Wednesday, May 25, 2011

Where Is The Gap Going?

The Gap has been struggling with sluggish sales, a declining profit margin, and an uncertain economic climate. What's the future for this 42-year-old fashion retailer?

Cotton prices are rising, as are transportation costs (due to higher oil prices). Customers won't accept price hikes in line with these steep and sudden cost increases, so Gap's margins have shrunk to under 40%. Given the economy, customers are likely to remain bargain-hunters, leaving little opportunity for margin increases in the coming months.

Meanwhile, Gap's new logo, introduced last year, caused an upheaval among brand fans, igniting a social-media firestorm--and the company quickly reverted to its traditional logo.

What about social media? Gap has 1.5 million "likes" on its Facebook page, but only 354 followers on its corporate Twitter account. Its YouTube channel has a few videos but not too many views. GapMobile invites mobile browsing, buying, and store location functions.

Who, exactly, is the Gap's target customer and how does that customer feel about the brand, the shopping experience, and Gap's image? I'd be interested in finding out how many Gap customers take advantage of this special deal with Goodwill: From May 19-29, anyone who brings a donation to a Goodwill store or a Gap-branded store (Gap, BabyGap, GapKids, GapBody) agets 30% off Gap purchases that day. Will this social-responsibility project resonate with Gap customers?

What's next for the Gap?

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