Photo: RetailWire
Is a trendless fashion industry killing Gap’s business?
It’s been quite some time since Gap was at the forefront of fashion. Some have pointed to the general decline of malls as the source of the chain’s poor performance. Some have pointed to deep discounting and a lack of new ideas for the once essential brand’s current lack of popularity. But on top of that, CEO Art Peck sees another significant challenge — a fundamental flaw in today’s fashion world that’s making it rough for the company to find its footing.
At an annual retail conference hosted by Goldman Sachs, Mr. Peck told analysts, “There are no [compelling] fashion trends driving the business,” reported The Street. Mr. Peck contrasted today’s apparel landscape with that of 2012, when colored skinny jeans drew customers to the chain.
Mr. Peck stepped into the role of CEO in early 2015 promising technological innovations that would bring the company back to its heyday. But there has not been much word on the company’s omnichannel strategy, dubbed Retail 3.0, since the moniker was first thrown around last year.
Gap’s stock performance has continued on a downward slide. The company reported a drop in sales for the eighth straight month in a row early in September, according to The Street. The numbers were made slightly better by a one percent increase in sales at Old Navy.
Some are painting the increase in Old Navy’s sales as a potential resurgence of what had, until recently, been the single standout brand in Gap’s portfolio.
The phenomenon of Old Navy’s success despite its parent company’s tribulations was attributed in no small part to the fast-fashion acumen of the head of global sales, Stefan Larsson, formerly of H&M. Larsson left Old Navy towards the end of 2015 to become CEO of Ralph Lauren. Shortly after that, a sales slide began which continued well into 2016.
Not all of Mr. Peck’s comments at the retail conference were about the state of fashion, according to Fortune. The recent closure of 100 Macy’s stores may give Gap leverage to pursue reductions in rent in some malls, depending on how their leases are written.
- Gap CEO’s Brutally Honest Presentation to Goldman Bankers Should Really Frighten Investors – The Street
- Gap’s Slide Towards Irrelevance Quickens as Sales Slip for Eighth Straight Month – The Street
- Gap is still waiting for a turnaround – RetailWire
- Where will Old Navy’s new captain steer the ship? – RetailWire
- How Macy’s Store Closures Could Help Gap – Fortune
Discussion Questions
DISCUSSION QUESTIONS: Do you agree with Art Peck that a lack of significant fashion trends, in general, is a root cause of Gap’s poor performance? What can apparel retailers do to thrive in such a trendless environment?
Poll
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
Joan Treistman
President, The Treistman Group LLC
From years of discounting, Gap has shown their value proposition as nil. On the other hand retailers like Ulta have refashioned their brand away from discounts successfully. Until as a company they believe they have merchandise worth the price stated, not marked down, consumers will sit on the sidelines. The question is, how long can a brand survive like this?
Even the most casual observer of fashion knows that there are always fashion trends — a glance at the September Vogue will show hundreds of pages of them. One of Gap’s issues is its insistence on selling the same items season after season. If you need striped tees or jeans, Gap is your destination … but if you’re seeking current fashion trends, you’ll head almost anywhere else.
I’m glad to hear Mr. Peck mention this if only because I’ve been saying it for a while! Apparel retailers tend to trot out the weather, economic trends and other all-purpose excuses when business is down. These are often valid but ignore the fact that “trends” as we once knew them are no longer driving the business and they certainly are no longer being dictated by retailers. Gap was actually a hold-out in this regard, declaring that it was the season of the puffy vest as consumers shrugged and went online. Three other related dynamics are at work here — 1. Consumers trading off dollars between apparel and consumer/personal electronics; 2. Social media-driven “trends” that require reaction on a dime and that therefore favor fast-fashion retailers over those with traditional supply chains/lead times; 3. “Category killers” of all stripes are at risk when Amazon aggressively attacks as it certainly has in the apparel space. Self-branded retailers have even less room to move.
