The Decline of The Gap...What Happened?

[Music] the gap has not been doing well for a long time now I'm gonna go ahead and say that the 1990s were the best decade for them do you remember that when they were one of the biggest brands out there all right I have to admit that they're a little before my time I was more of a gap kids or even baby gap customer in the 90s but hey I remember that let me show you what's been going on I compiled 30 years of revenue onto this graph and I think it tells the story pretty well we can see some pretty steady growth in the first half of the 90s followed by some pretty rapid growth in the second half of the 90s that followed by well not much going on but we also have to consider it this is the revenue for the entire company Banana Republic old Navy and some other stores are blended into this I can assure you that most of the revenue from the 1990s was from the Gap stores but they've since become a smaller and smaller portion of it the old Navy it they didn't even exist until 1994 and then by 2018 they'd become the biggest part of the company that year less than a third of their sales came from the gap so even though the company has been fairly consistent in sales the sales from the Gap stores have been struggling as a result a changes needed to happen old Navy is splitting away from them the gap is closing a bunch of stores and it all raises a pretty good question what happened to the gap and to answer that question first I think it's important to look at the companies foundation and how they grew so big in the first place Don Fisher is the original man behind all of it he was a smart guy graduated with a degree in Business Administration went on to serve in the US Naval Reserve and eventually it became a real estate developer specifically involved in hotel renovation know when it came to shopping for clothes Don Fisher was a lot like me do you know how disappointing it is to search all the way down that stack of Levi's looking for size 32 by 32 and the closest you find is 31 by 32 and the real mistake I make is trying to trick myself into thinking that maybe it's close enough then I go and try them on still thinking maybe I can make it work I decide to buy them for 6950 and then they just sit there because I never wear them because they're too tight the whole thing is a nightmare I guess 50 years ago it was even worse because in reference to why he created the gap Don Fischer said I just wanted to take the nightmare out of buying Levi's to offer an easy well organized shopping experience that would appeal to a guy like me see that's why you have to respect him what most of us just see is a hassle he saw is an opportunity to open a specialty store I'm talking about a store that only sold Levi's jeans themselves were exploding in popularity especially among the younger generation which at the time were the baby boomers I think the name is sort of lost meaning over the years but the gap is referring to the generation gap between them and the generation before it was a term that everyone was using at the time Webster's dictionary identifies that as the most famous generation gap it was just a great way to capitalize on some current terminology while letting everyone know that this store was meant for the young people in 1969 Don Fisher teamed up with his wife Doris to open their first store near San Francisco State University in the beginning like I said all they sold was Levi's every style and size that you can imagine but still just Levi's well actually not exactly they also sold some records as sort of a way to lure in some of the younger people but the Levi's were by far what they cared most about at first things were slow but they quickly learned that a few strategic price reductions made all the difference from that point the whole thing became a massive success they opened their second store year later a year after that they raised some more money for expansion by becoming a public company but it's important to point out that Don and Doris were sure to hold on to most of the stock meaning and they only sold a small percentage of it and they used that money to continue opening more stores reaching across the country as some of the reasons for the early success were creating a trendy environment by using bright colors and rock music they had an efficient inventory system ensuring that they always had every size and every style in stock they would open smaller stores which kept the rent low and that meant that they can open more of them which put their name out there not to mention the rising popularity of Levi's and the memorable fall into the gap campaign [Music] things were as good as you could possibly expect through 1975 that year they pulled in 100 million dollars in sales from their 186 stores across 21 states not a bad six years and considering Don and doors still owned most of the company that was good for them but things got a little strange in 1976 they sold another 10% of the company to the public it was 1.2 million shares it sold for $18 per share well right after that the whole industry started failing the gap reported some of its first losses and that stock fell to 725 meaning the Fisher's sold their stock at a suspiciously perfect time if they had waited just a little bit they would have made thirteen million dollars less in response the people who bought it at the worst possible time organized nine separate class-action lawsuits they claim that the Fisher's new information not available to the public and that caused them to sell their stock when they did which is insider trading which is illegal the end result was a 5.8 million dollar settlement in 1979 it's unclear whether they did anything wrong or not but that's some questionable timing it hardly impacted the company at lower sales losses lawsuits they came right back from it tripling their sales by 1980 but here's the issue they were facing it they had actually built up a pretty loyal customer base which doesn't sound like an issue but consider they were on their 11th year of targeting 14 to 25 year olds did you see the issue here I don't care how loyal you are if you're not 30 six years old I don't know if you want to be shopping here for the adults watching I'm guessing most of you don't wear the same clothes that you wore in high school the other issue was Levi's as I said they had grown in popularity they were more widely available the traditional department stores had caught up with the demand in other words it had become a little less of a nightmare to find the ones that you wanted to address all the issues at once they put everything into the gap brand I should make it clear that they weren't 100% reliant on Levi's at this point that their own private labels and some other stuff