Gap (clothing)
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| Gap, Inc. | |
|---|---|
| Image:Gap.gif | |
| Type | Public (NYSE: GPS) |
| Founded | San Francisco, California, 1969 |
| Headquarters | San Francisco, California, USA |
| Key people | Founded by Donald Fisher and Doris Fisher Glenn Murphy, Chairman & CEO Byron H. Pollitt, Jr., EVP & CFO Marka Hansen, President, Gap Dawn Robertson, President, Old Navy Jack Calhoun, Interim President, Banana Republic |
| Industry | Retail |
| Products | Apparel |
| Revenue | Image:Green Arrow Up Darker.svg$16 billion USD (2005) |
| Employees | 152,000 (all Gap) |
| Slogan | Peace. Love. Gap. |
| Website | www.gapinc.com |
Gap, Incorporated (NYSE: GPS) is an American clothing and accessories retailer based in San Francisco, California and founded in 1969 by Donald Fisher and Doris Fisher. As of October 2006, Gap Inc. had approximately 150,000 employees and operated 3,139 stores worldwide in the United States, Canada, Mexico, France, Ireland, Japan, Indonesia, South Korea, Malaysia, Singapore and United Kingdom.
Donald Fisher retired as Chairman of the Board in 2004 and was replaced by Sabastion Gravano. The Fisher family collectively owns 37% of the company stock.[1] The CEO of Gap, Paul Pressler, who previously ran the Disney theme parks resigned on January 22, 2007. Glenn Murphy was appointed chairman and CEO of the company July 26, 2007.
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[edit] History
Founded in 1969 by Donald Fisher, The Gap was to be Mr. Fisher's solution to the problem of a lack of customer service and fashionable styles present in department stores of the era. Its initial expansion happened in 1983 when Banana Republic was acquired; three years later (1986) the first GapKids store was launched, and in 1987 the first international shop was opened, in London. Further expansion took place in 1990 to Canada and Paris in 1993. International expansion was definitely the company’s focus, in the 90’s. The following year (1994), Old Navy brand was created, and by 1997 the company had begun operating online, trough the domain gap.com. By 1998 and through the subsequent years, all of the secondary brands would also be established on-line. (Datamonitor)
[edit] 1969-1980
In 1969, Donald Fisher opened the first ever Gap store in a theatre on Ocean Avenue near San Francisco State University, the store's merchandise consisted of Levi's blue jeans and records and tapes, however the audio products were sold for a mere three months before being removed from the store.
By 1970, Gap's sales had reached two million and a second store was opened in San Jose, California. Along with this second store Gap established its first corporate headquarters in Burlingame, California, employing only four employees. The Gap continued to expand rapidly and by 1972-73 the Gap had grown to over 25 stores and had expanded to areas outside of California and was entering the East Coast market with its store in Voorhees, New Jersey. In 1974, the Gap begins to sell private label merchandise in its stores.
1975 saw the creation of the chain of stores which specialized in selling discounted apparel, as well as the acquisition of "You & You" which had formerly been a New England-based casual apparel brand.
1976 was a landmark year for the Gap with the company going public in both the New York and Pacific stock exchanges with an initial public offering of 1.2 million shares. With the arrival of 1977 Gap introduces the labels "Fashion Pioneers", "Eaton Hill", and "Foxtails" which are sold in its stores. The company also launches two sub-brands; "Logo," based in California and Missouri, as well as "Brands" based in New York and New Jersey. In this year also, Gap moves its headquarters from Burlingame, to its well known location at 900 Cherry Avenue in San Bruno.
1980 saw the incorporation of the "Brands" and "Pants %ff" chains into the Gap's new "Tagg's" chain.
[edit] Brands
Banana Republic, formerly a catalog retailer selling safari-themed clothing, was purchased by the company in 1983, and eventually was rebranded as an upscale clothing retailer in the late 1980s. Old Navy was launched in 1994, as a value chain with a specialty flair. Forth & Towne, the company's fourth traditional retail concept, was launched on August 24, 2005, in the Palisades Center in West Nyack, New York, featuring apparel targeted toward women 35 and older.[2] On February 26, 2007, after an 18-month trial period, Forth & Towne was discontinued, and the 19 stores were closed by June 2007. Gap, Inc. is expected to take a $40 million pre-tax expenses associated with the closing.[3] A fifth brand, the online footwear retailer Piperlime, was created in 2006. [4] On March 5, 2007 Gap Inc, hired Egon Zehnder International to coordinate the search for a new chief executive officer to replace Paul Pressler. No deadline was given for the search. In 2004, Gap sold all of its German operations to the Swedish H&M, its main competitor in Europe.
