By  on November 12, 2013

Gap Inc., once in the vanguard of progressive marketing, is pitching innovation as part of its culture again.

But this time it’s not about the latest denim wash. After a decade of being immersed in turnaround efforts, the $16 billion business is reporting improved sales and profits and striving to “omnify” its online and brick-and-mortar experiences to sustain momentum. The company has begun mining big data, testing personalization of its Web sites, shipping online orders from a limited number of stores, and even injecting a dose of service into its largely self-service store environments by piloting a “Reserve” program where shoppers select online and get the items held in the stores for purchase and pickup. Padmasree Warrior, chief technology and chief strategy officer of Cisco Systems, recently joined Gap’s board, further reflecting intentions to integrate enhanced technology into its operations.

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Years of weeding out weak stores, differentiating the brands in the portfolio, and strengthening core, historically-strong categories like Gap jeans and Banana Republic suits and wovens have resulted in better results at Gap Inc. since the first quarter of 2012, putting the company in a better position to experiment and spend on new, technology-driven strategies. The foundation was set three years ago when the company built a search engine that can locate every piece of inventory, which is instrumental in matching the demand with the assortment. That led to last year’s introduction of Gap’s “find in-store” feature on its Web site, which determines where a shopper is and, on a real-time basis, tells them the nearest store to find that item, in the color and size that they want. The Web site also gives the probability of getting the item; in other words, whether it’s a certainty, whether the store is down to a few units, or whether it’s not worth the trip since the item is probably no longer available.

“Eighty percent of our customers actually want to go try on a product in a store,” said Gap Inc. chairman and chief executive officer Glenn Murphy, who has repeatedly stressed the need for getting more consumers into the stores and has acknowledged that traffic remains unsatisfactory despite improving sales and profit trends. “The store matters in our category,” Murphy said during his second-quarter conference call.

Industry experts see Gap trying to catch up to other retailers, such as Macy’s, Nordstrom and Saks Fifth Avenue, which have advanced on the omni front and are doing a good job driving traffic across shopping channels.

“I don’t think Gap has been innovative,” said Erich Joachimsthaler, founder and ceo of Vivaldi Partners Group, a New York-based brand consultant. “The efforts they are making, everyone else has already made. Look at Burberry. They’re addressing young customers and probably many are Gap customers.” Burberry has paved the way in the omnichannel world with fashion videos and fashion shows that are both shoppable, and store greeters with iPads with information on consumers and how they shop the store.

Joachimsthaler was also critical of Gap’s foray into social media, particularly a recent contest on Tumblr encouraging anyone to post artistic interpretations of what the “Back to Blue” Gap campaign meant to them. “It’s good to engage, but is this really going to drive traffic to Gap? Tumblr is the wrong target market for Gap. I would have done it with Old Navy. Gap needs to create broader relevance with new customers and those who have defected to other brands,” Joachimsthaler said.

“I don’t necessarily think Gap is ahead of the curve, but I think the idea of Reserve is a unique option. It’s not a game-changer though not a lot of retailers are doing it,” said Rebecca Duval, analyst at BlueFin Research Partners. She did give Gap points for taking a lead on encouraging cross-shopping across the brands, as far back as five years ago, when it first enabled consumers to use one basket for online purchases from different brands in its portfolio, including Gap, Banana Republic and Old Navy.

Reserve currently operates in a couple dozen Banana Republic and Gap stores in San Francisco and Chicago. The setup doesn’t seem very complicated, at least judging by how Art Peck, Gap Inc.’s president of growth, innovation and digital, describes it.

“You go onto the Web site, and reserve it. Store personnel picks the item and takes it off the selling floor. You get a confirmation that it’s been done. It’s reserved until the close of the next business day,” he said.

Peck said Reserve, depending on the location, provides a designated fitting room or a self-service or assisted service area where Reserve has a dedicated rack by the cash wrap. Stock specialists in larger stores and sales associates in typical stores pick the products to be put on Reserve. When a customer arrives to pick up their selections, a sales associate is there to offer outfitting ideas, potentially generating additional buying.

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“We see this an important capability to roll out as we quickly we can,” said Peck, who a year ago was president of Gap North America. He believes a reserve-in-store model is a better fit for Gap than buy online, pick-up in store. “We’re in a tactile business where people want to try things on. They want to feel things. They want to know that it looks good. Reserve-in-store, depending upon the brand, is going to be a tremendous opportunity; number one, to get traffic in our stores that identifies themselves at the beginning of the shopping experience. That’s a wonderful thing. And it allows us to then build a custom shopping experience around that.”

Gap’s Intermix specialty chain is likely to have the most personal experience, while Old Navy, on the other side of Gap’s price spectrum, would be less personal.

Gap is also personalizing through its loyalty program and testing landing page personalization. For example, if a parent frequently shops GapKids, the homepage could become GapKids, or possibly a baby page. “It’s about creating a Web experience tailored to how you shop,” Peck said.

Also, “When a loyalty program member logs into our Web site, we can immediately tell them how many rewards points they have and when they expire. This helps customers take advantage of their rewards and it helps us drive conversion.” Utilizing big data will lead to further personalization.

With ship-from-store, “We can technically ship from every store, but we don’t have every store shipping now,” Peck said. If a store gets an order, a stock specialist or sales associate picks the product and brings it to a packing station. “The order looks as if it were shipped from our distribution center. It’s completely transparent for the customer,” Peck said. “How long before the order arrives at the customer’s house depends on whether the product is coming from a store just around the corner, or from far away. It’s ‘geo-sensitive,”’ meaning the system works to find the closest Gap with the right product.

Gap began the ship-from-store program last year, and a “significant” number of Gap, Banana Republic and Athleta stores across the U.S. are involved, Peck said, though he declined to specify how many. While some “incremental payroll” was added for support functions, ship-from-store is the same as reserve-from-store, in terms of labor, Peck said. “We are in the very early days but the ship-from-store economics are very attractive.”

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