The Gap has been a part of the American retail landscape for half a century, and as that landscape shifts, the storied brand and its subsidiary companies are making moves to stay on the map.
Compromise is a major part of the strategy, Art Peck, Gap Inc. president and CEO said during a keynote at Shoptalk in Las Vegas this week, and there are certain compromises that have kept Gap relevant in the e-commerce age. The biggest of which was deciding in recent years to shutter mall stores across the country in favor of opening new stores in areas where customers are underserved.
“Traffic in stores today is the most intentional it’s been since the beginning of the web,” Peck said, “but 70 percent of customers leave the store empty-handed. The one thing they came into the store to do, they can’t do.”
Legacy retailers in malls and traditional shopping centers see plenty of traffic, but not as many conversions. Coping with that reality means closing stores, Peck explained, but also opening new stores in areas where the company knows there’s a loyal customer base. To illustrate Gap’s modern approach to the physical retail space, Peck noted a store the company opened in California, not in a traditional mall setting, but next to a $50 million Trader Joe’s. “Compared to other Gap stores, the traffic is extremely low,” Peck said, “but conversion is two to 2.5 times what we see in a mall store.”
Today, consumers aren’t willing to drive to a mall, park, and navigate the space until they find what they’re looking for. And Peck isn’t too worried about seeing some of those stores go.
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“When I close stores, it’s because they’re the wrong stores in wrong locations,” Peck said. Brick-and-mortar retail remains important, though, because despite the demand driving e-commerce, many of Gap Inc.’s customers don’t have access to credit, which limits their online shopping capabilities. To serve those customers, Peck said Gap Inc. and Old Navy have spent time researching how to optimize the brick-and-mortar experience.
To that end, he addressed the other major component of Gap Inc.’s renewed brand strategy: demographic-based assortment planning that’s tailored to the regions served by Gap Inc.’s stores.
“When we customize the assortment at store, we look at factors like size curves and aesthetics, and we build in predictive demand based on geography,” Peck said. The company spends time building a longitudinal profile of its best customers in order to understand what they buy, where they buy it, how frequently they shop and how they react to store layouts and features.
That philosophy and focus on customer demographics has also driven Gap’s edits to its brand portfolio, including the decision to spin off Old Navy into a standalone business, Peck said, noting that Gap is eager to expand upon its newer brands, like Athleta, Hill City, and the recently-acquired kids’ brand Janie and Jack.
“This is our 50th birthday. Most retailers have burned hot and burned out by 50 years,” Peck said. “We’re going into our second half-century with loyal customers, strong brands—now seven in our portfolio—and we’re excited about the prospects.”