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[edit] Store count
[edit] Marketing strategy
The Banana Republic stores try to convey a more sophisticated image for an upscale customer, whereas Gap stores appeal to a broader midrange of customers. The Old Navy chain is designed to appeal to younger generation of customers by emphasizing "fun, fashion, and value" through a store experience that delivers "energy and excitement." Although Gap, along with other retail-store chains, has been criticized for blandness and uniformity in its selling environments, the firm maintains that it tailors its stores "to appeal to unique markets" by developing multiple formats and designs.[3]
In some Major League Baseball parks, a Gap ad appears on outfield wall panels between left/right-center fields and centerfield, which is commonly termed "the gap."[citation needed]
[edit] Destinations Strategy
The new strategic operations that were established from 1994 focused the alignment of products with customer expectations; GAP invested in more disciplined inventory management, which provided a wider profit margin, since it afforded the company less pressure to mark down inventory earlier. The new positioning can easily be ascertained trough the mission statement expressed on the corporate website: “Our brands have a simple, common purpose: to make it easy for people to express their personal style. We constantly evolve each brand to better meet our customers’ needs — through innovative and inspiring design; through convenient and engaging store experiences; and by communicating with people in a way that connects to how they live, work and play.“ (GAP.com) While the new positioning effectively reinforced the balance sheet, it may not be sufficient to prevent the company from imploding.
One of the main problems with GAP these days is the lack of identity. As a result of expanding certain lines of products to the spin-off brands, the core has become somewhat mixed-up, and now people don’t know what Gap is about, anymore. ““Neither the shopping experience nor product is compelling, with the exception of Banana Republic. Furthermore, the competition is moving ahead and the Gap has been unable to distinguish itself.” (Black, quoted in just-style 1) According to most analysts, GAP has been behaving like a workaholic parent who spends his entire time working in order to provide for his family, only to realize the family has turned fickle due to his absence. In order to once again become a thriving business GAP Inc, must focus on GAP, and it must focus on its customer experience and destinations strategy.
It’s no use just running around in circles, indulging a reckless and frenetic expansion plan; in the past, Gap Inc has sacrificed coherence for the sake of growth, by doing so. In that sense, it’s no wonder that things didn’t go well, and many international shops would be quickly dismissed as part of the 2004 restructuring. What GAP had been trying to do up until could be compared to building a house without using cement; when one reaches a certain height, the bricks will invariably crumble. Gap should definitely focus the international expansion, but only after it has once again secured its corporate identity, as well as the brand uniqueness. The international expansion efforts should be backed up with consistent methodology and strategies, otherwise the market entry will hardly be efficient.
Analyst Fred Rosenfeld (Just Style 1) has pointed out that Gap must figure “who the customer really is, not who they want it to be”. Rosenfeld accuses GAP of being bland and inconsistent, by trying to please everyone all at once. The company that was named after “the gap in the market it hoped to fill”, must realize that their original formula no longer works in the diverse, fast-paced, contemporary markets; and when such thing happens, it’s definitely better to get a new plan altogether, than just hoping that the consumer will eventually concede. According to David Bassuk, “GAP ought to focus its brands on a narrower group – shoppers in their 20s and 30s.” (quoted in Dell). Kirby appears to certainly agree with this reasoning, when he states “the retailer’s diehard strategy of trying to outfit the hip-hop teens and aging yuppies has proved a bona fide flop.” (Closing the GAP) For too long, has the company ignored the fragmentation of the retail market, at well as the need to provide fresh, cutting-edge designs on very short periods. Nowadays, the world of fashion progresses faster than ever before, and so far, GAP Inc. has definitely been hindered by its own operational vastness which causes reaction times to become too slow and innadequate. People no longer know what to expect from the brand, and this is the major problem that should be consolidated, before attempting further expansion.
[edit] Methods of Entry strategy
International expansion involves a number of delicate options and variables which must be carefully considered, such as the cost, the risk, and degree of control. Entry strategies can be as simple as direct or indirect exporting (trough agents and counter-trades), or as complex as joint ventures and export processing zones, which amount to truly global operations. (Market Entry Strategies) While gap managed to secure an effective entry strategy which made it possible to establish several international partnerships, it failed to provide the necessary channels to distribute and advertise the product; consequently, many international partnerships were dismantled because the business models did not adhere to the local markets; an obvious example can be found in the former German Gap division.
