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Driving Customer Loyalty Huge Focus at Gap

Don’t refer to Gap as a “mall-based apparel retailer” around Art Peck, the company’s CEO.

Peck strongly believes that Gap is a multi-dimensional company that is often pigeonholed in relation to malls.

Driving loyalty and building loyalty walk hand-in-hand at Gap.

“I often see us referred to as a ‘mall-based apparel retailer,’’’ Peck said during last week’s second-quarter earnings call. “I think that’s one dimensional, probably at best, but really, it’s just flat out wrong. We have clear points of advantage that are intrinsic to our business and set us apart, first, our portfolio of iconic and I would underline, profitable brands; We’re using our product capabilities to lead in loyalty driving categories to drive our business; We have a very robust, very profitable online and mobile business that meet our customers exactly where they are; and we have scale, and we're using that scale to drive advantage growth and profitability.”

Peck stated: “No other apparel retailer has a better, more diversified collection of profitable brands.”
“In Athleta and Old Navy, we have two growth brands, both have significant runway in front of them,” he added. “Gap and Banana, they’re more mature but also profitable and where we’re focused on driving improved performance and cash flow generation and at the same time, responsibly and aggressively managing our exposure to struggling mall real estate.”

Peck said that too often people believe Gap Inc. is limited to Old Navy.

“It extends to Gap Outlet and Gap Factory store and Banana Republic Factory store, and we are in many non-outlet mall locations with profitable stores in both of those businesses,” he explained. “The bulk of our business is in stores. But we have taken an aggressive and strategic approach to our real estate footprint and have shed more than 5 million square feet in North America over the past 10 years. It’s also important to point out that our real estate portfolio is very diversified. We have stores in strip centers, lifestyle centers, street locations, et cetera, and our stores are in places largely where customers are living their lives today. Our approach to real estate is disciplined and it’s balanced. We also see opportunities to responsibly invest here particularly in the value space.”

Driving customer loyalty is crucial at Gap, which grew same-store sales 1 percent in the second quarter.
“Loyalty categories are categories that drive repeat customer visits and a long-term relationship, categories like denim and bottoms, active and kids and baby,” Peck noted. “And we can build the best, most innovative and differentiated products in these categories because of our scale and our portfolio.”

Evan Magliocca, brand marketing manager for Baesman Insights & Marketing told Loyalty360 that Gap holds an interesting position in the retail space.

“As Peck said, they’re one of the few profitable brands in the industry right now,” Magliocca said. “They’ve beat or met earnings consistently in an industry filled with volatility. They’re also taking an interesting approach to loyalty based on Peck’s comments. For Gap, it’s all about the product—they’re focusing on categories to drive repeat visits and number of purchases instead of rewards and marketing levers. It’s not our classic sense of loyalty, but after all, great product is the catalyst for everything else.” 

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