but this really pulling away from them they would now be specializing in their own labelled clothing that was meant for an older customer you see they were trying to maintain their existing customers by changing with their changing tastes I have a hard time expressing what is significant and risky move this was imagine if Kohl's all of a sudden decided to get rid of all their brands and private labels next time you walk in there there's no Nike Sonoma urban pipeline everything is new and simply under the Kohl's brand I don't know if that would be good or not but it would be significant and risky as I'm sure they expected it costs a lot and it didn't go over well at first but after a year or two that Gap brand started building a reputation in 1986 they started opening stores under the name Gap Kids all one word because you wouldn't believe it they found another way to appeal to those original young customers by now many of them had kids ages 2 to 12 and here was a good place to take them Gap Kids was a huge success right away so much so that after three years at they had the idea of starting Baby Gap at first as a section in the Gap Kids stores put later becoming its own chain of stores in 1994 they started another chain of stores it was initially set to be called Gap warehouse which actually kind of liked that name it was their venture into selling cheaper or I guess they would prefer I say more affordable clothing the locations were significantly bigger which is why gap warehouse is actually a pretty fitting name but I think they feared that the cheaper line or I'm sorry more affordable line of clothing would have negatively impacted the perception of their core Gap brand so they ultimately decided to keep it separate by instead calling it Old Navy all right everything's in place now they use that foundation to grow into a major clothing brand and retailer through the rest of the decade now let me try to theorize where things went wrong I have five theories starting with the store locations same store sales for the Gap have simply been down for example in 2018 they were down five percent when compared to the previous year while the other two brands were in the positive this is in a good economy by the way when purchasing is in general up to improve that number they either need to increase sales or lower their number of stores most would agree that if they just need to close some stores and that's what they've been doing part of their previous success was opening stores in high-traffic areas usually in or around malls we can see what's happening here they're no longer high-traffic areas so they have a lot of stores in bad locations the next reason is they're having trouble attracting new customers i theorize that the exact group of people that they've been trying to attract has gotten too old in 1969 I think it's safe to say that their goal was to attract high school and college age students well in the 1980s when that group was aging into their 30s and they shifted their focus into more mature high quality clothing so they could maintain that specific group of customers I would usually see this as a strange move but they had some other goals at the time as first straying away from Levi and growing their own brand identity so in this circumstance it seemed to make sense but in doing it they never really figured out how to bring in new people and of course they attracted some new people especially during their explosion in the 1990s but I would theorize that explosion involved a fair amount of that original group and due to a lack of experience that they couldn't figure out how to hold on to the new people now that original group is in their 70s probably not shopping at the gap as much even the new people that they brought in during the 1990s are aging out of it or if they haven't they moved onto one of their many many competitors that brings me to the next reason the prices I think we can all agree that the Gap name does not have the same reputation that it used to name brands especially with clothing it can hold a lot of value in the 1980s and 1990s even beyond many people were willing to pay a premium just because it was made by the Gap but now well I'm not so sure those prices are justified you can go down to the Old Navy and find fairly similar stuff for I don't know half the price look I'm not incredibly tuned into the fashion world but personally I think the prices at the gap are a little expensive for what you're getting another potential reason is maybe they just haven't received enough attention clearly Old Navy has been doing pretty well and building a brand like that there's a lot of energy and money not to mention Banana Republic to a lesser extent they've been juggling three major retailers for 25 years now if there was a time where things weren't going that great over at the gap maybe it wasn't a big deal because old Navy was over here making up for it then at a certain point they became the more promising brand and let's face it probably a better place to invest finally the biggest thing is the gap just isn't cool anymore some of these reasons blend together forming a bigger picture but this is what it all comes down to I think this says something in October of 2010 they changed their logo from the iconic one that we all know to this everyone hated it so much that they went right back to the other one a week later I wouldn't identify the incident itself as having any major impact on the brand but for one just the fact that they felt they needed some major rebranding is a sign that the current brand wasn't very strong and for to the response to the one that they chose I think says something about how they've disconnected with their customers which is really important for a brand like this the fact is the moment in the 1980s they transformed from just a store into their own brand they needed to be cool that's just the way it is with clothing brands it's usually really hard to identify what makes one more appealing than the other but whatever appeal they once had is now gone I don't have the exact answer as to why but I'd argue that all of this has contributed to it let me know in the comments do you agree I maintain that the rise and fall of clothing brands can be some of the hardest to explain but do you have any other explanations also I'm curious as to your personal experience with the brand if you are one of their many many customers of the 1990s do you still shop there or if not what's your reasoning I'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 560,746

Rating: 4.9158363 out of 5

Keywords: The Gap, Old Navy, Gap, Clothing, Banana Republic, Malls, Company, Business, Company Decline

Id: HJUKLzG_2uo

Length: 12min 56sec (776 seconds)

Published: Wed Dec 18 2019