great to sustain that this year.
This has strategic implications moving forward:
This business is about omni-channel now. We need to make sure we have the right size stores in the right locations to support a bigger digital halo within a certain market, and that's how we look at each market that we're entering, we want to maximize that omni business. So, absolutely has an implication and we'll be thinking about that as we go into the back half of this year when we have those 240 leases up for renewal.
The digital focus is ramping up, confirmed Horowitz:
A common theme across the company has been our focus on digital, which is critical for future growth. As we continue our transformation into a digitally led operating model, we have made investments in technology and talent. Over the past year, we've expanded our data and analytics, user experience and technology teams, and we recently welcomed Samir Desai to the ANF family in the newly created role of Chief Digital and Technology Officer.
As product acceptance is built, our teams have been meeting our customers where they are in the digital landscape. We are firmly committed to our test and learn strategy and to new and emerging technology trends and engage in opportunities.
A case in point is the introduction of Social Tourist, pitched as a social commerce brand that is sold through two influencers, TikTok ‘superstars” Dixie and Charli D'Amelio, who combined have over 270 million followers across social platforms. Horowitz explained:
Social Tourist is a great example of how we are approaching our business differently. Meeting our customer where they are and pushing boundaries of social commerce in new and exciting ways. Since the launch, the brand has had over 700 million impressions and views, and we continue to build awareness. For the first collection, we had several Instagram exclusive pieces. And for the second, we hosted a live TikTok fashion show, featuring the D'Amelios and other social stars, which would be TikTok benchmarks. With Social Tourist, we have learned so much in a short period of time that up and coming fashion trends, social commerce and the growth of the TikTock platform. We are optimistic about Social Tourist and its future and have several more exciting events happening throughout the remainder of the year.
There’s a still a long, long way to go, but the direction of travel in the Vaccine Economy is becoming clearer and clearer. Learnings from the COVID crisis need to be embraced and adapted to the new normal.