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Gap Inc. Bets on Yeezy, Loyalty Programs and New Categories

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Consistent with a startup mindset, Gap Inc. is leaning into what’s working, abandoning what’s not and preparing for a successful 2021. For the Gap, Banana Republic, Old Navy and Athleta brands within the fashion powerhouse, this means doubling down on marketing and loyalty programs and expanding into new apparel categories.

Marketing mavens

In a conference call with investors on Thursday, Gap Inc. CEO Sonia Syngal attributed the company’s growing market share to aggressive marketing tactics that helped build its global known customer file by 14 percent ($183 million) in 2020. She noted that marketing dollars were up $66 million year-over-year.

“Leaning into marketing in the time of dislocated disruption is even more critical than ever,” she said.

Following that mindset, loyalty programs were a major focus for Gap Inc. in 2020, and will continue to be a top priority for 2021. The company aims to turn every customer into a loyalist, and started on its goal by shifting dollars into rewards programs like Navyist, Gap Good, Banana Republic and Athleta. In Q4 alone, the brands enrolled 6.4 million new program members. By this summer, the company aims to implement and integrate one loyalty program across all of its brands.

“What we’re doing with our loyalty design is establishing really intimate emotional brand-level engagement,” Syngal said. “But at the same time, we know the customer values cross-brand shopping and values the benefit of the portfolio.”

Loyalty programs will be broken down into bronze, silver and gold tiers to allow for flexibility in delivery speed so as not to overwhelm the supply chain.

To further connect with consumers, Gap Inc. introduced new ways to shop in 2020 by expanding “buy online, pickup in store” and curbside pickup capabilities and launching new payment methods such as Afterpay—factors that demonstrated the company’s flexibility in a moment of need.

“Our teams showed resiliency and the ability to try fast, learn fast and think big to meet customers’ needs,” said Syngal.

Digital was another point of focus that saw big rewards: Gap Inc.’s online business grew 54 percent in 2020 and closed the year at about 45 percent of total company sales—a 20 percent increase from the previous year. At over $6 billion, the company’s online channel is ranked No. 2 in U.S. apparel e-commerce sales.

By 2023, Gap Inc. aims to increase digital penetration to 50 percent, and plans to do that by honing in on mobile, which Syngal noted is customers’ preferred way to shop online: 50 percent of Gap Inc. traffic and 75 percent of its sales are conducted annually through mobile. She noted the team is working to provide “frictionless mobile shopping and new digital experiences” to accommodate evolving consumer behavior.

New product offerings

To accommodate the influx of new customers and loyalists, Gap Inc. is focused on expanding its product offerings and apparel categories across the board, noting “disproportionate sales” coming from categories such as active, fleece and kids and baby. The company also quickly pivoted to produce face masks, which represented 3 percent of sales in 2020.

Though total sales for the Gap brand were down in Q4, Syngal anticipates a strong 2021, thanks in part to its highly anticipated Yeezy launch in the first half of 2021. In June 2020, Gap announced the multi-year deal with rapper Kanye West’s Yeezy label to deliver a co-branded line of apparel and accessories to the market in 2021.

Gap Inc. CEO Sonia Syngal discussed doubling down on marketing and loyalty programs and expanding into new apparel categories in 2021.
Yeezy x Gap Courtesy

According to Syngal, Gap is already gaining traction with the Gen Z demographic ahead of the Yeezy debut.

“The brand is back in a conversation at the zeitgeist of culture where it belongs,” she said.

Chief financial officer Katrina O’Connell announced that Old Navy will roll out a plus-size offering in the latter half of this year, which she considers “squarely appropriate for acquiring new customers and better servicing existing customers.” The brand will also double down on its kids and baby categories, in which it achieved top engagement.

Athleta will also expand into inclusive sizing, offering 70 percent of its collection in sizes 1X to 3X for Spring 2021 and debuting an accompanying campaign.

Gap will expand into the home category later this year, following heritage denim brands Levi’s and Wrangler, each of which recently made its home debut.

Banana Republic is setting its sights on “redefining affordable luxury” in 2021, and plans to accomplish that goal under the new leadership of president and CEO Sandra Stangl. In January, the brand launched BR standard, a collection of luxe performance wear that satisfies new consumer demand for elevated essentials.

Store matters

Gap Inc. plans to close approximately 100 Gap and Banana Republic stores globally, including 75 closures in North America. On the other hand, as a result of Athleta surpassing $1 billion in sales, it will open 20 to 30 Athleta locations in 2021, part of a goal to reach $2 billion by 2023.

The company is also betting big on Old Navy, and planning to open 30 to 40 stores—some of which will pilot self-checkout—later this year. Gap expects the brand’s sales to grow to $10 billion over the next three years.

Coupled with its in-store developments, the company announced it will open a state-of-the-art distribution center in Texas to support Old Navy’s growing online business.

Gap, Inc. is reintroducing select inventory from the previous year, and was “very thoughtful” in terms of the items it kept for 2021. O’Connell pointed to a collective shift to seasonless fashion, noting that “the customer is just shopping differently”—something she expects to level out later this year.

“As vaccines roll out and stimulus checks begin, we currently view the second half of 2021 favorably, reflecting a likely return to a more normalized pre-pandemic level,” she said.