After a two-year dalliance with the trendy fashion set, Gap has been left with nothing but an empty pocket. It’s going back to basics, says Polly Devaney.
To the casual observer, the world of $14bn-worth (&£9bn) retailer Gap Inc may seem like a happy-go-lucky one of “crazy stripes”, colourful sweaters and cool, dancing youths. Its corporate image is the product of a slick marketing machine (the company spends over $100m (&£63m) a year on advertising) and its brand is at the heart of every American wardrobe.
Scratch the surface, though, and the recent history of Gap is anything but a happy story. Until the fourth quarter of last year, Gap suffered 29 months of declining sales and its shares, once worth $53.75 (&£34), languished at a record low of $8.35 (&£5.30) in September 2002. Not only was Gap suffering from a branding problem of its own making, but at the start of the millennium it seemed to have badly lost its way in the “fashion basics” market that it had itself created.
Problems started at Gap in 2000 when it tried to be too trendy. The blue shirts and khakis that the brand was synonymous with all but disappeared from the stores. They were replaced by what could best be described as “interesting” fashion items that aimed to pull in the fickle teen market.
It didn’t work. Gap executives seemed to forget that 90 per cent of the shirts it sold were blue. People didn’t want acid colours and strange motifs from Gap.
Not only did these executives alienate the moms and dads of the teens they were trying to woo, but the teens and young adults weren’t impressed either by Gap’s attempt at being cool. It probably seemed a bit too much like their parents trying to be hip and trendy.
At that point, Gap was either too young, too old, too boring or too trendy for everyone. The company had done the almost impossible and managed to please none of the people.
Then there’s the issue of the Gap brand being caught between a rock and a hard place of its own creation. In the US, Gap sits in the middle of a three-tier brand strategy, with Old Navy below it and Banana Republic above it – all owned by Gap Inc. Old Navy claims to “make shopping fun and affordable for the whole family”. And largely it succeeds – so much so that it cannibalises sales from Gap, which comes across as much more staid in comparison and sells the same basic T-shirts for $5 (&£3) more.
Banana Republic is the home of luxury fabrics and sleek tailoring, and is where those shoppers who have the disposable income to spend would rather spend it. Gap has got stuck in the middle of these two brands and needs to work hard to differentiate itself from its siblings.
After two years and a significant sales loss, it was back to the drawing board for Gap, a brand that was now struggling for survival in the market it had created. Gap opened its first store in San Francisco in 1969, but the fashion basics market has become a lot more crowded since then. It faces stiff competition in its homeland from Abercrombie & Fitch, J Crew and American Eagle Outfitters.
Now Gap is trying to rise above the fickleness of fashion and especially the fickleness of the teenagers it once tried so hard to seduce.
Gap’s latest strapline: “For every generation”, is attempting to entice back the adults and baby boomers who crossed the brand off their shopping lists when it tried to get too trendy. Early last year, vice-president of marketing Kyle Andrew told Women’s Wear Daily Magazine: “We understand we’ve alienated teenagers but we want to go after people who knew us and loved us.”
Gap’s “Every generation” ads were the first from agency Laird & Partners, and featured celebrities and entertainers dancing to upbeat music while wearing Gap gear that they had styled themselves.
Gap also wants to take an “authority position” on denim – a category leadership stance that it hopes will pay dividends. To reinforce the new positioning, Gap produced a 48-page “outsert” that was attached to Vanity Fair magazine, as well as running ads in several top fashion magazines at the end of last year. So far the strategy seems to be working: the ads match the Ad Track average and score higher with two key groups: women and those aged 25 to 64.
Gap has also been turning its hand to more innovative promotions. It started about a month after the arrival of new chief executive Paul Pressler in September last year. He had no fashion retail experience but that didn’t stop him injecting some much-needed magic into the Gap retail kingdom. For the first time in its history, Gap ran a promotion that focused on price, offering discounts before, rather than after, the holiday season. It posted “mystery gift cards” to shoppers in ten major US cities. The cards were worth a discount of from $5 to $100 (&£3 to &£63) in Gap, and the recipients had to visit a store to find out how much theirs was worth. There were also offers of $10 (&£6) off a $50 (&£31) purchase, and newspaper inserts offering 15 per cent off when making purchases worth $50 or more. Gap also decided to simplify its range, in line with its mass-market stance, reducing garment lines within some categories from 50 different colours and styles to just 12. Suddenly, those who wanted to could find blue shirts and khakis in Gap again.
But there was another reason for getting involved with the brand – the possibility of becoming famous. During the last two weeks of November 2002, more than 200,000 men, women, boys, girls and babies entered the Gap Casting Call, for a chance to appear in a Gap print ad. Entrants had to send in a photo and two essays – one about personal style and one tellingly entitled, “What you like about Gap, and the one thing that would make you like it more”. Gap, it seems, is now making an effort to listen to and learn from its customers.
Gap judges chose 24 finalists, and their pictures were featured in window displays at 1,000 US Gap stores at the end of January. The American public were then asked to vote for their favourites, and the six winners will be announced in March.
It’s still early days, but Gap seems to have turned an important corner. The cool, dancing models were back for Christmas, wearing those crazy stripes and grooving to the O’Jays “Love Train” and Gap Inc has reported a comparable store sales increase of 16 per cent for January 2003. Perhaps the inventor of those crazy stripes isn’t so crazy after all.
Polly Devaney is a former Unilever executive now working as a freelance business writer