Gap: Case Study
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SYNOPSIS
Gap, Inc. was originally founded by Doris and Donald Fisher. The company has evolved from a single store located in San Francisco, California into a predominate retail chain that includes the Gap, Banana Republic, Old Navy, Forth & Towne, and Piperlime.com. The company sells a huge variety of clothing from casual to chic for men, women, and children.
The 21st century has brought hard times to this extremely successful company, especially Gap adult stores and the company is losing market share. Key problems with the company have been identified and the follow solutions have been offered: increase supply chain streamlining and efficiency, decrease number of stores, hire creative staff to focus on fashion styles and trends, narrow target market, stabilize merchandise style and fabric quality issues, establish clear brand image, and cut bureaucracy and hire more executives with retail experience. The company needs to employ several of the previous solutions, since many of them intertwine and will help each other.
First, Gap needs to narrow its target market. Gap is trying to please too many population segments and should focus on one particular group. Once it has clearly defined its market it is easier to complete step two, establishing a clear brand image. Gap should create a story or image that will directly appeal to this new established market. Third, Gap must stabilize merchandise style and fabric quality. With a clear picture of the target customer and brand image, Gap can produce the correct merchandise, assortment, and advertising for that specific demographic. If Gap focuses on these three issues and solutions and hits the mark on each step it will definitely see a turnaround in business. Customers will once again know what Gap stands for.
PROBLEM
In the 1990s, specialty retailer Gap was known as a hip and trendy place to shop. Its television commercials with teens dressed in khakis dancing to swing music attracted the attention of many. Gap was the place to go for T-shirts and jeans; the provider of the new casual work uniform that was taking over corporate America. Actress Sharon Stone even wore a Gap mock turtleneck to the 1996 Oscars (ODonnell & Fetterman, 2007).
Since 2004, Gap has gone through hard times with declining sales. The company has not had an increase in group-wide quarterly same-store sales since that time (ODonnell & Fetterman, 2007). This past holiday season, sales dropped a staggering 8% and since 2000, Gap’s stock has fallen by 62% (ODonnell & Fetterman, 2007). In an attempt to get new leadership and creative talent into the mix, Gap’s CEO Paul Pressler left the company in January 2007. Many have speculated that Gap may sell off parts of its company (ODonnell & Fetterman, 2007).
This case study is an effort to address the critical problems within Gap, Inc. that have led the company to have these financial issues. From the viewpoint of a consultant, the following document will give an overview of the company, in particular the Gap store adult business, and identify key problems and provide possible solutions to turn the company around.
HISTORY OF GAP, INC
Gap, Inc. was originally founded by Doris and Donald Fisher. The company has evolved from a single store located in San Francisco, California into a predominate retail chain that includes the Gap, Banana Republic, Old Navy, Forth & Towne, and Piperlime.com. The company sells a huge variety of clothing from casual to chic for men, women, and children. The company currently has 3,131 stores throughout the United States, Canada, the United Kingdom, France, Ireland and Japan (“About Gap, Inc.,” 2007).
The Gap store was founded in 1969. Mr. Fisher built his first store in order to address the “trend among the city’s increasingly disaffected youth” (“The Gap, Inc.,” 2006). At that time, the store carried only records and Levi’s. Mr. Fisher chose to carry Levi’s because he was unable to find the right size of Levi’s in his local department store. He decided to cash in on the trend of “durable, cheap, comfortable, and acceptably offbeat” jeans (“The Gap, Inc.,” 2006). Unfortunately, Mr. Fisher’s strategy of attracted customer by means of selling records caused no one to notice the jeans and the store was almost driven to bankruptcy (“The Gap, Inc.,” 2006). Mr. Fisher invested more in advertising his low prices and emphasized the youthful ambiance of the store naming it The Gap, an allusion to the generation gap in society (“The Gap, Inc.,” 2006).
Donald Fisher “incorporated his business as The Gap Stores, Inc. and it was an immediate success” (“The Gap, Inc.,” 2006). Within two years of opening the first Gap store, sales were at $2.5 million annually (“The Gap, Inc.,” 2006). The company went public though the Fishers retained a majority of the stock (“The Gap, Inc.,” 2006). Within five years, Gap sales increase almost 50-fold to $97 million and there were 186 stores total (“The Gap, Inc.,” 2006).
In 1983, Millard (“Mickey”) Drexler joined the Gap, Inc. as President and COO of the Gap division and the Gap grew significantly from this point. Within the same year, the company acquired Banana Republic, a safari and travel clothing company with only two stores (“About Gap, Inc.,” 2007). In 1986 the first GapKids store opened and in 1987 the first international Gap store opened in London, England (“About Gap, Inc.,” 2007). The Gap became the second-largest selling apparel brand in the world in 1992 (“About Gap, Inc.,” 2007). In 1994, the first Old Navy and Gap Outlet store opened with huge success (“About Gap, Inc.,” 2007). In 1997, the Gap received an online presence and in 2002, CEO Millard Drexler retired and Paul Pressler of Disney is named Gap Inc. President and CEO (“About Gap, Inc.,” 2007). In 2006, Gap launched piperlime.com, a seller of shoes (About Gap, Inc.,” 2007).
The 21st century has brought hard times to this extremely successful company. The company is losing market share and even came under question about its labor practices in other countries (“The Gap, Inc.,” 2006). Most recently, CEO Paul Pressler left the company in January 2007. Bob Fisher, son of the Gap founders, has become interim CEO and will be leading the search for a new leader for Gap (OLoughlin, 2007).