Gap Embraces Digital Transformation On Way Toward Enhanced Brand Loyalty

Gap CEO Art Peck is focused on four pillars that he believes will help the company achieve balanced growth and, along with that, bring expanded brand loyalty.

Peck talked about these pillars during the company’s recent third-quarter earnings call.

“No. 1, investing in growth and value in Active; and importantly, in Active, that extends into the performance lifestyle space,” Peck explained. “No. 2, accelerating a large, fast-growing, highly-profitable, and accretive online and mobile business. As we spoke to you in September, we indicated that we were on the path toward that being a $3 billion business. And we are very pleased with the results in terms of continuing to accelerate its growth rate. Three, continuing to reduce our exposure as a company to traffic-challenged real estate through specialty store rationalization, largely in Gap and Banana Republic brands. And No. 4, substantially improving the productivity of the business.”

All four are estimable goals.

“Underpinning balanced growth are Gap, Inc. advantages that are helping us win,” Peck added. “First, multiple iconic profitable brands that give us advantaged economics in finding, attracting, activating, and retaining customers. Second, the ability to meet our customers where they are and deliver an exceptional experience, whether that is online, on a mobile device, or in our 3,300 stores around the world. Third, leveraging responsive and innovative product creation capabilities to gain market share in loyalty categories. And, fourth, continuing to identify and exploit our scale to drive profitability, growth, and deliver financial consistency.”

In the past two quarters, Gap developed a prototype of a low-scope, low-cost, but highly effective remodel, designed to ensure that even its oldest stores in the Old Navy fleet will always be up to brand standards.

“These remodels have delivered above their financial expectations and have had a positive customer response driving both top and bottom line performance,” Peck said. “Additionally, over the course of the year, we’ve opened 20 Old Navy stores in North America and expect to have about 1,070 as we exit the year. As well, we are accelerating our new store openings in 2018.”

Peck noted that Athleta is “on fire.”

“Top and bottom line momentum continues,” he said. “We’re seeing exceptional growth outpacing the industry with operating margin expansion. Many things are driving this, but two stand out: 50 percent of the assortment in the business is on a pipeline of six to 11 weeks. This allows us to responsibly buy the initial assortment and then feed units into the business as we see market share opportunities. Second, we’re making highly targeted and highly efficient marketing investments focused on customer acquisition, which continues to grow the customer file and continues to accelerate brand awareness.”

Jon Siegal, VP and General Manager at Stellar Loyalty, told Loyalty360 that Gap is heading in the right direction when it comes to digital customer engagement.

“In retail today, you either embrace digital transformation or you die, and the Gap has embraced it,” Siegal explained. “The Gap’s commitment to rapid innovation across its digital strategy−finding mobile and online experiences to keep and motivate their loyal customers−while ensuring a positive in-store experience with fresh inventory people want, is the right focus and a big part of why they are enjoying strong early holiday sales.”

Kate Hogenson, Senior Loyalty Consultant, Kobie Marketing, talked to Loyalty360 about Gap’s multi-tender loyalty program pilots.

“Gap reported positive growth in engagement from its multi-tender loyalty program pilot markets,” she explained. “This continues a trend toward multi-tender that we’ve been seeing over the past few years in specialty apparel retailers and department stores. Many of the brands that expand to a multi-tender program find they increase the penetration and use of their private label credit card. Therefore, having actionable and permissioned data from a multi-tender program enables them to target incentives to the right customers to consolidate their purchases onto the private label card, which helps brands better connect with their customers for a stronger experience.”

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