This week The Gap said it would close 175 of its stores in North America, or roughly a quarter of them, due to lackluster sales. The retailer also plans to cut 250 corporate jobs in San Francisco and New York. The brand, in other words, is floundering. What happened? And how can the once-dominant khakis-and-jeans chain get its mojo back?
Some culprits are obvious, like the prevalence of online shopping and the popularity of fast-casual competitors such as H&M and Forever 21 entering the market. (Other major North American retailers, like Abercrombie & Fitch and J. Crew, are hurting, too.) And analysts point out that Gap also hasn't established a real connection to millennial consumers.
But the biggest blow to the Gap brand, analysts say, is its murky brand identity. Gap used to represent "effortless cool." Now it has no clear position, and that's costing it market share.
"Gap was a leader and innovator in the '90s," said Ruth Bernstein, founder and chief strategic officer at YARD, a strategic image-making agency. "They single handedly reinvented the way retailers advertised through their entertaining khakis-swing-singing-dancing spots. Times have certainly changed, and the competition that once emulated them has overtaken their position."
Martin McNulty, CEO of the digital marketing agency Forward3D, agreed. "Gap has lost what it stands for today," he said. "In creating spin-off brands like Banana Republic and Old Navy, it did a great job of segmenting out-of-office wear and low-cost apparel. But the success of these brands seems to have come at the expense of the core Gap offering."
"Gap's TV strategy was legendary. It symbolized effortless cool—thanks to heavy celebrity association—but in the absence of this, the brand has been displaced by a slew of denim retailers," said McNulty. "Surf and street brands and discounters have all taken chunks out of the mass appeal that Gap once had."
'Dress Normal' didn't make a dent
Last year Gap hired Wieden + Kennedy's New York office to run its creative. The shop came up with the brand's current "Dress Normal," campaign, using celebrities like Elisabeth Moss and Anjelica Huston to tout the brand's new tagline. In a press release for the campaign, the brand said consumers needed to find their own versions of "Dress Normal" and that the campaign stood for "individualism and the liberation that comes from confidently being your most authentic self."
Differences between Generation X, which represents about 40 million people, and the millennial generation, which represent nearly 85 million people, have also played into Gap's woes, said Michelle Lynn, evp and managing director of the Dentsu Aegis Network.
"You want to play to the mass market," said Lynn. "But what we've seen [with millennials] is that this population of people is much more nuanced [than Generation X]. You have to go beyond those stereotypes to figure out what the insights are, what's important to these people that you can win with, and it's hard to win with 85 million people."
Analysts agreed that for Gap to win over its consumer base again, it needs to dig deep into what once made the brand successful—while keeping in mind that times and retail tactics have changed.
"They need to get their mojo back by resurrecting their innovator spirit," said Bernstein. "They were never about doing things 'normally,' but always about the American spirit of individuality, which made the brand so simply, brilliantly, strong."