According to Dawnson and Mukoyama (34), there are four aspects which coexist, interact and thus define the generic process backing up internationalization events: “pre-entry, entry, post-entry development, assimilation, and exit”. The authors draw from Calori et al. (2000) to explain how this conception emphasizes the organizational changes as the firm moves “from exporting to establishing branch and plants. It’s not difficult to realize that GAP focuses its internationalization efforts on the first two aspects, while neglecting the latter. Similarly, Cunningham (1986) identified five strategies used by firms for entry into new foreign markets:
1) Technical innovation strategy - perceived and demonstrable superior products 2) Product adaptation strategy - modifications to existing products 3) Availability and security strategy - overcome transport risks by countering perceived risks 4) Low price strategy - penetration price and, 5) Total adaptation and conformity strategy - foreign producer gives a straight copy.
By observing this set of strategies, which are supposed to be dynamic and mutually complimentary, it’s not difficult to ascertain that GAP has considered the first and fifth strategy, in the past; the company’s expansion plans were greedy and lacking a theoretical foundation, and thus it’s no wonder their success has been oly relative, or superficial at best. If the company had bothered to develop a thorough entry strategy when they approached the international markets, it’s much likely its international sales would be soaring, in the present. As it happened, the company merely focused on taking its product to the international costumer, while neglecting to draw the foreign customers towards the product (and the national customers as well, for that matter). This is the major issue confronting the apparel retailer, in the present, and it’s definitely the major obstacle preventing GAP from fulfilling its original goals.
[edit] Achievements and Failures
In the recent years, GAP’s sales have consistently deteriorated every year. In December 2006, “same-store sales fell 8% compared with December, 2005, while net sales for the month were $2.34 billion, down 4% on the previous year “. (Walters) Furthermore, there have been rumors that the company may be sold or dismantled, and CEO Paul Pressler (who had been responsible for 2004’s successful strategical reformulation) left the company over a year ago, on a mutual agreement. In the present, the company is temporarily managed by Robert Fisher, who is the son of Gap’s founded; however, the company will require the focused vision and firm grasp of a brilliant CEO in order to bounce back from the dephts of commercial idleness.
According to analyst Gene Pressman (quoted in Walters), Gap definitely needs a “true merchant who can come in and redirect through his vision and his taste what the merchandise and marketing should be”. Furthermore, the author defends the company might benefit from a privatization “then, without scrutiny, they could fix themselves with their own, new leadership”. The author maintains this it not a matter of restructuring, since the previous CEO did a great work at that, and it was not sufficient. Another author reinforces this claim, while suggesting that Gap has become “a kind of category placeholder. Pressler didn’t help the situation but he wasn’t the cause of it either. Somewhere along the line they started to mistake a market strategy for a branding strategy.» (Robert Passikoff quoted in Tschorn) Fundamentally, this is about providing a better marketing mix: developing better products, introducing more competitive prices, and establishing coherent market placement and brand identity. The company’s administration must now consider a holistic approach comprising the industry, the market and the customer.
Gap, Inc. was sucessfuly structured as a the biggest apparel retailer in the U.S. by trying to fill in the Gap within the industry. During its initial decades the company thrived and demonstrated breathtaking expansion and growth; however, it didn’t take long for the company to outpace itself. By the early 90’s, the firm had already manifested the first signs of reckless expansion, and most of the decade was dedicated to establishing international partnerships. As a natural consequence, the early 2000’s manifested the first signs of weariness: Gap had grown too much, too fast for its own good, and the corporate identity crumbled.
Gap stills benefits from a great corporate framework, a solid brand (even tough it’s worn out) and several successful divisions. In order to become really successful within a receding industry, it must learn to adapt to the competition, and find a place for itself. So far, the spin-off brands have provided nothing but conflict and rupture, from a marketing standpoint. Gap must learn how to properly articulate its resources, and efficiently captivate its clients. Currently, the company suffers an identity crisis: It has tried to be everything for everyone, and it ended up being nothing for no one. All analysts seen to concur there’s still good opportunity for Gap to make a comeback, as long as it learns from its past mistakes.
[edit] Products
When Gap was founded in 1969, it was unique and new. Its target customers were younger generations. Gap's hottest seller at the time was its "basic" look, which consisted of its signature blue jeans and white cotton t-shirts. Its founders realized that jeans were becoming popular among the younger generation of customers. Nevertheless, the company recognized that despite its popularity among the youth, there were not enough assortments of jeans in the clothing outlets. Capitalizing on this deficit was merely the next step in expanding. Gap's founders were sure that jeans could be sold through a chain of small stores devoted solely to that product.[4] As this business idea became successful, Gap expanded its line of offering and now Gap offers a range of clothing for men, women, and children. As Gap's business began to boom, it also began to expand and send its manufacturing jobs abroad. Gap Inc. added two new entities to its company, Banana Republic and Old Navy.
