Gap Inc is eyeing a larger share of the $1.4trn global apparel market

Gap Inc is eyeing a larger share of the $1.4trn global apparel market

As turnaround efforts finally start to take hold at US specialty clothing retailer Gap Inc, the company is now focusing on leveraging its global brands to gain a larger share of the $1.4trn global apparel market.

Among the goals outlined at the company's annual investor meeting in San Francisco yesterday (17 April) were plans to franchise Old Navy stores overseas, expand overseas - especially in China - and build a seamless omni-channel experience.

But as chairman and CEO Glenn Murphy explained, these developments are only possible through recent efforts to realign the business so that it focuses on brands instead of channels, a global assortment, and speed to market.

Key to this last point is a responsive supply chain. "You've got to move in this business," Murphy said, adding: "We've been known to be a little tardy."

The company has managed to cut its core pipeline by one-third and is now turning its attention to "fabric platforming."

"Not hundreds of fabrics, the right amount of fabrics, because they can be washed and treated in so many different ways. Fabric platforming is a big change that's coming in the business," he noted, adding that this also feeds into vendor-managed inventory, "which we're doing already."

"Vendor-managed inventory is a style that's around 52 weeks, the fabric is platformed, the vendor sits on six weeks of finished goods, you've got two weeks in the distribution centre, you've got two weeks in a store, done. It's a continuous cycle."

The next step is rapid response, the goal of which is to reduce volatility in the business.

"Rapid response is a style that's four to six weeks. You don't buy it all at once. The fabric is sitting there. You go and do a short, some are pleated, some are not pleated, get a read, make your adjustments. Fabric is sitting there. Not rocket science. That is on the way to being built."

"Seamless inventory"
Another opportunity Gap Inc is working on is "seamless inventory" and a global assortment.

"Today, we have pools of inventory trapped around the world. It first gets trapped in a country. So Japan inventory, when the PO gets cut and goes to a vendor and it goes to Japan, it's Japan's inventory. It's trapped in Japan. Then it goes to stores, and it's trapped in 150 stores.

"We're now going to unlock the power of our inventory where any unit that leaves a vendor should go to where that unit could be maximised the most. It starts with having a global assortment."

At the Gap brand, for example, global president Stephen Sunnocks explains the company has moved from seven regional merchandising teams all feeding ideas direct to the design teams, to a global centre in New York which channels this regional information into "one global vision."

"We're looking at 70% to 80% of our product being the same consistently globally. Bestsellers are bestsellers," he notes, adding: "We're leaving between 20% and 30% open for local requirements."

The retailer is also working on a universal fit - based on US fit but reflected through the size curve - instead of having a secondary fit for different markets.

This not only recognises that consumers around the world vary in terms of height and so on, but it is a simpler model to have the same product with extra sizes at either end of the spectrum.

"Gap is a complex business, so we're not quite there yet, but we are working through some of our fits to see if we can get to a more globalised and simpler assortment," Sunnocks admits.

Omni-channel aspirations
"Seamless inventory" and a "global assortment" will also pave the way for Gap Inc's omni-channel aspirations.

The company, which operates 3,100 stores and over 300 franchise stores under the Gap, Banana Republic, Old Navy, Piperlime, Athleta and Intermix brands, wants an end-to-end experience that merges online and brick-and-mortar shopping.

This includes capabilities such as ship-from-store, find-in-store and reserve-in-store to help drive store traffic and conversion. "You can ship a unit from a store to satisfy an online customer," Murphy notes. "That's going to become seamless.

"Now the inventory can go anywhere. Now the inventory is untrapped. It starts with being untrapped by country. Because when it leaves the vendor, it will go to the country where we can maximise our sales, our growth and our AUR. Then the next step is inside of a country, you have to maximise that profitability. This is such a huge unlock for us. It'll take us a number of years. It's there to be done."

This integrated "one brand, one experience," whether online or offline is key, Murphy believes, because "the customer today is running a little ahead of us." This compares with the past when retailers traditionally brought ideas for customers when they weren't ready.

Gap has reason to feel confident after a "stellar" year last year in which net income surged 32% to $1.1bn, sales grew 8.2% to $15.7bn, and comparable sales increased 5%.

The company also revealed yesterday that it ended 2012 with a 3.9% share of the $300bn North American market, a gain of 20 basis points.