Together, these dynamics create some mighty headwinds for any apparel retailer (forget “thriving”). Although Uniqlo has not been pleased with its U.S. performance to-date, I do think they have a more concrete model. Instead of selling blah basics, they spice things up with technical fabrics and offer depth of assortment in seasonal key items, encouraging multiple purchases. Uniqlo’s flagship-style stores are also much more exciting to shop.
It’s the job of Gap stores to test, identify and exploit trends — not to blame “the fashion cycle.” Walk into Forever 21 and you’ll see a strong statement right now on the “spice market” color trend. What’s stopping Gap?
I agree with Cathy. Here’s a current fashion trend that transcends all age groups; Millennials, Generation X, Baby Boomers and Generation Z … Athleisure.
The impact of Athleisure (mostly leggings, tops, hoodies, sneakers/athletic shoes), is that it encourages women and girls to wear pretty much the same thing wherever they go … in the home, in the gym, at the movies, when dining, etc. This cuts down the size of a person’s wardrobe and the need for the accessories (jewelry, shoes, belts) that go along with it.
For me Athleisure is a significant trend that influences sales across all apparel segments and retailers, including Gap.
The term “trendless” (Is that even possible?) is a puzzling one best explored toward the end of Friday’s Happy Hour. However I will jump the gun in anticipation.
Futurist Dan Burrus says there are “hard trends” and “soft trends.” Hard trends are developments, innovations, styles or whatever that will certainly happen whether you want them to or not. They are predictable. We can see them coming. They are based on facts not assumptions. And they can’t be stopped. Cashless commerce or driver-less cars might be two examples. Soft trends are those that might happen, maybe even look like they’re going to happen. Soft trends are based on assumptions and guesses and are not a future fact.
Burrus concludes that the game-changer — the ultimate differentiator we all long for — is knowing how to tell the hard from the soft. Whichever retailer learns how to do that owns the future. The problem for Gap and everyone else in clothing and fashion is that they are trapped in the sinking sand of soft trends. It’s all a big guess as to what will work or not work. What will endure long enough to get through inventory and what will end by the weekend.
Could it be that the only hard trend retail has created for itself is discounting/low cost? That’s the future game whether we like it or not. It no longer can be stopped.
To say that there are “no compelling trends driving business” is ludicrous. Chokers, off-shoulder tops, white sneakers and athleisure are completely pervasive.
Millennials aren’t buying Gap/Old Navy/Banana Republic’s “ethical company” pitch since their child labor expose in 2000. Wearing Gap is now taboo for an entire generation.
Furthermore, like Abercrombie, Gap kept trying to make a profit on basics in the face of fast fashion. It isn’t that the trends aren’t there, but that Gap fails to utilize them.
Stock price, investor expectations and a new generation of “corporate retailers” focused on numbers rather than exciting their customer. In a world void of trend, if that were possible … Even basics can be cut, shaped, fit and color-assorted with a unique twist or detail to draw a past Gap customer into a Gap store. The business of retail is now a commodity business run by the numbers, not by the art of fashion, with the exception of a few retailers. Remember the day one could walk into the Gap and be excited? Where are the fun Gap “novelty” items that drove the purchase of Gap basics?
I disagree with the weight given to fashion trends. Fashion as a variable is subjective, it never changes.
Gap used to present clear and distinct fashion store brands in their Old Navy, Gap and Banana Republic stores. However, in the last 10 to 15 years, that distinction has been often blurred and overlapped. If you ask consumers for the distinction between the three stores, they will say it’s price range. My guess is that other than in the high price range, not many folks want to wear price range as fashion statement.
Wasn’t it a few months ago that there was talk of Gap selling a Amazon? You can’t tell me that’s a fashion driven decision.
Another CEO deflecting responsibility and blaming others for their ineffective strategies and policies. Gap has rested on their past successes for too long and now the new shopper landscape has caught up with them. Rather than change and be responsive to the times and shoppers’ expectation, Gap chose to continue to do what was successful 10 to 15 years ago. Shoppers make their voices heard with their wallets and in this context have been shouting to Mr. Peck and the rest of the Gap executives for some time. To blame the fashion industry for their decisions is weak at best. Where is Elizabeth Warren when you need her?
