VMS3.info FEATURE ARTICLE

Subject: March 2003 VMS3.info: Gap Analyzed via the Value Framework™
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March 1, 2003 *4,500 subscribers* Volume 5, Issue 3
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Summary - Gap Inc. "For every generation. GAP."
Gap Inc. prides itself in being the leading international specialty retailer offering clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Banana Republic, and Old Navy brand names. Don and Doris Fisher founded Gap Inc. in 1969 in San Francisco, CA. When Gap was first introduced, their niche was their basic clothing. As Gap expanded, it took its basic clothes to three different levels-there was Gap for casual work clothes, Banana Republic for the dressier casual clothing, and Old Navy for the affordable family oriented clothing. Each entity addressed its own target market. In the recent years though, many competitors began to compete with Gap's style.

Strategy Deployed
In 1969, when Gap first opened its doors it was unique and new. It prided itself in having the "individual style." Gap's hottest seller at the time was its "basic" look, which consisted of its signature blue jeans and white cotton t-shirts. Gap was more than a brand; it had changed the clothing industry in many ways. Gap offered a range of clothing for men, women, and children. As Gap's business began to boom, it also began to expand.

Gap Inc. added two new entities to its company, Banana Republic and Old Navy. All three stores have their own target markets. Banana Republic is known for its casual luxury, with high-quality apparel. Banana Republic tailors its store to appeal to the unique market of pleasing the most fashion conscious consumers. Gap is known for turning classic clothing into must-have fashion. Since its founding in 1969, Gap has provided its customers with clothing and accessories that enhance their personal style. Old Navy has redefined value-priced apparel retailing by making shopping fun and fashion affordable for customers of all ages.

Gap Inc. has strategically placed itself in three key parts of the industry. Gap Inc was able to target many consumers through its company and catered to many people's individual styles. Lately, however, Gap Inc. has begun to stray away from its former vision. For the past two years, the company has hit a record slump. Gap Inc.'s former CEO, Millard Drexler, appeared to have lost his touch. Millard Drexler had an eye for flair and design, and he did a lot of the merchandising for the company. Gap Inc. began to have many competitors and had to differentiate its product from the rest of the industry.

The "classic" look was becoming more and more popular and also very easy to imitate. In order to save the company Drexler introduced more flashier fashions like: bolder colors, low rider jeans, small form fitting tops, and stretchy materials. Gap went from casual to very trendy and many of its customers were displeased. After almost two years of declining sales Drexler decided in May of 2002 to salvage the company and began a back-to-basics campaign. Drexler wants to bring back the old apparel, the old ads, and the old management style. He wanted to bring back everything that was once Gap Inc. and its identity.

Strategy Managed
Today ex-CEO Millard Drexler is no longer the head of Gap Inc but his back-to-basics campaign still lives on. The new CEO, Paul Pressler, the former Chairman of Walt Disney's Global Theme Parks, is still implementing the idea of bringing the old but loved image of the original Gap. In 2001, sales slid and so Drexler began reshuffling top management. Shortly after Drexler's retirement, the company reshuffled more to make room for its new CEO.

With the reshuffling, Gap was able to promote brand presidents from within, individuals who could take care of merchandising on their own without the help of the CEO. With merchandising taken care of, Pressler could put more emphasis on the new marketing strategies. The brand presidents of all three entities are bringing back all of what made Gap unique when it first opened. It is re-emphasizing the basics, and promoting its classic fit jeans, signature khakis, and cotton tops. It has simplified its mix of colors and fabrics and remembered that 90% of the tops it has sold were blue. Gap was no longer selling nylon disco tops and bright colored oxford shirts. Old Navy is bringing back the image of family and affordable clothing. It is bringing back more cargo pants, active wear, and other seasonal offerings instead of the fashionable low-rise jeans and strappy tanks of last season. Banana Republic is beginning to use many of its old fabrics as opposed to the new stretchy materials it has used in the last couple of seasons. Banana Republic is going back to its dressier and more upscale apparel.

Gap Inc. is constantly challenging itself to think about what the customer wants, not what other stores are selling. Under the guidance of Pressler, Gap Inc has also begun a new ad campaign. It is no longer targeting adolescent teens that change their minds rapidly, but more of the market boomers. Gap wants to win back the trust of the customers it had lost.

In the past seasons, it has had commercials with teens and the younger generation. This year, Pressler and the rest of Gap Inc. are emphasizing the individual once again. They want the people to see that it's not the fashion that's important-it is all about Gap being Gap. Gap encouraged models to wear their old worn Gap clothing for photo shoots and to dress it up in their own styles. They have also implemented a Gap Casting Call in conjunction with Yahoo. According to the gap website, "Gap is a brand people can make their own, and now [Gap Inc.] is offering a chance for everyone to be in one of the Gap print ads. [They] are looking for individuals who personify the Gap brand-intriguing people with personal style." With the addition of Pressler and his customer service background, Gap Inc. is able to lure the old buyers back thus increasing its sales from the last couple of seasons.

Strategy Evolved
Now that Gap Inc. is beginning to win back the trust of old loyal Gap customers, it is beginning to look at new opportunities with open doors. In choosing a new CEO, Donald Fisher, Gap Inc's founder and now Chairman of the Board, was looking for someone who had a strong international background and had good customer focus in retailing and marketing. Although Millard Drexler had a great eye for fashion trends, he lacked expertise in marketing and reaching out to customers. When choosing Pressler, Gap Inc. took into considerations all of the assets he brought to the table. Pressler's background from Disney can challenge the company to expand and satisfy its company at an international level. Pressler has a small background in apparel retailing and plans to steer away from making merchandising decisions. He believes that Gap Inc. has good merchants and talented people who can do that. His goal is to bring them the strategic vision and the resources they need to be successful.

Recommendations
Pressler is not making comments on what his specific plans are for the future of Gap Inc., but it appears obvious that he is going to take what he learned at Disney and implement it. Disney had a vision that the customer always comes first. At Disney, Pressler learned how to reach customers on a global level through 600 international stores; Pressler needs to expand sales in those markets. In the past, many of Gap's ads appealed to white middle class Americans. Pressler will probably try to appeal to the minorities. Gap has focused on African and Asian Americans before, however, Latin Americans appear to be a ripe group to focus on. Gap can expand by adding a more diverse group and introducing them to its basic styles instead of trying to expand its style to fit the fashion trends.

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