GAP PLANS INTERNET GROWTH

Byline: Melonee McKinney

GALLATIN, Tenn. — Gap Inc., already a big player on the Internet, sees a lot more potential for e-commerce and e-branding.
Millard Drexler, the usually low-profile Gap chief executive officer, took a strong public stance on how he rates the Internet, during Friday’s annual shareholder meeting here. Far from the Gap’s home base of San Francisco, he disclosed some major initiatives in the works, among them, having taken its growing baby business one step further by introducing Gap Maternity as an online exclusive.
“Maternity apparel has been the number-one requested product category for us for the last five years,” Drexler said. “So we wanted to introduce it online and let it help drive traffic to our site.”
More significantly, Gap officials on Friday were boasting the world’s largest selection of jeans and khakis available through Gap.com. The vastly expanded assortment includes more than 175 sizes, 25 fits and 15 colors and washes, including sizes never before available at Gap.
The Gap also announced a new tool, pants@gap.com, where customers can shop three ways: online at gap.com, at any one of the 1,700 Gap stores in the U.S. or by phone at 1-800-GAPSTYLE. Online, shoppers log on to Gap.com, click on the pants@gap.com icon, then select one of three categories: find the right size, find the right fit or find the right color. Pants@gap.com also features “compare fits,” so customers can see what styles look like side-by-side, from four different perspectives: front, back, side and sketch.
“Pants@gap.com allows us to offer more sizes, styles and colors than we can within the four walls of every Gap store,” said Ron Beegle, executive vice president, Gap Inc. Direct, in a statement Friday. “We want to make it as easy as possible for customers to find the perfect pair of pants, whether it’s in our stores or online.”
Gap jeans and khakis range in price from $29.50 to $69. Since Gap products are generally more basic and predictable in character, they are considered easier sells via the Internet. At the meeting, Drexler said he views both Gap.com and Bananarepublic.com as opportunities to market the brands on the Internet and create an integration between the sites and the stores.
“The Internet has been a nice addition to our marketing opportunities,” Drexler said. “And we are not worried about the Internet taking business away from the stores because our customers are still going into the stores. At the end of the day, frankly, e-commerce is just retailing. We are pleased quite pleased with the marriage of online and stores.”
He added, “Online is making things very available. It is a commodity in a sense. It enables people to check prices….Online has changed the nature of competition.
Nobody knows what the long-term effect will be, but we will always want to have a balance [between brick-and-mortar and the Internet], and we are learning everyday.
In fact, the company learned a lot just last week, when the last of the company’s brands to venture into e-commerce, Old Navy, began conducting transactions on its Web site. Drexler did not say how much business was conducted, and there seemed to be little fanfare prior to Thursday’s launch. Still, he acknowledged there were some glitches, but he assured his audience they would be worked out.
Drexler’s speech to roughly two dozen shareholders, and about as many Gap executives and staffers, was brief, under 20 minutes. It was held in a meeting room inside a new 2.4 million-square-foot, $200 million distribution center in the Nashville suburb of Gallatin to celebrate its opening. The latest section is dedicated to The Gap brand and began operating in March.
The previous center was strictly for Old Navy, and the expansion will bring 1,300 employees to the site. The Gallatin distribution center services all on stores east of the Mississippi and all Gap stores in the U.S. for year-round basics.
He didn’t address the fate of Banana Republic, which lost its president Jeanne Jackson to Walmart.com recently. The division is currently being run by the team of Jerome Jessup, executive vice president of product design and development; Gary Muto, executive vice president of merchandising, and Amy Schoening, senior vice president of marketing, and seems to be in a holding pattern, at least for now.
“This is a team that Jeanne assembled, so we know they are capable of driving those businesses,” a source said at the meeting. “For the time being, that’s the way it’s going to be.”
As for brick-and-mortar stores, the Gap just keeps on growing and growing. And the Old Navy division, Drexler said, is headed to Canada by April 2001. He did not specify how many stores there are planned, but the expansion north of the border is likely to be swift and extensive, just as it’s been in the U.S.
Domestically, after opening 570 stores in 1999, an additional 600 units are slated for 2000.
On Thursday as reported, Gap Inc. warned that first-quarter earnings would fall below analysts’ expectations, though comp stores sales for April rose 7 percent. The company remains in solid financial shape, having reported $11.6 billion in annual sales for 1999, and net earnings up 37 percent.
“We have 5 percent of the market share in America and we are looking to grow all three brands domestically and internationally,” Drexler said. “We want to continue to grow our market share to [more] profitable levels.”