What efforts is Gap doing to improve performance?

According to the World Apparel and Footwear Network, Gap, the largest apparel retailer in the United States, who has been caught in the performance quagmire, finally saw a signal of better performance. In order to catch up with the pace of other competitors, what efforts is Gap doing?

Gap Group recently released its preliminary results for the second quarter, with sales down 1.29% year-on-year to US$3.8 billion, but net profit surged more than doubled year-on-year, from 116.8% to US$271 million, and same-store sales recorded 1%. Increase. Among them, the core brand Gap same-store sales continued to decline, recording a 1% decline, but the decline was narrowing. Banana Repubic same-store sales fell 5% year-on-year, Old Navy is still the only brand with growth, same-store sales rose 5% year-on-year. Art Peck, Group President and CEO, said that he was satisfied with the results of the quarter and proved that his restructuring strategy and investment in consumer experience and investment in products began to pay off.

In view of better-than-expected second-quarter results, the Group improved its annual performance target. In the first quarter of this year, Gap's performance was also more optimistic, and the US domestic market began to recover. Thanks to the strong performance of the Old Navy and Athleta divisions, Gap Group sales increased 2% year-on-year to US$3.4 billion in the first quarter ended April 29, while net profit surged 12.6% to US$143 million. During the period, sales of Old Navy, a brand of the Gap Group, recorded an increase of 8%, while sales of core brands Gap and Banana Republic both fell 4%.

After a period of downturn, the Gap Group's performance finally showed signs of turning better. Although the core brand Gap still recorded a decline, but with the strong performance of Old Navy and a series of restructuring measures, Gap is trying to make up for its distance from fast fashion brands such as Zara.

Reduce discounts and promotions

In the past year, the US department store has fallen into a performance quagmire. The culprit is the discount sales that have been going crazy for ten years. Department store promotions have triggered a series of collateral reactions, not only for the light profits of luxury brands such as Michael Kors, but also “cultivating” a group of consumers who have become accustomed to various holiday discounts, black Fridays, and end-of-season discounts. Excessively discounted promotions have made regular-priced items often slow-moving, and must be cleaned up through promotions, thus leaving fashion sales in a vicious circle. From the perspective of consumer psychology, consumers believe that buying a regular-priced product is a “loss”. In order to maintain the brand image and accelerate the transformation, fashion brands bear the brunt of reducing department store promotions.

Fashion Fashion Media The Fashion Law quoted First Insight, a Pennsylvania-based retail business analysis company, as saying that the constant discounts of retailers and brands have created “sale fatigue” for consumers, and consumers no longer have to pay the full price for clothing and accessories. The report, entitled "Discounting Frenzy," pointed out that 45% of American women see a price reduction of less than 40% before they enter the store. In addition, consumers are usually only willing to pay 76% of regular-priced women's products because consumers don't think Product value matches pricing, which is “not worth the price”.

More affordable apparel retailers have not been immune to discounts and promotions, but for less profitable apparel retailers, discounts are equivalent to drinking and quenching thirst. Gap is working on solving this problem that has caused many brands headaches, and will reduce discounts as an important part of the brand reorganization strategy. But the question is, how can the Gap Group attract discerning young consumers in the increasingly competitive apparel retail industry in terms of fashion, supply efficiency, delivery experience, and uniqueness?

Rejuvenate and increase fashion

Not being young and fashionable is a drawback that the Gap Group has been criticized for. But before Zara became popular around the world, Gap's American casual style was once considered a fashion for young people. With the evolution of the trend, the beauty of the youngsters gradually lags behind, and the extremely popular A&F, American Apparel, Urban Outfitters, Wet Seal, and Rue21 are facing a crisis of declining performance, being sold or even bankrupt. Today's young consumers are beginning to favor special, fashion-conscious products, and gradually immunize basic products such as Gap sweaters. Obviously, to capture the hearts of young consumers, Gap must provide more freshness.

In July of this year, Gap and China's social app WeChat launched a series of joint design issues caused a heated discussion. Joint design has become the standard promotion and configuration of fast fashion brands, but the joint name of clothing brands and technology brands is rare. WeChat, with 1 billion active users, maintains a high user viscosity by grasping the biological attributes of people, especially young people who are currently characterized by community culture. The combination of Gap and WeChat clearly also sees the community of WeChat, and incorporates Gap's original and life-like design style. Judging from the choice of partners, Gap has already found the right direction.

From a more core product, Gap is also making some efforts, such as launching the GapFit sports series, focusing on the fashion of the product, and strengthening the more popular tannin products. However, from the perspective of Gap's Chinese stores, product innovation is still not significant enough. Compared to the more fashionable Zara and H&M, Gap's efforts on the product are slow and not thorough enough. The younger generation likes fashion products, but Gap's traditional style is simple and natural. Gap needs further exploration on how to balance the two.

Compared with the same basic model, the performance of the better Uniqlo, Gap in the product technology and product categories are even worse. Uniqlo light down, Heatech and other innovative technologies already have a group of loyal fans, one-stop product selection makes it attract consumers of all ages. At the same time, in terms of brand image, Uniqlo China also uses the popular stars such as Ni Ni and Chen Kun to shape the brand image. Although Gap had invited Zhou Xun and Jing Boran as spokespersons, there was not much marketing action in the past one or two years.

Supply chain is fast and fashionable "infrastructure"

Although Gap has never positioned itself as fast fashion, in the fast-growing apparel retail industry, Gap has gradually been placed in the same camp of fast fashion brands such as Zara, and consumers have increased their expectations for the Gap supply cycle. A&F and American Apparel were hit by fast fashion while being classified as fast fashion, and then began to decline. Between the faster-changing Zara and traditional apparel retail brands, consumers are more inclined to choose the former.

Therefore, the weak supply chain is the biggest shortcoming that hinders the development of traditional apparel retail brands. Moreover, the traditional fast fashion brands that are known for responding to consumers' needs and constantly bringing freshness are also suffering from “ultra-fast fashion” (Ultra-Fashion). ) The challenge. They take less time from design to shelf and more products are updated at fixed times.

In this case, Gap also put the supply chain issue on the restructuring agenda. Art Peck, CEO of Gap Group, stressed that the group's restructuring measures are proceeding smoothly and will increase the efficiency of the supply chain in the future to meet the changing needs of consumers. More specifically, Peck said that during his tenure, the Gap Group will reduce the 10-month average development cycle to 8 to 10 weeks, allowing the company to compete better with fast-fashion retailers. Uniqlo, which is more similar to Gap, has announced earlier that it will further shorten the product cycle and develop in the direction of fast fashion.

The product cycle is only part of the supply chain construction, and equally important is the inventory management issue. How to arrange time properly, use appropriate and not excessive discounts to clean up inventory, and free up inventory space for new products is a more complicated issue. Gap is increasing its focus on supply chain construction because the flexibility of the supply chain is related to the consumer experience.