Gap’s Global Tech Strategy Is Slave To Fashion, Service

For anyone who’s ever tried on — and fallen in love with — the stretch jeans, the cropped jacket or printed bag but couldn’t bear to stand in a mile-long, Saturday afternoon line at the checkout, Gap has the answer. <BR><BR>The...

For anyone who’s ever tried on — and fallen in love with — the stretch jeans, the cropped jacket or printed bag but couldn’t bear to stand in a mile-long, Saturday afternoon line at the checkout, Gap has the answer.

The company, which recently completed point-of-sale upgrades in the U.S., is working to enhance the customer experience at Gap, Old Navy and Banana Republic stores with technology that allows customers to get in and out of the store, find the right size or check the balance on their store card in record time.

“Our goal is to change and enable the customer experience with technology,” said Calvin Hollinger, vice president, information technology at Gap Inc.

“We are not deploying technology for technology’s sake. Everything we do has the customer in mind and we are constantly looking for better ways to improve the customer shopping experience,” he added.

Hollinger lifted the veil on Gap Inc.’s technology plans during the Retail Technology Summit that took place at the Langham Hotel in London last month. It was organized by the National Retail Federation, the Association for Retail Technology Standards and Retail Week.

Hollinger said the company has just finished installing new point-of-sale systems in its 2,500 stores in the U.S. Workers upgraded 25 to 35 stores each night until the project was finished. Citing company policy, he declined to specify the make and model of the new systems.

The new registers will have significant benefits to customers, employees and shareholders, Hollinger said.

For example, shoppers can make purchases with PIN-based debit cards. If a store is out of stock on an item, a sales associate can see which stores still have it, and even print out a receipt for the customer listing the stores and their locations. Stores can also place orders online if they are out of stock, he said. And sales associates can look up transactions without the customer having to show a receipt.

For employees, the system is more intuitive, he said, which reduces the need for training. Each register now has a Web browser, so sales associates will be able to access store e-mail and customer information without leaving the sales floor.

This story first appeared in the November 10, 2004 issue of WWD.  Subscribe Today.

The new registers have sped up the checkout process, too. At Old Navy, the goal is to have a 60-second checkout. “Customers have responded very favorably to the shorter lines due to the more efficient checkout process,” Hollinger said. Finally, the system is less costly to maintain and will further help reduce costs by limiting fraudulent returns.

Since the new POS system can run on any device, he said, Gap Inc. is looking at introducing more handhelds to better serve consumers in the future. All nonsales transactions will be taken away from the register, allowing sales associates to interact with customers anywhere on the shop floor. For example, sales associates could use handheld systems to check if certain sizes are in stock, enroll a shopper for a store credit card or check the balance on a gift card. In the future, it will also be possible to have clients pay by credit card in the fitting room to avoid checkout lines.

The point, he said, is to have a centrally managed system that will inevitably translate into increased sales and a reputation for customer service.

Gap Inc. is now gearing up to launch the POS system in Japan after some modifications to meet local needs. There are far fewer returns in Japan and many of Gap’s shops are in department stores, so the system will need to accept new payment options. Gap plans to pilot the POS in the U.K. and France toward the end of 2005, with a full rollout planned in 2006.

Other technology helps the store sell as much merchandise as possible — and avoid markdowns.

In the past, Hollinger said, all stores received the same sizes and styles without much regard to local needs. This led to some sizes always being sold out and other sizes having to be marked down.

“Each store received the same size bias, which meant some stores were consistently marking down the small and extra-small sizes,” said Hollinger. “Why? If we have the right product in the right place, then there will be no markdowns.”

Gap is pursuing several strategies to tailor its assortments to individual stores. These include focus groups, mystery shoppers, interviews with customers, shopper surveys, feedback from store managers and sales associates, studying demographic data and analyzing sales data from individual stores to see which sizes sell where. The company has modified its merchandising system to enable it to send unique assortments of sizes to particular stores. Gap is evaluating software that allows full-fledged assortment planning.

Gap is also using markdown software from ProfitLogic of Cambridge, Mass., to determine the optimum timing and amount for markdowns, said a Gap spokeswoman. And when Gap Inc. is considering whether to open or relocate a store, it uses software to analyze the relevant demographics and psychographics to predict sales potential, Hollinger said. This helps determine where stores should be located to best serve customers. It has also led to the closing of a number of underperforming stores in the U.S.

As for the future, Gap is currently testing technology in its San Francisco store that allows customers in the fitting room to see if the store has the sizes and styles they want. The company hasn’t yet settled on a look-up device, but is considering kiosks and personal digital assistants as well as other hardware, Hollinger said.

Gap also wants to help customers circumvent annoying checkout lines by eventually allowing them to pay by mobile phone in the dressing room, handing them tokens so they can pay at any register in the store or even creating self-service kiosks. “The kiosks are an option, but then again we like the sales staff to be interacting with the customers,” Hollinger added.

While Hollinger’s talk focused mainly on current and upcoming technology, he also admitted some humbling lessons that Gap learned in Europe.

“We closed [operations in] Germany in September,” he said. “We were there for 10 years but we weren’t relevant to that market. So we cut our losses. It was 10 stores — and less than 1 percent of revenue.”

In the U.K., he said, Gap grew too fast. “Rent is a fixed cost here, so picking the right store location is key. We closed 220 stores that were underperforming.” There are now 120 Gap stores in the U.K.

That said, international expansion is still a key part of Gap’s strategy.

“We’re asking ourselves: ‘Do we penetrate new markets through a franchise, joint venture, acquisitions?’” He said that “at some stage” Gap would go into China, and that maybe Old Navy would set up shop in Japan, France and the U.K.

As for Gap’s philosophy, Hollinger said, it’s more about science than art nowadays. “We used to be a gut-feel business. Our former chief executive officer has great fashion sense. By contrast, our new ceo says ‘Don’t ask me about the buttons,’” he said with a laugh.

“We’ve moved away from the gut-feel approach and more toward the science of retail. Everything is now driven by consumer insights. We are working for the customer,” he said.