Gap Inc. is a leading global apparel retail company. It offers apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Athleta, Janie & Jack, and Intermix brands. The portfolio of distinct brands across multiple channels and geographies gives the brand a competitive advantage in the global retail marketplace. The Gap was founded in the early 1970s and enjoyed a period of sustained success selling Levi Strauss & Co. blue jeans.
Gap Inc. has company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and beginning in October 2015, Mexico. It also has franchise agreements with unaffiliated franchisees to operate Gap, Banana Republic, and Old Navy stores throughout Asia, Australia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate or will operate, stores that sell apparel and related products under Gap’s brand names. The products are also available to customers
online through company-owned websites and through the use of third parties that provide logistics and fulfillment services. Most of the products sold under the company’s brand names are designed and manufactured by independent sources. It also sells products that are designed and manufactured by branded third parties, especially at the Intermix brand.
In addition to operating in the specialty, outlet, online, and franchise channels, Gap Inc. is a leader among apparel retailers in using omnichannel capabilities to bridge the digital world and physical stores, creating world-class shopping experiences regardless of where or how customers shop. The Company’s suite of omnichannel services, including order-in-store, reserve-in-store, find-in-store, and ship-from-store, as well as enhanced mobile experiences, are uniquely tailored across its portfolio of brands.
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Gap entered the international markets in the late 1980s and reached the peak of its success in the 1990s has grown 24,000 percent since 1984. At the turn of the century, Gap was the largest pure apparel company in the world, with a burgeoning international empire and significant brand recognition for each of its companies. However, Gap’s period of success took a turn after Mickey Drexler retired as CEO in 2002. Profits and revenue continued to decline for much of the decade. The young adults that bought Gap products in the nineties grew out of Gap, and Gap was unable to replicate its success with the new generation.
History
The Gap’s history is legendary in the retail industry. From humble beginnings as a small San Francisco shop that sold jeans as its only product, Gap Inc. exploded into a multinational dominant player in the clothing industry, with several huge divisions that together provide for almost all conceivable style needs below luxury. However, in the 1990s, the company has faced heavy competition from specialty retailers and budget warehouses, with its heyday in the 1990s just a distant memory.
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In 1969, Don Fisher had just celebrated his fortieth birthday when he noticed a new trend among Northern Californian youth. Levi Strauss & Co. blue jeans were becoming astoundingly popular among the city’s young counterculture. Already a successful real estate developer, he ventured to open up a shop in one of his own San Francisco buildings as a space to sell jeans and records.
No one bought the jeans at first until he put out desperate ads in local newspapers for jeans at rock bottom prices. As the store’s simple but rebellious attitude grew more popular among the youth, he decided to incorporate the business as The Gap, Inc., in homage to the Generation Gap, which was widely discussed at that time. He expanded locations in areas frequented by 14-25-year-olds; the business model succeeded dramatically well.
The Gap focused on projecting a youthful image, which rapidly increased revenue from its target market. It stocked only a few different types of items – jeans, shirts, and light jackets – but it stocked all sizes and colors at low prices so customers would never leave disappointed. In addition to high sales, the company’s financial success was also attributable to costs being kept down because the company only bought from one supplier, Levi Strauss; Levi Strauss was in the midst of a national advertising campaign at the time, and The Gap benefited from chain store merchandising benefits such as centralized buying and name recognition.
Marketing own independent brands
In 1973 The Gap ended its dependence on Levi Strauss and began to market other national brands and private labels of its own. By 1974, sales had increased to $97 million, a 50-times increase, and 186 stores were operating in 21 states. In 1976, The Gap, Inc. made its first substantial public offering of 1.2 million shares. Don Fisher continued to retain tight control over the accounting, purchasing, and marketing functions of the company and added between 50 and 80 locations in the U.S. each year giving it a nationwide presence by 1980. By the end of the 70s, the jeans market had become much more stratified and was no longer a niche item. In response, The Gap expanded its offerings of other types of clothing, experimenting with several different strategies. A foray into higher fashion
failed quite handily, and the company eventually realized its strength was in casualwear. However, 45% of its sales were still from Levi products in 1980, so The Gap decided it had to develop its own image and line of clothing. In this vein, Don Fisher hired Millard “Mickey” Drexler as president in 1983.
Drexler had just solved the same problem as an executive with AnnTaylor, and he immediately launched a
transformation of the company from a store catering to teenagers to a store for those who wanted to feel young but not look rebellious.
The Gap spent a huge amount of capital on Drexler’s plan in the first year, and in 1984 profits decreased 43 percent to $12.2 million. However, by the middle of 1985, revenues skyrocketed and Drexler’s vision began to pay off. The company used its profits to acquire a number of smaller competitors, the most important of which was Banana Republic.
Arrival of Banana Republic
Drexler kept Banana Republic’s name and branding intact but marketed them as a higher-end version of The Gap; its clothes were more fashionable, higher quality, and accordingly more expensive. The company saw huge profits from the Banana Republic segment, and further expanded its consumer base with the launching of GapKids in 1986.