It’s been three years since Gap’s acquisition of INTERMIX and from a distance (I am not a shopper) their mix of products and services seem to have promise. Check out the website here. For convenience, I’ve copied their “About” page below. Their fashion and business design seem to be very different relative to this article. Thoughts?
“INTERMIX offers the most sought-after styles from an edited selection of coveted designers. Renowned for our philosophy of mixing on-trend pieces in unexpected ways, INTERMIX delivers a unique point of view and an individualized approach to shopping and personal style.
In addition to our e-commerce destination, INTERMIX boasts 43 boutiques across the United States and Canada, offering a thoughtfully curated mix of emerging and established designers, the most of-the-moment styles and the latest must-haves of the season. Each boutique’s assortment is hand-selected to reflect the neighborhood and the lifestyles of our clients. Within our intimate shopping environment, personal stylists work one-on-one with clients to create compelling looks from the most exciting designers.
Intermix prohibits the use of fur in its products.”
Once upon a time, I heard, “It’s the goods, stupid.”
For the most part, that is what ails Gap. And its not that alone. As is common to most retailers, as topline softens, then payroll and advertising are cut. The lack of store payroll results in sloppy housekeeping (both merchandising and facility) and Gap stores do suffer from that lack of a crisp presentation.
Further, Gap advertising follows its slavish reliance upon the past. No wonder the goods and its messaging no longer resonate. GAP brands have little appeal.
There are trends. As others have said, look at any fashion pub/site. Or watch reality TV. Or view any awards show red carpet. Or the torrent of stuff from last week’s Fashion Week. Walk any mall, even those doomed. You will see shoppers buying apparel. Some stores are busy and some are not. The busy stores are trend right. Go in and you will see on-trend goods. Visit high-traffic, pure-play apparel sites. Across this range of “content,” you will see plenty of trends. Like the diverse number of shows and networks that received Emmys, the trends are no longer mass but are many slivers. It’s a long tail world fueled by the pursuit of “what’s relevant to me.”
Of course, the challenge is how to convert that information into insights and then goods for GAP customers.
Yes, “retail ain’t for sissies!”
I think the “lack of significant fashion trends” is a poor excuse for Gap’s poor performance. There are significant fashion trends and there always will be. Consumers are still buying clothes; it is just not the clothes at Gap. Savvy retailers like the fast fashion and off-price retailers are understanding customers’ needs and adapting their products and price points to meet the new fashion trends.
Many consumers are more interested in having the new, fashionable clothing than wear the same classic t-shirt, polo or jeans for several seasons or years. Several fast fashion retailers, like Primark, Uniqlo and Zara, have responded to this new fashion trend for stylish but cheap clothes that need to be quickly replaced. Gap and other retailers should learn from these successful retailers and listen and respond to consumers’ evolving needs.
Maybe it’s the product. Cleaned house and found a “100% cotton, gap classic pocket T” from I won’t tell you when. Compare it to today’s version of the cotton t. This years version is … (can I say?) cheap, low quality and and inflation adjusted even more expensive than the classic. Should have put away a few dozen. Maybe the new ones are high fashion and I’m not … oh right there’s no fashion trend. I guess then I’ll just say “frugally built product might be part of the issue….”
Innovative, interesting products are a critical to building retail traffic. So Art Peck is correct in noting that Gap fashions have been lackluster and that has led to poor traffic.
Yet I find that most retailers manage buyers without a recognition or incentive for bringing in innovative products despite the slightly higher risk. So it’s no surprise that the products on the shelves are lackluster.
The internet debacle has also contributed to this. Omnichannel is important. But while pursuing other things, retailers need a constant stream of innovative products in order to have healthy traffic (at their stores OR online).
We saw it last Christmas when there really weren’t many interesting things in the stores — store traffic suffered badly.
Gap is part of this. But my sense is that Peck should look at Gap for the failing and not blame it on the fashion industry….