Never losing sight of their target customer and planning in advance for its product development, merchandising and advertising strategies, Gap Inc., originally a north American clothing chain, is today one of the largest specialty-apparel retailer in the US, reporting a 29 per cent rise in profit for the second quarter of 2012, exceeding analyst expectations. As sales rose 6 per cent to $ 3.58 billion and comparable store sales up 4 per cent during the quarter, the company has proved that acting proactively to changing situations, well in time can help a retailer gain profits even in a downturn global condition…
Operating through 5 successful brands, each of which caters to a different consumer profile holding a strong global image, the company’s advantage lies in offering global customers widespread access to their product, regardless of their shopping preferences through multiple brands, multiple channels and across multiple geographies, fueling earning opportunities at all times. While ‘Gap’ the flagship brand offers casual, American style, at accessible price points including denim, khakis, outerwear and tees, giving competition to retailers like Levi’s, Ralph Lauren, J Crew and Abercrombie & Fitch; ‘Banana Republic’ is a global multi-channel, upscale division of the company that is a destination for modern, versatile work wear for both men and women. Featuring a budget division to enter the growing discount retail sector with Target and Walmart as main competitors – ‘Old Navy’ offers value-priced apparel for adults, children, and babies, as well as other items, including a maternity line, a plus-size line and consumables.
Unlike other chain retailers who remained almost entirely focused on stores in times when online started to emerge as the next logical platform for the future, Gap acted aggressively towards growing a web channel of its own and in 2006 launched ‘Piperlime’ as an online fashion boutique that offers customers a fresh and unique mix of private label and leading brands in footwear, apparel, and accessories for women and men, as well as footwear for kids. Accessing the next big market of sports, the company introduced ‘Athleta’ in 2008, offering performance-driven women’s sports and active apparel and footwear for a variety of activities, including golf, running, skiing, snowboarding, tennis, swimming, and yoga. Today, the brand has managed to build upon a successful catalogue and online business with extremely loyal customers, opening eight more retail locations across the US, where female athletes can build a community and inspire one another.
The biggest strength of the company over the years has been its inventory management and product availability. Modelled after the concept of supermarkets, Gap Inc. stores carry a high inventory and pride themselves on always being in stock, unlike other specialty stores, which try to carry as little back stock as possible. Keeping this very fact in mind, Chief Executive Officer Glenn Murphy claims “Customers respond well to our product offerings across our brands. Our continued focus on product and store execution is helping to drive positive momentum and we’re committed to sustaining solid performance for the remainder of the year.” The key focus is on attracting and retaining key personnel in design, merchandising, marketing, and other functions, competition for which is extremely intense at the moment to maintain continuity in strategy and offerings.
Sourcing private label and non-private label merchandise from over 1,000 vendors, with no vendor accounting for more than 4 per cent of the dollar amount in 2011, approximately 26 per cent of the total merchandise units are produced in China. The company sources its merchandise from only those vendors who can transport products over large geographic distances without delays, adhering to their methods, products, quality control standards, environmental, labour, health, and safety standards. Considering that the company’s lead times for many of their purchases are long, it is important for them to have complete control on product development to respond rapidly to new or changing fashion trends or consumer preferences, well in advance.
One of the things that has been really working in favour of the company, is its well strategized marketing plan, whereby Gap Inc. offers limited “capsule” collections in partnership with some of the fashion industry’s best-loved designers from time to time, attracting footfall on a constant basis. Not only for adults, but in 2011, Gap also became a favourite of kids by launching an exclusive ‘tin-tin’ collection which was a rage in the international streets. Another most buzz worthy success was Banana Republic’s partnership with the popular American television show, “MadMen”, which has ever since made the customers a lot more loyal to their purchases, as the chain satisfies their need to invest in something unique.
Still banking on its strong hold in the North American market with same-store sales rising 7 per cent for Gap stores and Banana Republic, the retailer has been proactive about its international expansions in the fastest growing economies like China and eight new franchise countries including Chile, their first new South American nation. Offering Gap’s American inspired casual style to a global customer base, this year the company opened its first Old Navy store outside of North America in Tokyo and continued to expand its Gap brand store base in China, the world’s second largest apparel market, representing a major component of their global growth strategy, expected to expand further with 45 stores by the end of 2012.
Implementing an online strategy that takes its assortment of brands to 90 countries, enabling customers to shop for their preferred brand, Gap Inc. has seen its online revenue exceeded $ 1.5 billion in 2011. By deploying a number of new tools to allow customers to shop more easily from any location, including their smart phones, the company has also established a new distribution centre in the western United States to better serve the North American customers; and stepping up targeted and personalized online marketing. Since launching an e-commerce site for the Chinese subcontinent last year, online orders by the end of 2011 have been logged from over 330 cities in China alone.
New Sourcing Strategy at Gap
Dealing with the downturn, Gap Inc. has been one of the best prepared to take on the new challenges. In a major shift of its sourcing strategy, the retailer has realigned its buying approach to get maximum advantage of price, delivery and quality. While earlier the buying offices in various countries had responsibility to source for different divisions from their region of operation, but now different offices have been made responsible to source only one or two key products. It is for the office to decide where to source from depending on price points and product requirements. While the India office is tight lipped about their responsibility, the news is that Korea buying office is responsible for knit sourcing from the entire region including India.
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