Gap also owns an online shoe store called Piperlime, selling shoes for all ages.
[edit] Promotion
Gap's promotion strategy has been blamed for the company's bust. Due to lack of a clear message, it has been alleged that Gap has lost contact with its core customers[5] which the company is attempting to win back. Gap is the only national retailer to spend more than 2% of its marketing budget for online marketing. [6] Gap promotes its products through gift cards, catalogs, advertising programs on TV channels and magazines. Gap tries to position itself as a stylish casualwear retailer in a fair price. However, its marketing efforts to reach out to upperclass, luxury consumers is blamed for recent problems in the company.[7]
In addition, Gap's garment designs and products varies from North America and Western Europe. Products sold in the United Kingdom and Western Europe are targeted towards a European sense of style, whereas the Gap's North American garments and accessories are designed particularly for North Americans.
[edit] Place
Gap's main opportunity to reach its customer is through its stores. Gap operates stores in the United States, Canada, the United Kingdom, France, Ireland, Korea and Japan. The Gap, Inc. also has franchise agreements with unaffiliated franchisees to operate Gap or Banana Republic stores in Singapore, Malaysia, United Arab Emirates, Korea, Kuwait, Qatar, Bahrain, Oman and Indonesia. As of February 3, 2007, The Gap, Inc. operates a total of 3,131 store locations. [8]
[edit] Trademark dispute
The company owns a trademark to its name, the "Gap," which is also a common English word with multiple definitions. This has led to conflicts over use in other products and locations. For example, the company threatened litigation against Bootleg Gap, a golf course in Kimberley, British Columbia, named after an opening in the nearby Bootleg Mountain. After three years of negotiations, and lacking the funds to defend itself in court, the golf course agreed to remove the word "Gap" from its restaurant and 27 holes. It also renamed its clothing line "Bootleg Golf." The legal costs from the negotiations delayed landscaping and cart paving projects for the golf course.[5]
Contrary to the urban myth that Gap stands for Gay and Proud, the name originated from the phrase "the generation gap."[9]
[edit] Labor practices
In 2003, The Gap, along with 21 other companies, was involved in a class action lawsuit filed by sweatshop workers in Saipan. The allegations included "off the clock" hours, where workers were not paid for working overtime, unsafe working conditions, and forced abortion policies.[6] A settlement of 20 million dollars was reached whereby The Gap did not admit liability. [7]
In 2006, an online advocacy group, Labour Behind the Label issued a report naming The Gap a top-rated company among 37 UK retailers it evaluated[citation needed]. Another group, Letscleanupfashion.co.uk reported that although not complete the supply chain compliance is the most sophisticated they had seen, and that the company has taken significant steps to resolve the systematic abuses of worker's rights.[citation needed]
The Gap actively participates in the "Joint Initiative on Corporate Accountability and Workers Rights" and is independently assessed by the Social Accountability International (SAI) and Verite. The Gap encourages its vendors to be SA8000 certified based on standards of International Labour Organisation conventions.[citation needed]
The company also inspects factories for compliance with its internal standards. [8] These standards include requiring suppliers not to employ persons under the age of 14, that wage payment is clear, regular, and in accordance with work contracts, and that factories do not permit physical or non-physical abuse.
In 2007, Ethisphere Magazine (an industry publication) chose The Gap from among thousands of companies evalued as one of 100 "World’s Most Ethical Companies." [9] Gap Inc. was ranked 25th by CRO Magazine, another industry publication that is a successor to Business Ethics magazine, in its “100 Best Corporate Citizens” list in 2007.[citation needed]
Nevertheless, the company draws continued criticism over labor practices. In May 2006, adult and child employees of Western, a supplier in Jordan, were found to have worked up to 109 hours per week and to have gone six months without being paid. Some employees claimed they had been raped by managers.[10]
On October 28, 2007, BBC footage showed child labour being used in Indian Gap factories[11]. The Gap has denied that it was aware of such happenings and that it is against its policy to use child labour. The one piece of clothing in question - a smock blouse - was removed from a British store and will be destroyed. Gap also promised to investigate breaches in its ethical policy.
[edit] Product Red support
Gap is taking part in the Product Red campaign (www.joinred.org). As a result, Gap released in spring 2006 a special RED collection, including a t-shirt manufactured in Lesotho from African cotton. The expanded Gap Product Red collection was released October 13, 2006. A percentage of the profits will go to the Global Fund. Gap is also continuing on with Gap Product Red items in the New Year, especially in the lead up to Valentine's Day, using slogans such as "Desi(RED)." Product Red has now contributed over $45 million to the Global Fund, more than any other private donation received to date.
