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Gap Bringing Global Approach to U.S.

Retailer's ceo Glenn Murphy laid out key strategies for resurrecting the brand, which included making the U.S. stores look more like those abroad.

There’s a new wrinkle in the protracted campaign to revive Gap stores in the U.S.: make them more like Gap stores abroad.

“We see the international team having a much bigger say in not only how our brands operate in global markets but how they operate in the U.S.,” Gap Inc. chairman and chief executive officer Glenn Murphy said Wednesday at the Piper Jaffrey Consumer Conference, where he gave his prescription for resurrecting the $14.7 billion retailer’s operations in North America, specifically Gap brand.

The louder international voice “will be fairly noticeable next year and a little bit this holiday,” said Murphy, who underscored Gap’s Global Creative Center in New York, launched in February, as the primary vehicle for change.

Murphy said the center houses all the creative components integral to the business — product design, marketing, in-store experience and windows — and has a mission to create “one assortment and one big seasonal marketing message around the world.” He also said it’s stacked with Americans with Gap International experience and know-how on competing against H&M, Inditex and Uniqlo, which in the U.S. are stealing market share from Gap.

According to another Gap source, “Each market from around the world has been shopping the center’s ‘global line’ with the needs of their consumers in mind. Some specific designs happen but for the most part it is one global design offering. Each country still has their own visual presentation guides and the direction for windows is country-specific. Store design is somewhat globalized as well but is a bit newer to the game.”

Overseas, Gap stores perform better than their dated U.S. counterparts because they’re newer, look fresher and sell some fashion-forward products. About 25 percent of the product line is different from the U.S. stores. In addition, “The U.S. stores buy superconservative,” said one source formerly close to the business. “Gap stores overseas have more of a point of view. Jean fits can be ahead of the curve, and the stores sell more premium products.”

In the U.K., Gap has a cashmere program. “Gap in the U.S. never does that,” the source said. “In Japan, the stores are immaculate and really creative. The visual standards are much higher.”

Murphy portrayed Gap as “still a strong iconic brand that resonates well internationally” yet one in the throes of “big changes in terms of people, structure and globalization,” he stressed. “We have been tapping at the edges of Gap brand in North America. It’s not good enough. It needs significant change,” and in particular, more of the flavor of the international stores, to restore the traffic and “buzz” that’s been missing for years.

“One of the benefits of having an international business is creating a two-way street. Learnings from Milan, Tokyo, Shanghai and Beijing — all of that shows up now in New York City, which is the epicenter,” Murphy said, referring to the Gap flagship on Fifth Avenue and 54th Street.

In outlining other recovery steps, Murphy cited “an amazing opportunity to have a better balance between specialty and value” and “reducing the dependency on the specialty business in North America.” Since Murphy took the helm at Gap in 2007, he’s brought the Gap store count in North America down to about 900 units from 1,150, and sees 700 units operating by 2013. He’s further reducing square footage by closing freestanding GapKids and babyGap stores and relocating them into Gap Adult stores.

On the other hand, the outlet channel can really grow, Murphy believes, with Gap outlets in the U.S. seen adding 50 to 60 locations, bringing the chain up to 250, and Banana Republic factory outlets adding about 40 sites, bringing that business to 150 sites. Murphy also said China has “huge potential” for outlets.

Gap’s recovery also hinges on developing a nimble, shorter product pipeline to keep costs down, work with fewer vendors and stay closer to consumer trends, Murphy said.

The four-year-old Piperlime division recently added women’s merchandise and will add men’s wear this fall, and Athleta is “developing aggressively,” with two stores operating and eight more opening this year. With Athleta, Murphy said, “We believe we have a tiger by the tail.”