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Senthooran Ka

on 22 July 2013

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Transcript of GAP

Salient Features of Apparel Industry - '85 to '05
* Wal-Mart is the largest vendor of clothes in US with 9.8% share of dollar market and 23.2% share of unit market.

* Intense competition among department stores, specialty and discount stores marked 1980s and 1990s. But the turn of millennium saw department stores lose market share whilst specialty stores gain market share.

* Discount stores started becoming popular in early 2000s as they added fashionable items to their clothing lines and in 2004, they accounted for 40% of the total apparel sales in the States, up from 25% in 1989.

* The modern fast-fashion business model, which came about in 2000s, turnaround the supply chain system of apparel industry, reducing the delivery time to consumers to 2-4 weeks from what was 4-9 months.

* This model allowed leaner inventories, higher profit margins, ability to scale up production of in-demand items.
Brand Positioning
* Out of a total sales totaling $16 billion for the year 2004, GAP spent $528 million on advertising expenses

* GAP created in house marketing teams for each of its brands and focused on celebrity endorsed advertisements

* It roped in Sarah Jessica Parker for $38 million to appear in television and print ads and promoted its pretty khakis line – segment focused ads

* Replaced Parker with British soul singer Joss Stone as its spokes model.

* GAP realized the importance of celebrity endorsed advertisements when it saw its turtlenecks sell out in no time after Sharon Stone appeared at an award ceremony wearing one
Gap Advertising strategy
Gap Brands
* Shift from ‘casual weekend’ to ‘dressing up their wardrobe for work or going out in addition to casual weekend wear’

* The shift in positioning would be because of the increase in usage associations

* Three sub brands (portfolio)
- Gap Body: Intimate apparel, - Gap Kids: Kids, - Baby Gap: babies

* TG: 18-30

* Female apparel was too boxy and androgynous (due to lack of focus on one segment)

* Move from separates to outfits for higher unit sales and options for the customers

* Current and stylish but not trendy (maintain a down to earth feel)

* Move to separate men and women

* Store traffic diverted based on the sex of the customers

* Old navy cannibalizing sales due to the lack of differentiated positioning

* Territorial issues cannibalizing sales
Gap Inc. Brands
* Three existing brands:

- Gap : Fresh casual American style
- Bananana Republic : Affordable luxury
- Old Navy : formidable player in the value sector

* New Pilot: Forth & Towne

* Differentiated mostly on price

* Too closely positioned
Banana Republic
* Brand Image: ‘chic basics & casual office wear in beige and black’ (boring & stale)
* Brand Identity: affordable and trendy positioning (differentiated from Gap & Old navy)
* Upscale positioning upgraded to ‘affordable, coveted luxury’
* Premium positioning: Italian and European associations
* Petite stores: women who are shorter
Old Navy
* Inexpensive basic and trendy clothing

* Families: intimates, maternity & infant range

* Change in positioning to Hispanics

* Plus size: Women and Kids

* Maternity clothing
Forth & Towne
* TG: 35 + segment (good growth)

* Entire wardrobe from office to dinner

* More feminine

* Make them comfortable when shopping
Gap Advertising strategy
* GAP wanted to position itself as a lifestyle brand

* The popular ads with the campaigns for “Individuals of Style” and “For every generation there is a GAP” gave it a brand image

* It also assigned importance to bring in some form of theatrics and story telling associated with each of its brands

* Most of GAP’s advertising strategies could be seen as targeting specific consumer segments as a response to declining sales

* It made good use of the business casuals trend trend that exploded in the wake of the dot com boom promoting its khakis during the period

* It also employed various forms of Guerilla marketing – (Sprize - shopping turned on its head) and grassroots marketing techniques to attract its customers
GAP Advertising Strategy - Old Navy
* Old Navy kept its advertisements in line with its goal of providing inexpensive basic and trendy clothing for entire families in a fun filled environment

* It even targeted Hispanics with its first television spot at the end of 2003

* The advertisements spoofed old TV shows and featured eccentric spokespeople

* It made sure it maintained its eccentricity in the way it advertised. For example a 2005 TV ad featured Old navy clad people frolicking to 1980s pop tunes

* The smile and wink in its brand maintained the tongue and cheek image it was associated with

* Their ads had the highest amount of recall in the first half of 2005
Old Navy - Commercial
Banana Republic
* Banana Republic was regarded as an upscale GAP brand and thereby was associated with more sophistication

* Its advertisements positioned itself as an aspirational yet approachable brand

* This could be seen in the ordinary, real world settings that GAP employed in its advertisements so that its clothes would appear more accessible and wearable

* It relied primarily on print and outdoor advertising to target professionals in their 20s and 30s
Banana Republic - Commercial
Improve the Supply Chain
Trend right and appropriate products
Providing trend right and Supply chain Improvement?
* Companies like H&M and Zara thrived because of their innovative supply chain model.
* They were able to deliver the latest trends cloth within a period of 2-4 week as compared to 9 months taken by Gap
* Need to integrate the vendors as the COGS of Gap (61%) were highest among the industry
Cost of Goods Sold
* According to the collected consumer insights female Gap customers felt that the brand offerings were too androgynous & boxy
* Gap made button down shirts , chinos – the boomer uniform. They missed on judging the insight that they were looking for individuality not conformity
* Inexpensive and trendy clothing brands became the top selling brands
* Emerging trends in nice segment like women plus size clothing, kid’s plus size clothing, maternity clothing
* Brands focusing on 15-25 years old had decent earnings growth
Gap’s Sales growth is least
Companies in niche segment like Chico have high earnings growth
Companies which adopted different supply chain models have shown growth Eg. : H&M
Sales & Profit Growth
As compared to the competitors Gap has relatively less sales/employee
Sales/Emp Comparison of Competitors
Data suggests that employee productivity is falling
Sales/Employee in Real Terms (000)
Improving Supply chain & Operation
* Decided to launch new products like maternity & plus size
* This is the right approach to launch new products in existing brands rather than creating new ground like Forthe & Town
Expansion through new product ?
* Presseler decided to open 175 stores
* According to the data given below old navy has the highest average store size, also the earnings growth at 4.5% was slow
* This suggests that expansion by increasing the stores won’t be a wise decision
Expansion through increase of stores
Expansion through right size in right stores & Growing Existing Brand ?
Return of access cash or Dividend
* As the company is in a mature stage it is not in great need of the cash reserves

* The company’s dividend pay-out is low as compared to other players in the industry

* We recommend that either a dividend or the buyback of stocks must be done to increase shareholder’s value
Expansion through increase of stores
GAP Case Study
A SDM Assignment
Presented by Group 9
Alok | Bhavna | Bodo | Manu | Nithin | Suruchi | Senthooran | Shyfaz
Full transcript