Daily Dose of iQ: Gap Struggling to Regain Its Iconic Reputation

Mar 24, 2015 — Allan Pulga

Fast Company published a feature article yesterday (March 23) on Gap Inc. and the company's new CEO, Art Peck (pictured above).

The article hit home for me because I, now in my mid-30s, used to shop a lot at Gap. The company's marketing once spoke to me: smart, simple, preppy basics that suited my style. A few years ago, I stopped buying clothes from Gap; I'd graduated to its more "grown up" sister store, Banana Republic. Still, it was undeniable the Gap brand had lost much of the luster it enjoyed in the '90s.

In the past decade, Gap has fallen behind the likes of H&M, Zara, Uniqlo and Target.

Why? "The iconic brand slept through the fast-fashion revolution fueled by the likes of European labels H&M and Zara; got lost amid competitors such as Uniqlo and Target, who offered basics and denim at higher and lower price points; overexpanded; and became too ubiquitous for today’s niche-minded fashion crowd," wrote Fast Company's Danielle Sacks.

So true. Just today, I saw an article about H&M beating its Q1 profit estimates, with pretax profit up 34.4%. Even the photo accompanying the article (shown below) features H&M ads that -- with their whited out backgrounds -- say "Gap" to me.

One of the issues Gap has long wrestled with -- even when I used to shop there -- was carrying too much stock. I never bought Gap clothes at regular price. I simply waited for them to go on sale. The store turned over so much product from one season to the next, that it was worth waiting for it to be marked down, often by 30 or 40%. I didn't care that it was last season's line. Most of it was wearable year-round anyway.

Perpetual discounts hurt the Gap brand: Shoppers still gravitate toward its sales racks.

"Training customers to expect chronic discounts has become a destructive cycle at Gap," Sacks wrote. "(Peck) knows that he has to 'pull out the promo needle,' as the industry puts it. To do so, Gap needs to ramp up its Retail 2.0 capability: Right now, he says, it takes the brand at least 10 months to get its new product ideas into stores. That’s about three times as long as competitors like H&M and Zara, which have built their success by hopping onto the fashion world’s hottest trends and riding them."

It's not all bad news for Gap, however. The company has seen North American sales dip over the years (bottoming out in 2009), but have slowly climbed upward since then. Sales in Asia are growing steadily and online sales are a bright spot: up from about $1.6 billion in 2011 to just over $2.25 billion in 2013.

The role of the store is something we and (our) customers will figure out, together, over time.Gap CEO Art Peck

"The role of the store is evolving," Peck told Sacks. "What it’s going to become is something that we and the customers will figure out, together, over time."

Topics: Retail Operations, Wireless Trends, Mobile Industry, Retail Marketing

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