Q 15Q 15
Case 2: Fixing the Gap
In 1997, Gap Inc. (www.gapinc.com) was designated as Advertising Age's "Marketer of the Year." Advertising Age rec-ognized the firm for its success with integrating its marketing and merchandising strategy, in building its brands via TV, and for its message of selling casual and comfortable clothing. The company was (is) the parent of such chains as Gap (www.gap.com), Banana Republic (www.bananarepublic.com), and Old Navy (www.oldnavy.com).
However, the firm's fortunes have declined in recent years. As one retail analyst noted in 2011, the company's management "will need to rekindle the Gap brand. This has been a challenge facing [the company] since 1998, the last time the Gap brand was hot."
Let's look at some evidence of Gap Inc.'s current problems. Between 2006 and 2010, its net sales declined by 8 percent. This was during a time when the retailer's total square footage declined by 1.3 percent and the number of company-operated stores was reduced by more than 2 percent. Over the 2009 through 2010 period, same-store sales were down by 5.0 percent. In contrast, 2010 sales were down 1.4 percent at Coldwater Creek (www.coldwatercreek.com), down 2.6 percent at Urban Outfitters (www.urbanoutfitters.com), up 6.1 percent at Chico's (www.chicos.com), and up 10.0 percent at Aeropostale (www.aeropostale.com). Ross Stores (www.ross stores.com) and TJX (www.tjx.com) both had a 6.0 percent same-store sales increase.
Although Gap Inc. has had many successes over the years, these have been too few in the twenty-first century. Its early denim collection was highly successful (forty years ago), the firm was among the first retailers to launch an iPad app, and the August 2011 edition of Apparel magazine named the Gap store brand (not Gap Inc.) as the tenth-largest retail brand in terms of popularity on Facebook, with 1.7 million fans. The number of fans now exceeds 2 million people.
Some experts believe that the Gap store brand poor performance in particular has been due to a number of factors: too broad a target market (ranging from babies to men and teens to pregnant women), product designs that have been erratic, and even a change in the corporate logo-which was restored to its former status after irking many consumers.
According to Jeff Jones, president of an advertising and public relations firm and a former Gap executive: "Gap is way too big and broad in today's specialty retail business. Are we trying to sell to my wife or my teenage daughter or both I don't think you can do both. The hard marketing decision, business decision, is it needs to be really clear who it's for." Jones adds that "Gap has to shrink to regain relevance. On paper, it still has several hundred too many locations." And too many locations means that anything too fashion-forward may be unappealing because its customers are more mass market oriented.
In 2011, Gap made some major structural changes involving its top management and its advertising agency. Art Peck, who was previously the president of Gap Inc.'s outlet business, became the new president of Gap North America (the Gap store brand). Ogilvy Mather (www.ogilvy.com) was also named its new ad agency. And the former worldwide managing director at Ogilvy Mather became the Gap store brand's first global chief marketing officer. Gap also announced that its global marketing operation would be located in New York. This operation manages Gap's Global Creative Center with centralized global public relations, design, and production. The Gap brand is now sold in 90 countries, up from 25 at the beginning of 2010.
1. Why do you think that so many other apparel retailers have outperformed Gap
2. Visit the Web sites of Gap, Banana Republic, and Old Navy. Describe the positioning of each brand.
3. What are the pros and cons of the Gap store brand's broad target market strategy
4. What do you think should be done to revitalize the Gap store brand over the next three years