Gap Case Study

GAP.COM By Gediminas Sumyla

Mission and vision
Mission : GAP is a brand-builder. “We create emotional connections with customers around the world through inspiring product design, unique store experiences and compelling marketing.” It’s goal is to simply make it easy for customers to express their personal style throughout their life.
Vision : GAP hoped that effective Web initiative could let company to solidify its brand, improve customer relationships, serve markets that could not support a store and cut costs. Company also believed that going online would attract new customers and steal market share from competitors.

History
In 1969, Don Fisher and his wife Doris opened the first GAP store in San Francisco. The company took name from “generation gap” and targeted the late-teen customers.
By the end of 1970, there were six GAP stores already. Sales reach $2 million.
In 1974 GAP introduced private label lines to pull it out of price-based competition with larger retailers. Private-label clothing lines gave GAP control over the entire supply chain.
In 1976 GAP went public offering 1.2 million shares of stock on the New York and Pacific Stock Exchanges.

History (cont’d)
In 1983 there were 566 GAP stores and Millard ("Mickey") Drexler joined the company as President and COO of the Gap division. Drexler improved company’s margins, promoted growth and redefined its image.
In 1983 GAP acquired Banana Republic.
In 1986 first GAP’s GapKids launched.
In 1987 company reached $1 billion in sales.
In 1987 GAP opened a new store outside US in London, and in 1989 in Vancouver, Canada.
In 1992 GAP becomes the second largest selling apparel brand in the world.
In 1994 GAP introduced Old Navy brand.

History (cont’d)
In 1995 Millard Drexler is named President and CEO of Gap Inc., succeeding founder and Chairman Donald Fisher.
In 1997 Old Navy sets a retail record, reaching $1 billion in annual sales in less than four years of operation. GAP opens its Online Store at GAP.COM.
In 1998 Banana Republic surpasses the $1 billion mark in annual sales.
In 1999 BananaRepublic.com launches.
In 2000 Oldnavy.com launches. In april GAP divisions had 3145 stores and company accounted for approximately 5% of all apparel dollars spent in US.
In 2002 Paul Pressler is named GAP Inc. President and CEO. Millard Drexler retires after 19 years of service.
In 2003 GAP Inc. Founder Don Fisher announces decision to step down as Chairman of the Board.
In 2006 GAP Inc. launches its first online-only brand, Piperlime, offering a fresh shoe shopping experience.
Thirty years after entering the retailing industry, GAP had an established, prominent positionin the specialized retail apparel industry and consistently achieved among the highest margins in the industry.

History (cont’d)
“The same passion and entrepreneurial spirit that our company was founded on more than 35 years ago continues to drive our ongoing growth.”

Management team
Glenn K. Murphy- chairman and Chief Executive Officer, Gap Inc.
Jack Calhoun - President, Banana Republic.
Marka Hansen - President, Gap.
Toby Lenk - President, Gap Inc. Direct
Dawn Robertson - President, Old Navy
Michael B. Tasooji - EVP and Chief Information Officer

Stakeholders and key players
Millard “Mickey” Drexler – joined the company as president of GAP stores in 1983. He came from Ann Taylor, an upscale women’s mass retailer, where he had built a reputation for establishing large consumer brands. Drexler improved GAP’s margins, promoted growth, and redefined its image.
Among Drexler’s early initiatives was consolidating the multiple private-label lines into a GAP brand.
He also extended GAP’s reach by acquiring Banana Republic in 1983 and opening the first GapKids store in 1986.
Drexler sought to reposition GAP as a global brand, rather than just a retailer.

Goals and strategies
In e-commerce GAP used the same strategy that had worked for it offline – establishing new markets, focusing on stylish, value driven product offerings, and controlling value drivers in-house.
GAP also sought to control an increasing share of the consumer’s apparel dollars.
Company integrated technology into Web sites so they could enhance the customer experience.
GAP also was trying to provide the best customer service that they can and guide their success with values such as integrity, respect, open-mindedness, quality and balance.
GAP also believed that it can manage the conflict between its online and offline channels.

