Gap's New Retail Approach and How It's Affecting Sales

BY DREW HENDRICKS  @DREWAHENDRICKS

In light of changing buyer expectations and behaviors (as well as a shifting global economy), Gap has made deliberate moves towards a radically different retail strategy.

 

 

 

Not long ago, Gap and its related retailers were among the most popular destinations for back-to-school shoppers. With apparel and accessory options at various price points for all age groups, the classic brand once enjoyed spiked sales and soaring profits during the late summer and early fall.

However, Gap's most recent sales numbers appear to show a shift away from its favored status in the hearts (and wallets) of shoppers. Although the company aggressively advertised and discounted throughout back-to-school season, sales remained stagnant. The lone bright spot during the month was the "positive momentum" gained by its Old Navy stores.

Recent changes to Gap, Inc.'s retail strategy are raising the question of whether the brand is making the right choices to remain competitive. Could its August sales slump be an indicator of more bad news to come?

What Has Been Changing at Gap, Inc.?

The company's multi-pronged approach shows several deviations from its previous approach, including:

• Expansion in Asia. The growing apparel markets in the East have attracted the retailer, which is set to open 40 stores in India and 110 in China over the next year. Rising incomes and massive populations in the region make it an area of enormous potential for Gap and its related lifestyle brands.

• Acquisition of new brands. Shoppers have been familiar with Gap brands Banana Republic and Old Navy for years, but the company has continued to acquire new online and virtual brands, such as Piperlime, Athleta, and Intermix. This has diversified its offerings as well as its target audiences.

• Fewer brick and mortars. In 2011, Gap closed the doors to 21% of its stores in the United States. At the time, the retailer cited higher efficiency and profit margins as the objective for its store closings.

• Online sales focus. At the same time, Gap has been placing a greater emphasis on sales through Gap.com, which also conveniently links to its other brands for a seamless and all-encompassing shopping experience for its brand enthusiasts.

Although these tactics have met with varying levels of success, their impact on the brand's long-term growth and global reputation will continue to unfold over the next several years. This will certainly serve as a lesson to its competitors as they formulate their global strategies, both virtually and online.

How Balancing Physical & Virtual Locations Helps Companies

When companies like Gap operate brick and mortar retail establishments in addition to ecommerce websites, the balancing act between the two can be a challenge. However, when businesses achieve this, it yields a number of benefits to the corporation and its customers alike, including:

• Personal connections. The ability to walk into a store, try on clothes, and talk with retail associates is something many shoppers value. When too few physical stores remain within an individual's area, he or she may choose companies with a stronger brick and mortar presence.

• Touch points. Brands that meet their customers wherever they are stand the best chance of remaining competitive in a multidimensional economy. Those unlikely to visit a mall or shopping center may be more apt to make a purchase from an online retailer, while online advertising and sales efforts may be lost on those preferring a more traditional shopping experience.

• Purchasing options. Online and in-store shopping each present their own advantages and disadvantages, which may apply to the same shoppers at different times during the same day, month, or week. Someone who needs a new outfit the next day can't afford to wait for a purchase to ship, whereas someone with a busy work schedule may be unable to walk into a store during its business hours. In addition, an online purchase remains impossible for those seeking to pay with cash.

When providing online and in-store shopping options, one of the most important components of the retail experience is the point of sale. A business offering a wide range of payment options and making the process as quick and uncomplicated as possible will enjoy the highest numbers of converted and returning customers.

One way to achieve this is by utilizing high-quality point-of-sale systems. Businesses of all sizes can accept a wide range of payment types with new mobile payment options such as Square and PayPal, which attach directly to one's mobile device and allow them to complete transactions anywhere they travel. For online businesses, comprehensive POS systems such as Shopify make completing purchases an attractive prospect for customers.

For Gap and other retailers combining brick and mortar and ecommerce locations, it is crucial to make every aspect of the customer's experience more convenient, enjoyable, and memorable. With a balanced, versatile, and streamlined approach to business, brands of all sizes can achieve sustained growth in their chosen markets.