Write Alternatives and 2 Recommendations of Gap Company
. (Maybe use for the introduction)
Gap Inc belongs to the “Family Clothing Stores in the US” Industry, given that in this industry, we can find a variety of items for children, men, and women. Therefore, since this is not a specialized industry, we can more precisely analyze all aspects of the environment.
According to historical performance data, this industry has a revenue of 132 billion dollars as of this year, and it is estimated that it will keep growing in the following years (See Exhibit A). However, the pandemic had a significant impact on consumer spending. Many companies in this industry, such as Gap, were affected and saw a decline in their sales, but they were confident that they could recover in the following years (Scott, 2021).In 2020, when the pandemic started, some consumers limited their spending and stopped buying high-quality, expensive clothes, and looked for clearance and more affordable prices. However, in 2021, when people started to recover from this pandemic, consumers purchased more clothes and were less sensitive to prices, increasing revenue growth for this year (See Exhibit B).
Additionally, the industry is segmented into women’s clothing, men’s clothing, footwear, children’s clothing, and accessories. These groups consist of 39.8%, 26.5%, 14%, 11.5%, and 8.2% of the industry revenue, respectively (See Exhibit C). Because women purchase a large variety of clothing for different occasions, this segment has the most significant percentage of revenue.
Consumers’ ages are another essential aspect of the industry that has been segmented. Thus, the industry shows that people between the ages of 25 to 44 are the primary consumers, followed by consumers between 45 to 64 (See Exhibit D). These people tend to buy more clothing because they earn the most income and buy for their significant others. Consumers younger than 24 tend to be more brand-conscious and have specific preferences. Most of these individuals depend on their parents to purchase their clothing and accessories. Finally, people aged 65 and older prefer to spend their income on other areas such as travel and entertainment and limit their clothing purchases. Additionally, they do not follow trends whenever they need to buy clothing.
The market share concentration consists mainly of three top participants. These participants are TJX Companies Inc., Ross Stores Inc., and Gap Inc. (O’Connor,2022). The rest of the players own 65.9% of the market share, but they do not own more than these three companies individually. Moreover, O’Connor (2022) reported that competition in this industry is high, and the growth of stores has saturated the market.
Looking more toward the financial and analytic side, Gap Inc has a strong global presence within multiple countries but continues to decline in revenue with each passing year. The list of countries that contribute to Gap’s revenue includes the United States (84.4%), Canada (7%), Asia (5.1%), Europe (2.4%), and other regions (1.1%). (MarketLine, 2021) The company tries to connect with each country equally with their diversified store network. This helps the company synergize with their customers to understand their needs through apparel, accessories, and personal care products. In the FY 2021, Gap Inc has reported a 33% increase in total current assets from $4,251 million in the previous year to $6,008 million. (MarketLine, 2021) This increase in liquidity means that the company is able to fund itself for its day-to-day operations or to create growth opportunities for its community. However, Gap continues to decrease in revenue from $16,383 million in the previous year to $13,800 million in FY 2021, which shows a 15.8% decline in their annual financial performance. (MarketLine, 2021) Multiple reasons that cause their decline include the loss of sales within multiple sectors of their company, COVID-19 restrictions, the failure to adapt to modern trends of fashion consumption, lack of distributive global presence in the world, and a few more.
( I believe I’m done with this section. Will do more sections as well. Feel free to message me or alter it yourself if it doesn’t seem complete)
Using this source and the SWOT analysis to explain further about the company.
The industry is composed of three major competitors, Gap is one of them. That means that the other two competitors for Gap are the TJX Companies Inc.,
Key Strategic Issues
Gap Inc., one of America’s most loved clothing brands in the 1990s, has recently undergone multiple internal and external conflicts that have caused a decline in performance and sales. We first began to see a decline starting in March of 2019 when the pandemic of COVID-19 created a shutdown of most storefront operations except those deemed as essential. At this time GAP did not have a strong online platform to continue to increase sales as some of its competitors such as H&M and Forever 21 thus saw their first decline in sales, with an approximately 200 million dollar loss in Q3 of 2020. In addition to not having a strong presence online, GAP was also failing to adapt to the fast-fashion shift in the industry. Fast fashion allowed for customers and consumers to be able to stay within the fashion trends at low cost, this resulted in a negative impact for GAP as they had too much inventory to continue to place orders for new merchandise. This pressured GAP, Old Navy, and the Banana Republic to sell their merchandise at a discounted rate in order to reduce inventory holding costs and to keep up with the current fashion trends. Following discounted merchandise, GAP believed it could rekindle its losses by reducing storefronts for the Banana Republic and shifting its focus to Old Navy as its new savior. Over 320 storefronts have been shut down since 2019 after a 30% decrease in sales from the Banana Republic, their more luxury line.
Old Navy then shifted to the mainline for GAP, INC. Old Navy at the time was holding a constant profit but shortly after Q1 of 2022 experienced an 18% loss in the stock market. Because of this, GAP parted ways with Old Navy’s President and Chief Executive. This can now serve as a new opportunity to address the internal and external conflicts GAP has been facing over the last 3 years. GAP must act quickly as this could be the saving grace and shift in the industry they need in order to succeed and continue operations.
Exhibit A (Industry Data from IBIS World)