Gap falling short of consumer trends

What happened to the Gap? Gap Inc. was once a leading retailer and the place to buy your perfect pair of khaki and black pants. But it seems once you have bought one pair of these pants and one brightly colored shirt you are set. There is no more need to go back into the store to find monotonous products that can be purchased at a cheaper price at other retailers.

Gap Inc., which owns Gap, Old Navy and Banana Republic, announced Monday, June 15^th , that in order to drive productivity improvements and showcase the brand in the most successful locations, it plans to close 175 of its namesake stores in North America, 18 per cent of its current total, and cut 250 jobs at its headquarters. Recently we have seen the resurgence of normcore clothes: high waisted jeans, chino pants, t-shirts and hoodies. However, Gap, a retailer that has consistently sold these products cannot seem to draw customers to their brand. Why, though, are consumers turning to other retailers such as H&M, Zara, and Forever 21 for their normcore clothing instead of a company that has sold this clothing for decades?

Consumers are changing how they shop. Not only is online shopping surging, but consumers aren’t looking for classic logos and status, but rather looking for trendy clothing at an inexpensive price and using the money saved to buy technology and entertainment items like iPhones or Netflix. According to the Wall Street Journal, consumers are increasingly spending on this category instead of traditional goods like home décor or clothing.

In 2012, Gap tried to get back on track and hired Rebekka Bay, a Danish fashion designer who gained attention for her COS minimalist clothing line for H&M. However, her partiality toward grays and blacks did not mesh with Gap’s happy, all-American aesthetic. In January, Gap fired Ms. Bay and eliminated the creative designer position altogether, hiring Wendi Goldman as Gap’s new head of product design and development. Gap sales have been declining ever since, and without a fashion direction the only way for them to compete again is to close stores and restructure their company.

Jeff Kirwan, Gap’s global brand president said that some stores were “just not appropriate anymore.” He said, “We’re changing the way we bring product to market, taking out redundancies, efficiencies within the organization.” Gap estimates that its cuts will trim about $300 million from annual sales and will incur one-time costs of about $140 million to $160 million, mostly in the second quarter due to lease buyouts, inventory write-offs and the costs associated with shrinking the corporate headquarters work force. But by 2016, the company hopes to generate annualized savings of about $25 million. They are hoping to make the company more nimble, and the job cuts at its headquarters are intended to make operations faster and more decisive.  

Hopefully with these store closings Gap will be able to revamp their brand and focus on a product aesthetic that is more appealing to their target audience. While normcore may be the fashion trend, clearly being a normcore brand from the very beginning does not guarantee that consumers will buy your brand. These store closings and job cuts at corporate headquarters will hopefully enable Gap to become a leading retailer once again.