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What Gap Inc.’s New Tech Acquisition Is All About

Gap Inc. isn’t done with its spending spree.

The specialty apparel retailer followed its August deal for Drapr by acquiring an AI-based retail store operations technology, Context-Based 4 Casting Ltd. (CB4), for an undisclosed sum.

The Athleta and Old Navy parent has sought to strategically expand its technology operations in an effort to turn the business around under the leadership of president and CEO Sonia Syngal, and is now bringing aboard a software platform that already counts Levi Strauss & Co. and Urban Outfitters as clients, in a bit to elevate store execution.

Gap Inc.’s strategic growth office, which seeks opportunities to fuel growth and accelerate new capabilities across brands, brokered the CB4 deal and spearheaded this summer’s virtual try-on technology acquisition.

“We believe artificial intelligence and machine learning will shape the future of our industry. Gap Inc. has experience working with CB4’s world-class data scientists, so we understand the impact and the wide applications their science can have across sales, inventory and consumer insights, as well as its potential to unlock value and enhance the customer experience,” said Sally Gilligan, chief growth transformation officer, and head of the strategic growth office at Gap Inc.

CB4’s Spotlight solution leverages AI algorithms designed to identify products with high hyper-local consumer demand based on POS data patterns in an effort to optimize store performance and boost product sales.

Retailers lose between 3 percent and 5 percent of total sales due to persistent in-store execution issues, CB4 estimates. Using its platform can restore 0.5 percent to 2 percent of a retailer’s bottom line, it adds.

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The platform sends store managers push notifications when products in their stores are failing to sell to demand, and shares information on what may be causing low sales, including promotional errors, visual merchandising mistakes, replenishment oversights, out-of-stocks and inventory system discrepancies.

Store managers can share the issues they find in stores in the app, enabling CB4 to leverage machine learning to create more potent recommendations over time based on their feedback.

The idea is that while associates can spend time spotting these issues by walking around the store and scanning SKUs, it is time consuming and ultimately leaves more room for human error.

Gap Inc. Acquires AI-Based Store Optimization Platform CB4
The CB4 app. CB4

This kind of solution is pivotal, particularly for a retailer like Gap Inc., which is in the middle of shuttering 220 Gap stores and 130 Banana Republic locations by 2023 and exiting its European brick-and-mortar operations. The retailer is refocusing on a smaller, more profitable store base, so acquiring a solution dedicated to maximizing physical sales dovetails with its new strategy.

What’s more, the CB4 platform has already generated data across apparel, specialty, grocery and C-store clients about the main problems plaguing stores. Across all Spotlight-enabled locations, CB4 says the two biggest issues store managers report is that stores don’t often meet visual guidelines and that products are too often left languishing in the stock room.

The New York and Tel Aviv-based company indicates that 82.3 percent of apparel shoppers have left the store they shop at most often without being able to purchase the product they came for. Another 54 percent who exited without buying said the product was out of stock or the store didn’t carry it.

The software has garnered high praise this year. In February of 2021, market research firm CB Insights named CB4 to its inaugural Retail Tech 100 ranking, which showcases the 100 most promising B2B retail tech companies in the world.

As part of the acquisition, CB4’s team will join Gap Inc. as full-time employees.

“CB4’s AI helps lift sales and enhance customer experiences,” CB4 CEO Yoni Benshaul said in a statement. “As we join Gap Inc., I’m excited to see how our team can drive even broader and deeper impact at the company’s global scale.”

As part of its Power Plan 2023 turnaround strategy, Gap Inc. completed its transition to the Microsoft Azure cloud platform in October 2020. This year, company’s strategic growth office also participated in the latest funding round for Obé Fitness, a digital fitness platform that partners with Gap Inc.’s Athleta to bring entertainment, pop culture and design to fitness. The $15 million funding valued Obé at $190 million.