The Gap has been a fixture of UK High Streets for many years and has had both ups and downs. In a highly competitive market, it faces fierce rivals from other high street retailers and also from an increasingly important online presence. Same-shop sales for Gap fell in July by 7% and the brand is now finding itself in a tricky position.
Although the Gap does sell products at a variety of prices, even sales growth in its most affordable line was not sufficient to offset declines elsewhere. It’s not just the UK where this decline is observed, with 175 Gap specialty shops in America being shut down over the next year. This will inevitably mean job losses. So why is Gap struggling so much, after being such a popular brand?
Its competitors are arguably offering a very similar product, but at a lower price. Consumers, being increasingly aware of prices and having many more options to make price comparisons, are perhaps using this information to make better choices. If they don’t believe that they are getting something extra from paying a slightly higher price at Gap, then they’d prefer to get the same thing elsewhere, from somewhere like Forever 21 or H&M. Some also suggest that the product itself is out of date and with the world of high fashion being such an important part of life for many people, an out-of-date product is bad news. That, together with consumers finding more and more things that they can spend their money on, beyond clothes has led to a tricky position for the Gap.
A key part of maintaining a presence on high streets has been sales and special offers – this has been a key element in keeping customers coming, but it is certainly not a long term strategy. Research analysts have been investigating some of the key aspects of the Gap and various comments have been made, including:
“Uniformity is no longer cool… The trick now is convincing your customer that they’re getting something unique.” (Simeon Siegel), Nomura Securities.
“Of top priority is delivering more consistent and compelling product collections.” Kari Shellhorn, Gap spokeswomen.
“Whether it’s colour or print or it’s pattern, the Gap brand hasn’t been kept up to date … Until they have their product right, I think we’ll continue to see them have promotions.” Dana Telsey, Telsey Advisory Group.
The future of Gap is certainly in the balance and with an increasingly competitive market when it comes to retail, an effective strategy to maintain and increase its market share will be essential.
Why Gap is in a tight squeeze BBC News, Gianna Palmer (20/8/15)
Gap Inc sees some potential for next year but Q2 2015 remains weak Forbes, Investing, Trefis Team (24/8/15)
Questions
- What sort of figure would you expect Gap’s clothes to have and why?
- Into which market structure would you place the retail industry? What does this tell us about how a company such as Gap can hope to make profits?
- If you were advising Gap, what strategies would you propose as a means of boosting revenue and cutting costs?
- The BBC News article states that the fortunes of Gap have been hurt by a strong US dollar. Why may this be the case?