Gap Inc. shifting focus—and store footprint—to two brands
Gap Inc. is shifting its emphasis to its two best-performing brands — and realigning its store portfolio to reflect its new emphasis.
The nation's largest specialty apparel retailer had decided that its future growth lies primarily in its lower-priced Old Navy and athleisure-positioned Athleta brands. As a result, it expects to close about 200 underperforming Gap and Banana Republic stores over the next three years. Banana Republic has been a particularly dismal spot for the retailer, with 10 straight quarters of same-store sales declines.
During the same time period, the company will add about 270 Old Navy and Athleta stores across its portfolio. Gap expects Old Navy to exceed $10 billion and Athleta to exceed $1 billion in net sales in the next few years, driven by growth in online and mobile channels, U.S. store expansion, and continued market share leadership in loyalty categories.
In addition, Gap Inc. will accelerate its online and mobile strategies during the next three years with a continued "significant" investment in such areas as direct fulfillment capacity, loyalty, personalization, omnichannel services, artificial intelligence and other data-driven customer experiences.
Gap expects to save about $500 million in expenses over the next three years by "better leveraging its size and scale, cross-brand synergies and streamlining operations and processes." It said it plans to reinvest part of the savings in its growth initiatives, "providing opportunity for margin expansion."
"Over the past two years, we’ve made significant progress evolving how we operate – starting with getting great product into the hands of our customers, more consistently and faster than ever before,” said Art Peck, president and CEO, Gap Inc. “With much of this foundation in place, we’re now shifting our focus to growth. We will leverage our iconic brands and significant scale to deliver growth by shifting to where our customers are shopping – online, value and active.”
Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,200 company-operated stores, about 450 franchise stores, and e-commerce sites.
New stores fuel online growth
Brick-and-mortar stores are crucial to supporting a retailer's e-commerce growth.
When a new store opens, traffic to the retailer’s website from the surrounding postal area increases by 52% on average within six weeks of opening, according to research from British Land, one of the largest property development and investment companies in the U.K. The study, which used data from Connexity Hitwise, shows that digital traffic from the local area then remains around this demonstrating that a physical store has a significant, positive and sustained impact on digital interaction with the brand.
Brands with fewer than 30 stores enjoyed the greatest positive impact from store openings, with uplifts in local traffic to their websites of 84% on average
"The research shows that physical stores are an engine of online growth," said Charles Maudsley, head of retail, leisure and residential for British Land. "Consumers choose brands that align to their lifestyle and values: A physical store enables a retailer to demonstrate its brand in action and drive interest online. At the same time, stores enable retailers to respond to evolving shopping habits, market their brand effectively, and deliver products more efficiently."
Report: Alibaba to open a physical mall in China
An e-commerce giant is making a big push into the brick-and-mortar world.
Alibaba, China’s largest online sales platform, is building its own shopping mall, with a goal of enriching the real-world shopping experience with technology and convenience, reported MarketWatch.
The five-story center, called “More Mall,” will be located at Alibaba’s headquarters in the city of Hangzhou. According to the report, the center, which is scheduled to open in April, will highlight brands that sell on Alibaba’s e-commerce platform, Taobao, as well as conventional retail brands. It will also house Alibaba’s grocery store, Hema, in what will be considered the supermarket’s flagship location.
The stores in the center will also feature innovative solutions including high-tech makeup-testing mirrors and virtual fitting rooms.
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