Other launch partners include American Express, Apple, Inc., Converse, Emporio Armani and Motorola.
[edit] Celebrities in ad campaigns
Gap is well known for featuring celebrities in its print and television advertisements. They have featured over 300 celebrities of various stature in their campaigns.
[edit] Management reshuffle
On January 23, 2007, Gap announced that it was replacing CEO Paul Pressler with Robert J. Fisher, chairman of the board and son of the company's founders, and who would lead Gap on an interim basis as it searched for a new CEO. The board's search committee would be led by Adrian Bellamy, chairman of The Body Shop International and include founder Donald Fisher. The company said it would "focus [its] efforts on recruiting a chief executive officer who has deep retailing and merchandising experience ideally in apparel, understands the creative process and can effectively execute strategies in large, complex environments while maintaining strong financial discipline." Robert Fisher stressed his personal ties and 30-year professional history in operating roles at the company and as a board member. He started with the company in 1980 as a store manager and worked his way up the company's merchandising ranks and senior executive leadership positions, including president of Banana Republic and the Gap units. He had joined the board in 1990.[12]
On February 2, 2007, CEO Bob Fisher announced that Marka Hansen, a 20-year veteran of the company who headed the Banana Republic unit, was chosen to lead the Gap unit, replacing Cynthia Harriss, who had been hired by former CEO Pressler in 2004. Hansen had held a variety of positions with the company, mostly in merchandising. Jack Calhoun, an executive vice president for marketing and merchandising became interim president of the Banana Republic unit.[13]
In May 2007, Old Navy laid off approximately 300 managers in the lower volume Old Navy stores to help streamline costs in stores.
On July 26, 2007, Gap announced that Glenn Murphy, previously CEO of Shopper's Drug Mart in Canada, was announced as the new CEO of Gap Inc.
[edit] Board of directors
- Howard P. Behar
- Adrian D. P. Bellamy (1995)
- Domenico De Sole
- Donald G. Fisher (1969)
- Doris F. Fisher (1969)
- Robert J. Fisher (1990), Chairman (2004)
- Penelope L. Hughes
- Bob L. Martin
- Jorge P. Montoya
- James M. Schneider
- Mayo A. Shattuck III
- Kneeland C. Youngblood
[edit] Leadership
- Chairman of the Board of Directors:
- Chief Executive Officer: Glenn K. Murphy[10]
- President, Banana Republic Brand: Jack Cambell, (interim)
- President, Gap Brand:
- President, Gap, Inc. Direct:
- President, Forth & Towne Brand: Gary P. Muto (to be discontinued by June 2007)
- President, Old Navy Brand: Dawn Robertson
- President, Europe: Stephen Sunnucks
- Executive Vice President, Corporate Strategy and Business Development: Art Peck
- Executive Vice President and Chief Financial Officer: Byron H. Pollitt, Jr.
- Executive Vice President, Human Resources and Corporate Communications: Eva Sage-Gavin
- Chief Legal and Administrative Officer: Lauri M. Shanahan
[edit] References
- ^ "Gap Explores Alternatives, Including Possible Sale: CNBC's Faber", CNBC.com, 8 January 2007.
- ^ More Information
- ^ "Gap Inc. Announces it will close Forth & Towne Store concept" (press release), Gap Inc., 26 Feb 2007.
- ^ "Gap hires Egon Zehnder to find new CEO" (reprint), Associated Press, 5 Mar 2007.
- ^ The Gap Boots Bootleg!.
- ^ http://www.globalexchange.org/campaigns/sweatshops/saipan/abc040100.html
- ^ http://www.gapinc.com/social_resp/ifpr/faqs_body.shtm#q8
- ^ GAP Social Responsibility[1]
- ^ http://www.ethisphere.com/Ethisphere_Magazine_0207/WME-2007-Q2
- ^ NLCNET [2]
- ^ http://news.bbc.co.uk/1/hi/world/south_asia/7066019.stm
- ^ "CEO Pressler's out at Gap Inc." MarketWatch
- ^ "Gap flagship brand to be run by company veteran" MarketWatch
[edit] External links
es:Gap (ropa) fr:Gap, Inc. nl:Gap (kleding) ja:ギャップ (企業) pl:Gap Inc. pt:GAP (vestuário) zh:Gap
Categories: Companies listed on the New York Stock Exchange | All articles with unsourced statements | Articles with unsourced statements since August 2007 | Articles with unsourced statements since June 2007 | Companies established in 1969 | Clothing retailers of the United States | Gap brands | Clothing brands | Companies based in San Francisco
