The Era of Gap's Mass Appeal Is Over—But Specialization Could Bring the Brand Back

Twenty-some-odd years ago, few brands loomed larger in American fashion than Gap. Its signature logo hoodies were omnipresent at high schools and on college campuses, and Gap's marketing attracted big names, with stars like Sarah Jessica Parker and Madonna fronting its campaigns. But perhaps nowhere was Gap's influence more evident than at malls across America, where its stores populated shopping centers from coast to coast. Cut to 2020: The American mall is a dying breed—a 2017 report from Credit Suisse predicted that between 20% and 25% of malls in the U.S. will close by 2022, a number that's likely increased due to the Covid-19 pandemic. And as the mall has declined, so has Gap's influence. The Great Recession hit Gap's revenue, and it started closing stores in 2011. Though it climbed back in the early 2010s, revenue began to fall again in the latter half of the decade. Sales were slumping even before the pandemic—in Q1 of last year, they were down 10%. At the end of 2019, Gap Inc. CEO, Art Peck, a 15-year Gap veteran who held the top spot for five years, abruptly left his post, and CMO Alegra O'Hare, who had been with the company for less than a year, announced her departure in January, the same month plans to spin off affordable retail brand Old Navy were scrapped. Then came the pandemic, which has left few retailers unscathed. Gap has suffered, with sales falling 43% in the first quarter of this year (though its athleisure brand, Athleta, has been a bright spot for the company). At the end of October, Gap announced plans to close 350 stores, or 30% of its North American footprint, including its San Francisco flagship. Perhaps even more notably, within three years, the company said, 80% of its storefronts will be outside of malls, Gap's one-time home base. Nowhere was Gap's prior influence more evident than at malls across America. But Gap's woes can't be blamed entirely on its presence in malls. And while the pandemic surely didn't help, that's not it, either. Rather, the retailer is suffering from a loss of identity. Its past reliance on the mall is certainly something to overcome, but other brands like Lululemon have proved shoppers will still head to the mall to visit a store they love, according to Bob Phibbs, CEO of consultancy The Retail Doctor. "To say it's the mall's fault is exactly the wrong thing," Phibbs said. "Quite simply, they became a promotional brand." In that sense, Gap's problems are not unique. Some of its compatriots and competitors like J.Crew, which filed for bankruptcy earlier this year, are facing the same challenges: customers who expect discounts, a more crowded category thanks to DTC challengers and, at its core, a brand that's lost sight of what it is and who it's for. "A lot a struggle has been about their brand and this lack of clarity in the current stage," said Kalinda Ukanwa, assistant professor of marketing at the University of Southern California Marshall School of Business. "What is it that they stand for, and how are they relevant to the target market?" What Gap has going for it is a legacy to lean on. Founded in 1969 in San Francisco, the brand has long been synonymous with quality staple items, particularly denim. Mary Alderete, who was quietly appointed as Gap's new CMO in February following O'Hare's departure, said that history will be a boon for the brand. Her first major campaign as CMO, rolled out in early September, zeroed in on that Americana aspect of Gap's heritage. Called "Stand United," the campaign included virtual activations and events encouraging voter registration. The brand positioning, Alderete told Adweek at the time, "was this idea of culturally relevant expressions of modern American optimism." "Consumers are really looking for the brand that represents quality and trustworthiness," she added. "That's been an amazing momentum builder for Gap. As consumers have hunkered down, they've gone to a much shorter list of the brands they trust." Gap's marketing has included big names like Sarah Jessica Parker, seen here behind the scenes of an ad campaign in 2004. It's true that during the pandemic, consumers have been seeking out brands they're familiar with in a time of upheaval—CPG manufacturers, in particular, have benefitted from this trend—but whether the same thinking can be applied to fashion remains to be seen. Given the way the space has changed over the past two decades, it's unlikely we'll ever see another Gap logo hoodie era, said Jason Goldberg, chief commerce strategy officer at Publicis. "The idea that an item could be in trend for millions of consumers simultaneously is starting to die out," he said. "The worldwide fashion trends started to erode, and all these micro trends started to emerge." Indeed, Phibbs said, Gap is better off betting on a more niche future and moving away from a "mass brand" mindset. There are simply too many players in the space to rest solely on a reputation of well-priced basics, concurred Goldberg. Instead of trying to be the be-all-end-all retailer, zero in on a core customer and, in doing so, define what the brand is. "I don't think it's possible for them to recreate the old model, to be the biggest national provider of affordable basics," said Goldberg. "Gap is never going to have like a competitive advantage around making better quality textiles, having a lower price point or lower friction acquisition channels than the rest of the world. If Gap is going to rise again, they're going to need a new value proposition, a new reason for customers to choose them." But that doesn't happen overnight. It starts with recapturing a space in the cultural zeitgeist and following up with a worthy assortment of merchandise. Gap's upcoming collaboration with Kanye West's Yeezy brand, which was announced this summer and is set to debut in early 2021, is its clearest effort yet to do so. "Collaborations with designers, such as what they are trying to do with Kanye, are very relevant to the target market generation right now," said Ukanwa. "But because of the election, it's not clear to me whether Kanye has a positive association at the moment. Will that spill over into anything associated with him?" Behind the buzzy collaborations, though, comes the task of adjusting strategy for today's landscape—a retail world less reliant on malls and more on ecommerce. Gap said in its October earnings call that after closing the aforementioned 350 locations, 80% of its remaining stores are in off-mall locations. It will also shift more of its focus to its online business and its outlets. Gap's 'Stand United' campaign, which debuted this fall, is the first under its new CMO. It's a sensible move for the new world Gap finds itself in: creating a more specialized environment for consumers who do want to experience the brand in person. As Phibbs put it, "At some point, you don't need those big stores with all the same merchandise." A more niche approach will mean appealing to a more narrowly defined consumer. But even if that group of potential customers is smaller, the hope would be to find those so devoted to the brand that they will not only choose it over competitors, but pay a premium to do so. That, Phibbs said, is how a retailer gets off the endless promotion train. Lululemon, which rarely runs mass promotions, is an example. "When you go into Lululemon, it's, 'This is what it is. if you want it, here it is,'" he said. Of course, Gap isn't the only retailer that's struggled to reach that point, particularly this year. It's not an easy time to be a retailer—27 brands have filed for bankruptcy so far this year, compared with 17 in all of 2019. But as this year's crises have turned the retail world upside down, every retail brand, even the DTC darlings, has had to rethink how it does business under the current circumstances. As consumer behavior has changed, we're likely to emerge from the pandemic in a world defined by different priorities and preferences—and that could provide Gap with the second chance it needs. For Gap, this moment is something of a wiping clean of the slate, said Alderete. "What's exciting in this moment is, 'How do we really build this brand to be one of the leaders coming out of all of this upheaval in the industry?'" she said. "It's just really allowed us to have the courage to think differently and be disruptive and not have a backwards view about the way the business should be run."