Gap Pushes Internationally And Online For Growth
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
Following partial financial release showing increasing same-store sales, Gap looks ahead to expansions, omni-channel improvements, and luxury retailing
Since reporting a somewhat weak Q2’13, Gap has had its eye on improving sales for Q3’13, reporting Friday that its net sales have grown 3 percent and same-store sales have grown 1 percent, compared to Q3’12. The company also saw a 4 percent increase in same-store sales during October, foreshadowing a successful Q3’13 report, which will be released in full on November 21st.
The increase in same-store sales is definitely good news for the company, considering same-store sales decreased by 3 percent during the previous quarter, compared to a 6 percent increase in Q2’12. The company says that cautious consumer spending and changes in spending patterns were the cause of these lack-luster results. Indeed, the back-to-school season weighed heavily on many retailers this year because of the payroll tax hike and high unemployment. Similarly, low interest rates made house and car purchases more appealing to consumers, which resulted in a diversion of spending away from apparel.
Gap Brand Portfolio Expanding Abroad, Online
The company remains optimistic about growth however, not only because of the partial Q3 results, but also because of the growth of the company’s e-commerce revenue. During the last two years, the company has seen a 60 percent increase in e-commerce revenue, and despite a difficult retail environment for the first two quarters of 2013, e-commerce revenue increased 27 percent. Because of optimism that the global online retail market is only going to continue growing, Gap seems to be in a good position to continue growing, through e-commerce in particular.
Several months ago, Gap CEO, Glenn Murphy, announced the company’s plans to raise its profile through international expansion and Internet growth. The goal here is to compete more effectively with Inditex, H&M, and Fast Retailing, three of the largest vertical apparel operators in the world. At a September conference, Murphy asked, “How do we win against our global competitors? We can add approximately 1,000 new stores to the business and [an additional] $1 billion in online sales over the next three years.” Of these 1,000 new stores, the company foresees 300 of them to be in China because it “is convinced that China is going become an outlet market,” Murphy said. These expansions will be affecting all of the brands in the Gap portfolio, including Gap, Banana Republic, Old Navy, Athleta, Peperlime, and Intermix. The Old Navy brand in particular, will be opening 15 to 20 stores in Japan in 2013, also entering China in 2014. Other countries of interest for the brand include Mexico, Latin America, and South America.
Omni-Channel To Aid Gap’s Entrance Into Luxury Retailing
In addition, the company believes new online initiatives will raise operating profits and help the company achieve its goals of reaching $1 billion in e-commerce sales by 2016. To better meet consumer’s needs through online channels, Gap, like many other omni-channel retailers, has decided to invest in a “ship from store” policy so that consumers can have access to products not present in online inventory. Gap is also testing a “reserve in store” option in Chicago and San Francisco, which enables customers to reserve apparel online and have the products held in a nearby store for 24 hours. For customers interested in mobile offerings, all brands have a “find-in-store” option so customers can use their mobile phone to find a certain product size or color in a nearby store.
These initiatives will not only help meet consumers’ rising demands for omni-channel, but CEO Murphy also sees them as the key to easing the company into the luxury retail business, a process that began with the recent acquisition of Intermix. He says, “People wonder about out acquisition of Intermix. It’s a small business, granted. It gives us a foothold into the luxury business, where there’s been good growth. We believe there’s an opportunity. Our ability to seamlessly move between online and store is critical to survive in luxury.” Indeed, considering some of the recent changes prominent luxury retail Neiman Marcus has made to improve its online presence and to provide a more seamless experience-in store, every new offering Gap can come up with to meet customers’ needs will only make it a stronger player in the e-commerce market.
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