Consumer Behaviour Case Study

Gap Inc.’s Declining Apparel Sales in Europe: Style or Substance?

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Abstract:
Gap Inc., the US-based global clothing retailer, had faced dwindling sales over the period 1999-2002. While closing underperforming stores, reducing excess inventory, etc., led to a temporary turnaround in 2003, sales declined once gain during the subsequent years. During the fiscal year ending January 2006, Gap’s global sales fell by 1.5%, while the plunge was even sharper at 6.1% in its two European markets, Britain and France. The company identified that having an ‘American look’ was the foremost reason behind the Europeans’ disinterest in its apparel. Hence, Gap Inc. aimed to add some local flavor to its European business, by establishing a design house in London. However, analysts judged it as an inadequate solution to the company’s problems. Gap was facing enormous competition from supermarket chains like Wal-Mart and Tesco, which offered good quality clothing at attractive prices. More importantly, in recent years, various ‘fast-fashion’ brands were making strong inroads into the UK and French markets. Shoppers wanted to wear what the ‘stars’ wore, and some fast-fashion brands like ‘Zara’ and ‘Hennes & Mauritz’ (H&M), churned out fashionable and trendy, cut-price copies of catwalk pieces at lightning speed – in less than two to four weeks after conception (hence called ‘fast-fashion’ brands). Also, with the complete phasing out of the Multi-fiber Agreement from January 1, 2005, premium brands like those of Gap, became more vulnerable to low cost imports from developing countries. In this context, some analysts opined that Gap should revise its production, distribution and strategies so as to come up with trendier and cost effective styles at a very fast pace. At the same time, others pointed out that Gap could break free of low-cost competition by coming up with well-differentiated ‘pinch-hitting styles’ along with good quality and pricing, so as to establish its brand reputation. This case highlights Gap’s evolution, its sales decline during 2005-2006 - mainly in Europe, the company’s response, the further threats that it was faced with and analysts’ views and opinions regarding the same.

Pedagogical Objectives:

To analyse the competition in the Apparel industry worldwide and in Europe

To discuss about various factor contributed to decline of Gap Inc and its production, distribution and strategies.

Keywords : Gap; Fashion Industry; Fast-fashion Brands; Restructuring / Turnaround Strategies Case Study; Inditex Zara; Multi-fiber Agreement; Clothing and Accessories; Apparels; Readymade Garments; Retailer Brands; Competition; Positioning; Fashion and Styles

Contents:

• About Gap Inc.
• The Past
• Drexler's Era
• Pressler's Era
• Gap's European Market
• Gap's Steps Forward
• Gap's Added Trouble in Europe
• Competition from Supermarkets
• Competition from Fast-Fashion Brands
• The Future Outlook