We use first party and third-party Cookies to help us understand Website usage and to improve the content and offerings and to provide you advertising, analytics and other purposes related to your navigation habits. If you continue scrolling, we consider you accept the policy. You can read more about our cookie policy.


The global fashion business journal

Jan 23, 20203:18pm

Product, stores and sex appeal: can Gap gain back its crown?

The once biggest fashion retailer in the world has been stuck in boredom for years. The group need an executive that gives it a spin and bets on the product. 

Nov 25, 2019 — 9:00am
P. R.
Related topics
Save

Product, stores and sex appeal: can Gap gain back its crown?

 

 

Not first, not second, not third. And, if the company’s plans take place, maybe not even fourth. The American giant Gap, that only years ago was the world’s largest fashion retailer, has been in a reorganization process for years to try to regain momentum. On Thursday, the group reported the results of the third quarter, which confirmed what the sector expected: sales and the company’s result continue to drop. Gap faces the challenge of turning around and for two weeks it’s been doing it without a Capitan. 

 

In early November, Art Peck announced his departure from the American group. The chief executive officer of Gap had been with the company for fifteen years, since 2015. Under his direction, Gap boosted its international development, based on the alliance with local partners. At the time, Peck had to deal with the most complex years of the American group, affected by the fall in consumption in the United States.

Deals, deals and more deals. That has been, according to the experts, Peck’s main obsession, just like his predecessor, Glenn Murphy. In the line to succeed Peck is Sonia Syngal, president and chief executive officer of Old Navy, the driver of the group’s sales. However, Syngal is also pro deals.

 

 

 

 

Gap lacks, today, something that, according to the experts, can only be recovered with someone with a merchandising background. “It takes a new type of leadership, someone who manages to move, turn the product, shake the company, almost like a founder,” explains an executive close to Gap. In fact, Millard Mickey Drexler appears in Gap’s memoirs, considered the retail wizard who boosted the American company in 1980 and 1990. 

 

It is easy to make a comparison with another fallen fashion giant, Benetton. Another name of basic, but with a strong brand and a communication that allowed it to conquer the world. But the chaotic growth led it to lose it soul along the way. And when a basic brand stops being cool, what remains is just clothes. If Gap missed Mickey, Benetton missed Luciano Benetton, who ended up returning to his company in 2017. 

 

Product: more sex appeal

 

What plays for and against Gap? The main strength of the American company is that “it is the American basic company and that is not going to change.” However, the company needs to have a real turnaround, and manage to give sex appeal to the product. 

 

Gap is one of the largest fashion retailers in the United States, the largest fashion market in the world. The group’s revenues are more than 16.5 billion euros only in its local market: more than 7 billion are accounted to Old Navy, another 3 billion to Gap and 2 billion more to Banana Republic.

 

Gap is the king of basic American fashion, its jeans and sweatshirts were in every American closet and were the most wanted gift for European tourists visiting New York. There not another retailer that has been able to take its position in this regard: neither Inditex, who has just landed with its young fashion chains in the country, nor Uniqlo, who landed in the country in 2005, have achieved United States penetration.

 

 

 

 

Its rival, however, is at home. “The problem of Gap is Walmart and all operators that are eating market entering below,” says a senior manager of the sector. Experts miss the excitement generated by the brand under the direction of its former chief executive officer and responsible of its relaunch, Mickey Drexler.

 

In the war of price and fashion as a commodity, Walmart is king. “They have to put sex appeal to the basics,” recommends another senior executive of the sector. A turn towards fast fashion is not an option in a country where, beyond the two coasts, the basics dominate the closets. Gap’s war is in the Midwest, and Walmart is earning ground.

 

 

 

 

Stores, out of the heart

While in the Inditex model the store is at the heart of the business, for Gap it is only a sidekick, the executing arm of the strategy. “Gap is a retailer but with a wholesaler mentality,” summarizes an industry expert.

 

Inditex, Fast Retailing and H&M, which today are the top three of the podium, place retail in the center of its structure and manage to generate a common brand image throughout the world. In Gap, however, the store has much more power and adapts its offer. At the end of 2018, the company had 3,194 directly operated stores, mostly in the United States, and 472 franchises.

 

At the same time, the mass communication that had given it fame under the direction of Drexler, with advertising campaigns and collaborations, also began to disappear. As times changed, Gap stayed as it was.

 

International expansion

With the arrival of the crisis, exposure to the US market took its toll, like all the major groups in the country. The company, which was already coming from a downtrend, with falls of around 1% in the previous three years, sank its sales by 7.8% in 2008, the year the financial crisis reached consumption.

 

The company then undertook an accelerated international expansion: only in 2009, the company entered four new countries. But in the rush came the mistakes. First? Relying on partners that had all the power of decision in each country.

 

Like Benetton, Gap prioritized reviving sales to take control, and when it wanted to retake it the brand had already stayed on the road. The second mistake was to think that it could conquer the world in the American way: with marketing made in the USA and promotions. 

 

Perhaps Gap’s salvation is found in the great Art Peck project, in the air after the executive’s departure: Old Navy’s spin off. The chain was the first in the history of retail in the United States to reach one billion euros in sales in less than five years and today continues to be the best evolving group.

 

Its spin off would mean losing scale and synergies and would definitely unseat Gap from the ranking of the world’s largest distributors, but it would allow all financial and human efforts to face the turnaround.

Advertising
Comment
Participation rules

info@themds.com

 

Validation policy for comments: 

 
MDS does not perform prior verification for the publication of comments. However, to prevent anonymous comments from affecting the rights of third parties without the ability to reply, all comments require a valid email address, which won’t be visible or shared.
 
Enter your name and email address to be able to comment on this news: once you click on the link you will find within your verification email, your comment will be published.

0 comments — Be the first to comment
...