In 1987, The Gap began a foray into international markets, opening first in London. Riding on this location’s success, locations popped up in other parts of the UK as well as in France and Canada. When a severe global recession hit in 1987, differing segments of the company began to either flounder or flourish. The higher end brands Banana Republic and Hemisphere (a short-lived luxury brand) suffered huge losses, but The Gap continued its mainstream successes, buoyed by the prosperity of GapKids and the recently revived Pottery Barn. The company as a whole was able to actually grow during the 1987 Recession. Building off of the strong results of GapKids, Drexler
opened up BabyGap in 1990.
By 1991, the Gap had exceeded the wildest expectations of Donald and Doris Fisher, with 1216 stores internationally, revenues of $2.5 billion, net income of $230 million, and 40% return on equity, comparable to the results of every year that Drexler’s program had been in effect. The key to The Gap’s success was that it gained the support of most of the Baby Boom generation in the 1970s with their jeans and fresh image, and followed this generation as they aged and grew wealthier, providing for all their lifestyle needs through The Gap, Banana Republic, babyGap, GapKids, and Pottery Barn.
The Gap continued to capitalize on the trends of the youth with the opening of The Gap Warehouse in 1994, which took advantage of the new idea that it was cool to not spend too much money on clothes. The Gap Warehouse, later rebranded as Old Navy, had twice as much store space as other Gap stores and stocked its shelves with cheap
and durable clothing for all ages. In the meantime, Banana Republic strengthened its style offerings to those who still wanted to spend more money on clothes and look hip.
The Beginning of the end
Donald Fisher stepped down as CEO in 1995, and Mickey Drexler took over as president and CEO. The company was enormous in both size and styles and could satisfy virtually any clothing need for any demographic looking for sophistication, savings, or sex appeal. Drexler launched The Gap’s first moves into e-commerce, establishing gap.com, babygap.com, and gapkids.com, followed by online stores for the Banana Republic and Old Navy. On the brick-and-mortar side, new stores were opening their doors at the rate of one per day – the company had grown by 24000 percent since 1984.
However, by the turn of the century, The Gap began to decline as a whole as revenue growth shrunk to a crawl peaking in 2005 and since receding. Drexler retired in 2002, only to become CEO of J. Crew Group Inc. shortly thereafter. Rev Fisher selected Paul Pressler, a former Walt Disney executive, to lead the company in a resurgence of popularity. Pressler brought profits from red into black, but the clothing market had become intensely competitive and it was clear that the gains of Drexler’s reign would no longer be possible for a company that had grown so large.
Revenues continued to decline for the majority of the new millennium, despite several leadership changes among executives and lead designers. Revenues peaked in 2005 at $16.023 billion and fell consecutively for the next four years to $14.197 billion in 2009. The company grew revenue for the first time in five years in 2010 to $14.664 billion only to once again have it fall to $14.549 billion in 2011. The five-year percent revenue change was -1.81% in the year ending 2011. Sales have eroded in the U.S. due to competition from budget retailers like H&M and specialty retailers like Abercrombie & Fitch. In October 2011, Gap Inc. began the closing of 189 locations to be completed by 2013. However, the company has seen more success in international markets and has made plans to continue expansion abroad, especially in China.
Marketing and Branding Strategies Adopted by The Gap, Inc.
Target Market
Each brand of the Gap Inc. has each own target market as each brand is different. To illustrate, the Old Navy brand “the lower middle-to-middle income consumer”. More specifically, the target demographics are parents, and “to a lesser extent, young adults and teens”. Generally, “Old Navy stores are generally the largest of the three
Gap brands”.
Moreover, Gap’s target market is more difficult to define as it “ranges from lower middle to upper-middle income”. More specifically, the target market of Gap is adults “between 18 and 35, but consumers range from babies to baby boomers”. Banana Republic targets adults between 25 and 35 years old and its brand are very fashionable and pricey. Namely, it targets people that believe that fashion and style is very important.
Also Read: H&M – A Brand Delivering Affordable Fashion For Everyone
Positioning / Differentiation Strategy
The image that Gap Inc. have created in people’s minds is a positive one, as it is considered to be a clothing retail company that sell high-quality products at relatively moderate prices. Throughout the years, Gap has earned the reputation of a brand” that offers high-quality and up-to-date clothing with reasonable price.
“To differentiate their products, Gap, Inc. not only added additional stores such as Old Navy, Banana Republic and Intermix but they also added more fashionable apparel in order to meet the needs of the younger consumers. However, they tried too hard and had to eventually face not only failure but also loss of interest from their existing customers. That’s why it launched a new back -to -basics campaign in order to attract again the customers that it lost.
However, Gap Inc. utilizes multichannel and e-commerce strategies except of differentiation strategies. For instance, customers even if they make purchases online they can return the products to stores, and because of the Gap’s Inc. well-established brand and reputation, the customers feel more comfortable to make purchase online. In addition, Gap Inc. established new markets, focusing on stylish value driven product, and keeping value-drives tightly
controlled in the house. So, by incorporating technology into Web sites they could enhance the customer experience.
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