Gap Inc.. seeking to generate additional revenues, has formed a collaboration with Ware2Go to accelerate its strategy to open up its supply chain to other brands and retailers.
The collaboration integrates Ware2Go’s supply chain technology and existing warehousing footprint used by different brands and retailers with Gap Inc.’s GPS Platform Services for outsourcing the company’s distribution centers and warehouses, returns processing, customer insights, technical and digital capabilities.
The Ware2Go partnership will act as an accelerator for the GPS Platform business, which was launched last fall to raise revenues. It’s been servicing certain large national brands, whereas the collaboration with Ware2Go will service small- to medium-sized retailers and brands by enabling them to plug into the Gap network.
“Together we will help SMBs grow their brands with our combined logistics infrastructure and cutting-edge automation,” said Kevin Kuntz, head of global logistics fulfillment at Gap Inc.
“It’s a pay-as-you-go model. You pay for the storage, shipments and labor that you utilize,” said Steve Denton, chief executive officer of the Atlanta-based Ware2Go. “For us, the collaboration with Gap opens up a whole new market around apparel and soft goods. We had a void there.”
Denton defined small- to medium-sized businesses as those generating anywhere from $5 million to $250 million in volume. He said the collaboration with Gap Inc. involves moving product through the supply chain “from factory floor to front door — we do it all.”
Ware2Go’s fulfillment platform incorporates machine learning and data science. The cloud-based platform records sales patterns and offers customized inventory and distribution insights based on customer data. Gap Inc. won’t get access to data from other retailers and brands accumulated by Ware2Go, the two companies indicated.
According to the executives, by outsourcing, retailers and brands can focus more on what they are typically best at — product development and marketing — rather than logistics and fulfillment. The collaboration will also enable brands and retailers to more easily enter the U.S.
The collaboration is an extension of Gap Inc.’s business relationship with UPS, which owns Ware2Go and has long handled incoming and outgoing Gap Inc. parcels.
Ware2Go has 35 warehouse partners in its network and now adds Gap’s distribution centers in North America. Ware2Go already works with many small- and medium-sized businesses as well as larger companies such as Coca-Cola and Thrasio, an Amazon aggregator. Gap does not disclose the large brands that work with its GPS Platform service.
The Gap strategy is reminiscent of American Eagle Outfitters‘ acquisition of Quiet Logistics in 2021 for $350 million in cash, building upon its acquisition of logistics firm AirTerra earlier in the year to enhance its supply chain capabilities and extend them to other brands and retailers.
Gap Inc. in recent years has poured hundreds of millions of dollars into modernizing its supply chain, including opening a “state-of-the-art,” $140 million, 850,000-square-foot distribution center in Longview, Texas. It was built to service the growing online business.
Gap Inc. has 13 distribution centers situated on six campuse in the U.S. and one in Canada, several of which have transformed into highly automated, cross-channel fulfillment centers which the company refers to as “customer experience centers.” In addition to Longview, the distribution centers are located in Fresno, California; Phoenix; Groveport, Ohio; Gallatin, Tennessee; Fishkill, New York, and Brampton, Ontario.
Several Gap Inc. distribution centers are rigged with such technology advancements as sort orbs with robotic arms geared to quickly and accurately sort batches of units destined for multiple online orders; automated storage and retrieval systems with automated cranes that race up and down aisles of storage space to stash away or retrieve thousands of cases; unit sorters for high-speed sortation of small lightweight items, and robotic baggers to quickly and efficiently wrap e-commerce orders.
“We want to monetize what we have built. We have made some large strategic investments over the years and have a lot of capability,” Kuntz said.
He said Gap Inc.’s supply chain has kept up with its demand online, which has grown significantly through the pandemic, but has excess capacity to service non-Gap Inc. brands. Kuntz said Gap’s distribution centers are about 80 percent utilized, with some having the capacity to handle a million units a day, meaning they have about the 200,000 unit capacity available.
For several seasons, Gap has experienced slowing sales due to internal factors such as fashion misses and store closings, as well as external factors, contributing to the excess supply chain capacity.
Many small- to medium-sized brands and retailers already use third-party logistics companies, though according to Denton, “89 percent have their own warehouses, but they need optionality to expand.”
According to a Ware2Go survey of SMBs:
- 74 percent of SMBs believe the future of fulfillment is shared, co-warehousing models that allow SMBs to easily scale;
- 89 percent of SMBs report they own and operate at least one warehouse; 47 percent have explored more flexible warehouse strategies over the last two years;
- 65 percent of SMBs are actively planning over the next one to two years to make either short- or long-term investments to expand leased warehousing space, and
- 90 percent of respondents stated they would be open to sharing a warehouse with another retail brand and outsourcing fulfillment to that retailer.
“The future of fulfillment looks like SMBs owning zero warehouses,” Denton contended. “Our merchants want to remain focused on growing their business and product portfolios, and not worry about the ins and outs of their inventory placement or building up a labor workforce to support peak season.”