Strategies
GAP decided to use multichannel strategy.
Company saw its bricks-and-mortar stores not as an impediment, as many Internet pure-plays liked to assert, but as a key asset that it could leverage to give consumers a complete shopping experience:
Consumers benefited in several ways:
Customers could return products to stores even if they bought them online.
Banana Republic offered free alterations.
Customers could do product research first on the Web and then buy at brick-and-mortar store.
Customers were more comfortable buying online because of GAP’s well-established brand and reputation.

Industry and market
Estimates for 1998 online apparel sales ranged from $330 million to $460 million and expectations for 1999 online apparel sales ranged from $642 million to $1.4 billion.
Huge market, huge opportunities, excellent potential market share.
Forrester predicted that online sales would be $20 billion by 2003 (7% of total apparel sales) and Jupiter expected 6% penetration by 2006.
Despite these different estimates, the Web was clearly important for apparel retailers.
Moreover, analysts predicted that most Web sales would not be incremental gains, but would represent consumers moving their existing purchases to the Web.

E-Commerce opportunities
Web initiatives would attract new customers and steal market share from competitors.
Opportunity to solidify company’s brand, improve customers relationships and serve market that could not support a store.
Going online also opened opportunities to cut costs in selling and support services, service and operations, property and equipment.
Retailers could sell more if they reached consumers through multiple channels.
Offline retailers such as GAP could allay fears to buy online, whereas Internet-only competitors could not.

E-Commerce initiative
Gap.com was introduced with e-commerce capabilities in 1997.
By year 2000 only oldnavy.com was not an e-commerce functional
Company designed each site to look like the brand’s retail store. Online stores offered more sizes and products and comparable prices.
Web sites were well technology integrated and enhanced customer experience.
Technology gave Gap extensive customer data.
Sales in 1999 were $80-$100 million, comparing to $20 million in 1998.
Gap captured between 7% and 15% of total industry.

Perspective analysis
Creating value: economics of internet based commerce.
Gap was concentrating on satisfying the customers and creating more values for them.
“ Every day, we honor these values (integrity, respect, open-mindedness, quality and balance ) and exemplify our belief in doing business in a socially responsible way.
Gap created emotional connections between customers through inspiring product design.
Incentives, great return policy, alterations and in-store promotions made customers more satisfied with the brand and created more value for them.
Web sites integrated technology to enhance customer experience – customers could easily compare sizes for different cuts and styles, there were multiple navigation schemes, and wish lists and other tools to record their preferences and better understand what customers want.

Missed opportunities
Gap could have ran into the dot-com boom and could have focused on the volume of sales and not on customers, which would bring the sales revenues up, but would not satisfy the customer as much.
This strategy would have worked only for a short-term until company starts losing customers because of dissatisfaction.
Where would that lead the company in a long-term???

Success or failure?
Gap Inc. is one of the largest retail companies in the world with the revenues of $16 billion and 160,000 employees and more than 3,100 stores.
Gap didn’t blindly jump into the dot-com boom, but gradually moved forward launching online brand by brand.
Gap stayed ahead of industry trends.
Gap was in retail industry for over 30 years and people trusted this brand. Customers already knew products, sizes and styles. This allayed the fear of buying clothes online.
Company was spread all over the country which made online customers reachable by offline stores: customers could return online products to any Gap store.
Multichannel strategy helped Gap to shift offline customers that had trouble reaching the stores to online customers.
Online product returns were approximately the same as for store purchases.
Success!

“ I created Gap with a simple idea: to make it easier to find a pair of jeans. We remain committed to that basic principle.” - Don Fisher, Gap Inc. Founder and Chairman Emeritus

Gap Case Study

by Nirmala last on Oct 15, 2008

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