Narrowing The Gap

A woman walking in front of a Gap store in San Francisco.

TEXT OF STORY

Kai Ryssdal: Inflation was mentioned prominently in the Federal Reserve's Beige Book today -- that's the Feds once-every-6-weeks study of the economy broken down by region. It said businesses are having mixed luck at best in passing on their rising prices to consumers.

The sagging economy's been tough on a lot of retailers, an issue also reflected in the Beige Book, but The Gap has fallen on especially rough times.

Sales last month were down 8 percent over a year ago and back then it wasn't doing so well either.

The company's held things together this far by cutting costs and Marketplace's Janet Babin reports from North Carolina Public Radio it's planning another big squeeze.


Janet Babin: That old Gap slogan "Fall Into the Gap" has never been easier to do. There's Gap, Gap Body, Gap Maternity...

All told the company has more than 31,000 stores. That includes Old Navy and Banana Republic brands, but still, that's a lot a Gap.

Retail strategist Wendy Liebman calls it "brand saturation:"

Wendy Liebman: They just keep cannibalizing themselves. They're on every other corner and that creates a tremendous amount of sameness.

So Gap is gonna downsize. Beginning this year, spinoffs like Baby Gap will merge into existing Gap stores.

The annual rent reductions could be substantial, but retail consultant Howard Davidowitz says Gap will go nowhere 'til it increases sales.

Howard Davidowitz: Gap in not survivable company unless they can excite the customer and drive more footsteps into these stores.

Gap sales have declined for at least 15 straight quarters. Critics complain Gap has forgotten its core customer: 25 to 35, graduating from beer to wine.

But Simon Doonan, creative director for Barney's New York, says selling fashion to the masses requires a crystal ball.

Simon Doonan: If you're too funky one season, you turn off all the slightly conservative people who are potentially coming to The Gap. If you're too frumpy and you're too safe, then the groovy people don't come.

Gap says it'll return to its roots this year. It wants to be known as the Trader Joe's of clothing -- modern basics on a budget.

I'm Janet Babin for Marketplace.

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