Retail

Gap Dares to Ask: Are Customers Tired of All Our Sales?


A Gap store in Chicago on Sept. 13

Photograph by Scott Olson/Getty Images

A Gap store in Chicago on Sept. 13

(Corrects the timing of Gap's success with colored denim in the fourth paragraph)

A string of retail companies have been singing the same holiday tune the past few weeks: Get ready for a price war. Despite a bullish stock market and improving economy, consumers are being stingy and appear to require serious coaxing in the shopping weeks ahead. This month alone, we’ve heard some version of that warning from Macy’s (M), Best Buy (BBY), and Target (TGT).

Gap (GPS) Chief Executive Officer Glenn Murphy has a different perspective. Customers, he warned, are sick and tired of being bombarded by sales.

“Are we disappointed in the consumer sentiment or have we—I’m just being honest—as an industry not been that innovative in order to give the consumers a value proposition that doesn’t look like wallpaper day in, day out?” Murphy said Thursday on a call with analysts. “They are looking for something exciting.”

Of course, he also touted Gap’s fashion renaissance and improved service. Gap had the apparel equivalent of a home run with brightly colored denim, a trend the company saw coming and timed nicely. Murphy said it made “the difference between good and great” in 2012. “This is what we get paid to do and I get paid to do,” he said of the prescient call on garish pants.

Murphy also crowed about greatly expanding a program that lets customers reserve clothes online for later pickup in stores. As of this week, the service is now available at all Banana Republic outlets and Gap stores in 15 major markets.

The whole presentation was a savvy bit of executive misdirection. In a quarter when Gap’s discounting pinched profit margins, Murphy talked about hit products and an ambitious supply-chain endeavor. And despite his warning about sales fatigue, he didn’t say Gap was going to avoid promotions entirely—just be more creative with the tactic. “We are really trying to make sure that we don’t become predictable,” he said. “Just being ‘40 percent off,’ on an easel on the outside of your door, anybody can do that.”

Yet that statement arguably describes Gap pretty accurately. I can’t remember the last time I walked by a Gap or Banana Republic and didn’t see a big sales sign plastered in windows. And they are typically storewide deals, not the craftily worded offers of “up to” a certain percent off.

The message isn’t much more nuanced online. The Gap website is currently advertising 40 percent off regular-priced items. It assures that shoppers with a Gap credit card get half off, while those who haven’t yet signed up for the company’s e-mails can get 25 percent off.

I have, however, signed up for Gap’s e-mail deals in the past. Here’s a rundown of the recent bombardment:
 
• Nov. 11: A one-day, 40 percent off deal at Banana Republic
• Nov. 14: A four-day, 30 percent off deal at Banana Republic
• Nov. 14: A four-day, 40 percent off deal at Banana Republic.
• Nov. 18: A two-day, 35 percent off deal at any of Gap’s three brands
 
In short, Murphy has a good point about fatigue, and confusing is an apt adjective as well. At this point, though, Gap still seems to be the source more than the solution envisioned by its CEO. But the company must be doing something right. Its operating margin in the first nine months of the year was 14 percent, a level it hasn’t seen in recent years. Maybe Murphy is holding the line on all those colored jeans.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

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Companies Mentioned

  • M
    (Macy's Inc)
    • $62.29 USD
    • -0.07
    • -0.11%
  • BBY
    (Best Buy Co Inc)
    • $31.89 USD
    • -0.35
    • -1.1%
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