Can Gap mend its brand?
With approximately 4,100 stores worldwide (comprising Gap, Old Navy and Banana Republic), Gap Inc appears to have the retail clothing market sewn up. However, the brand recently reported its first back-to-back fourth-quarter loss, and Gap, the store, has had a trend of declining sales for a better part of the past two years. Even as many retailers feel the heat of the recession, one has to wonder if Gap's sister brands have cut into its own marker share.
From its humble beginnings as a San Francisco mom-and-pop jean shop, Gap Inc has grown into the largest specialty retailer in the US, selling clothing, accessories, underwear, loungewear and personal care items through three major brands Gap (including GapKids, BabyGap, and GapBody), Banana Republic and Old Navy.
After decades of rapid growth, Gap now seems to be taking a more conservative approach to world domination. The company recently announced that it is carefully reviewing all pending real estate deals for 2002 and currently expects growth for this year to log in at around 5 percent; a significant slow down from last years expansion rate of around 13 percent. This still means a whole lotta Gap an estimated 90 to 100 stores are slated to open this year, as well as 20 to 30 more Banana Republic locations. Old Navy is also set to expand with the addition of 75 to 85 new stores.
Although sluggish sales and weak stock prices could easily be attributed to the recent economic downturn, Gap proper seems to be wrestling with ongoing speculation about the brands success quota on a deeper level. Rob Frankel, branding guru and author of The Revenge of Brand X, offers his take: My suspicion is that the recession is only slightly to blame. Recession is an easy excuse. They have much bigger brand issues that bear far more blame.
When asked how the current recession has affected brand strategy, a Gap Inc spokesperson said, In terms of the general economy, like everyone, we've been experiencing the same uncertainty in the marketplace. We've acknowledged that we lost focus in our brands and are now concentrating on managing our business to improve cash flow, lower expenses, and most importantly, improve our product offering.
Some adjustments to spending may have been made, but it seems Gaps advertising budget has remained intact youd have to live under a rock to escape its presence in the media. Celeb-centric ads are still plastered all over the place, aimed at reinforcing Gaps position as purveyors of accessible, everyday fashion. These ads may still stoke the fires of brand awareness, but in recent times, they have failed to reign in more customers.
Overall, Gap and its sisters made the all too common mistake of allowing their true brand value the stuff that resonates with the end user to get lost in their messages, says Frankel. They shifted out of a more responsible brand message and opted for confusing, obtuse, media-driven advertising that essentially had no message. They fell hook, line and sinker for the cutting edge strategy so often used today in media advertising, where, if you don't understand it, you can't be hip enough to buy it. Well, they were right about that. Enough people didn't get it. [They] watched those oblique TV spots, scratched their heads and wondered what the hell the previous 30 seconds were about.
When the adventurer clothing brand Banana Republic was acquired by Gap Inc. in 1983, it consisted of two locations and a successful catalog business. Gap transformed the line into business attire, offering high-end classic and casual clothing, shoes and accessories for men and women in the 25 to 45 demographic. It also expanded into intimate apparel and has opened a number of home accessory stores that carry domestic products.
Banana Republic didnt take as much of a hit this past holiday season as Gap. Retail sales were level with last years numbers, and therefore, Banana Republic has been spared the fiscal and branding revamp now facing Gap.
However, that didnt preclude it from making some notable adjustments in strategy. Its monthly catalog has been replaced by a quarterly marketing piece called "the book." Shot by famous fashion photographer Ellen von Unwerth, the book aims to serve as a catalog-cum-fashion magazine, focused on feel as much as product. Following the lead of the other two Gap brands, Banana Republic is rumored to be jumping on the celebrity-as-imagemaker bandwagon, although it remains to be seen on the street. Even if the rumor proves true, it seems the Banana Republic brand and products differ enough to avoid comparison with its sibling brands.
Old Navy, with over 650 stores, is the least expensive of the Gap brands. The line caters to teens and college age, offering a combination of functional, trendy fashion with frugality. This discount formula seems to be effective; Old Navy was the first clothing retailer to reach US$ 1 billion in annual sales in less than four years.
But similarities between the Old Navy brand and the Gap brand run the gamut from products to advertising. With popular TV spots featuring personalities like MTV hosts endorsing the Old Navy brand, it seems they are following the Gap road most traveled if the market is saturated with images of Old Navy wearing celebrities, the kids will follow. But when consumers reach the stores, the product offerings blur in distinction, resulting in an inevitable competition between the two brands. Why buy the clothes at Gap when theres a cheaper alternative in Old Navy down the block.
To this end, Gaps spokesperson counters: The company does monitor for possible cannibalization of our brands, and we have found that this isn't the case. When we open an Old Navy store next to a Gap store, we initially do see some cannibalization but this is not evident over time and it tends to right itself within a year.
Frankel has some different thoughts on the distinction between Gap and its sister brands, If Gap were truly into branding strategy, they would find a very clear distinction between the three. I personally see no problem with the potential divisions. What Gap has lost is the ability to see it. Banana Republic has always skewed older and more conservative. Old Navy has always been the poor man's Gap. Gap before they obliterated the brand was happily in between.
When asked what measures the company will take to set brand boundaries going forward, Gaps spokesperson talks about making a number of improvements in strategy, We are re-focusing on our brand positioning, our customer and on delivering great design. We are focused on key item merchandising and on keeping our stores simple and easy to shop. We're backing that up with greater operating effectiveness.
Frankel offers his two cents, "Branding is not about getting your prospects to choose you over your competition; it's about getting your prospects to see you as the only solution to their problem. Gap and its sister brands all need to get back to that. Meanwhile were watching to see if Gap can mend its brand in time.