CAN GAP REGAIN ITS COOL?: Fashion giant Gap has seen its strategy fall flat in recent years. Conor Dignam asks how it can win back its core consumer base

Yet the consensus seems to be that it can recover. "Gap is a very strong brand that has made mistakes,

says Verdict's Bain. "But it has the power to get back on track. It won't be easy in the current market, but it is achievable if it restores what it's always done well and builds from there."

WHAT SHOULD GAP DO TO WIN BACK UK SALES?

David Davies - Creative director, Futurebrand

Gap is no longer cool or clever for fashionistas or label lads - the question is how to get meaning back for the big volume of customers its size of business demands. Like all problems, it simply represents an opportunity for Gap to edit, refine, refocus and rethink - which is exactly what it is doing, I would imagine.

My observations on what's missing might include where's the sex appeal?

What's the look? Where's the leadership since everyone's copied it?

The stores look a bit bland and featureless - a bit like a smart-looking medical day-centre. You may get a 'hello' as you walk in but beyond that it's piles of clothes you have to sort out and create a look from - and what's the look?

Having said all that and being very critical, Gap is still a huge, successful business and can still teach other retailers a hell of a lot.

The Gap people are clever and prag-matic. When they've worked out what they need to do - they will 'just do it' in the most single-minded way possible.

Marcus Brown - Partner, business development, Rainey Kelly Campbell Roalfe/Y&R

When Gap first hit the UK, the brand tapped into the consumers' psyche; 90s functionality was replacing 80s flamboyance. Everything that the brand did reflected that positioning.

The products were plain-coloured staples, the stores were unisex and easy to navigate, and it even introduced 'gift receipts'.

Visit the stores today and little has changed. And that is the crux of the issue. Now those plain designs seem bland and the easy-to-navigate layout boring. While the ads are generally quirky, the products they feature are not. Although fashion has evolved from funct-ionality to individuality, Gap has stuck religiously to its positioning, only to discover its followers have lost the faith.

Competitors have imitated and innov-ated. Zara is sweeping across Europe, Marks & Spencer's sales grow by the day and Uniqlo has declared its interest.

Gap has been de-positioned by the dynamism of fashion, consumers and the competition. It needs to offer cons-umers individuality, not uniformity.

Rita Clifton - Chief executive, Interbrand

Gap went the way of many successful fashion brands that have had a history of phenomenal growth and need to keep up appearances; it tried to lurch younger, it cut corners with the product, took a few liberties on price, and began to try too hard in the cool stakes.

We should remember that it is still an incredibly successful and valuable global brand; it's just the relative performance and loss of momentum that's the issue. But you can come back. French Connection and Burberry have done it.

It obviously needs to get the core Gap product right in terms of basic range depth, quality and style. But it will always need to hit the high note with its versions of the 'pieces of the season', and use these extensively to give renewed style credibility.

Finally, it could probably do with an injection of third-party help on re-discovering 'cool', perhaps with more interesting uses of celebrity, or creative direction. The last thing it should do is twiddle with its logo.

Too few customers, unexciting stock, dated store formats and tumbling sales: the problem for Gap is that this is a scenario being played out in its 4171 stores across the globe.

Earlier this week the San Francisco- based retailer reported a 12% drop in March in same-store sales for its US operation (including the Gap, Banana Republic and Old Navy brands) and a 22% drop for international stores. It does not break out separate UK figures.

This was the 24th consecutive month that sales had fallen. Worse still, retail analysts have described the current spring line as "dull and boring

and "lacking must-have items".

Gap admits 2001 was its "most difficult year ever". An $877m (£620m) profit in 2000 turned into an $8m (£5.6m) loss for its stores around the world. Gap, the brand that was named after the generation gap and built its business targeting baby-boomers, is suffering its own mid-life crisis.

Gap's European head of public relations, Anita Borzyszkowska is effusive when asked what went wrong. "We lost focus on our core brand, our core operation and key items. We ignored the fundamentals and we got too swept up on trends."

She agrees with the Wall Street and retail analysts who claim the company made serious errors in commissioning fashion lines at the expense of its classic essentials.

"We ignored the wardrobe staples that people love and know as Gap. The Gap brand is about simple, classic, confident clothing for everyday wear and we didn't deliver on that."

She says Gap's new focus is on 'evolved classics' - or improving and evolving the kind of clothes that have made it such a success in the past.

Borzyszkowska identifies three core aspects to Gap's turnaround effort - focus on the product, improving operating efficiencies and scaling back square footage.

Advertising is notably absent from the areas where Gap has identified a problem, but for many financial analysts its ads are a key problem.

In November last year Prudential Securities retail analyst Stacy Pak singled out the advertising as "ineffective

and said it was one reason why it was downgrading Gap's investment rating from a 'hold' to 'sell'.

Three months later, Gap ann-ounced that it was ending its short relationship with US agency Modernista, which it had appointed in October 2000.

Last month it brought in a new agency, Laird & Partners, a San Francisco start-up led by Trey Laird, former corporate creative director at fashion brand Donna Karan.

At the same time, the company has also brought back Lisa Prisco, the woman who directed some of Gap's most successful ads between 1996 and 1999, to develop new advertising.

Advertising assault

Although the retailer will not confirm or deny whether its ads will follow their historical creative format, dropping its agency and bringing back established talent from a more successful period suggests Gap sees room for improvement, and change.

Gap's advertising has been one of the most admired aspects of its brand in recent years. The music video-style ads had a distinctive tone of voice and look, suggesting the casual stylishness that the retailer was all about.

Even more notably, most of the ads were produced in-house by Gap's own creative people.

There has been a shift away from the music/dance numbers toward celebrity performances. The most recent major campaign, through Modernista, saw singers Alanis Morissette, Sheryl Crow and Seal singing the 1979 Supertramp song Give A Little Bit. The end-line to the campaign was 'Give Your Gift'. It didn't win many fans.

But Neil Dawson, executive planning director at TBWA, who has worked on French Connection's successful, but controversial Fcuk campaign, thinks Gap is unlikely to opt for a radical departure from the style that has worked in recent years.

"I suspect it will try to keep the underlying tone of the messages that have worked well for it in the past,

says Dawson. "They suggest the warmth that Gap is all about. I think the key issue is what they showcase - the clothes they pick, the artists they work with, and the music."

He says the brand's US heritage and global presence may also work against it with younger consumers looking for distinctiveness in what they wear.

British consumers - especially youth - do not always respond well to blanket US- or European-style advertising. Brands such as Coca-Cola, McDonald's and Skoda have all discovered that using UK-specific messages has won their brands increased recognition and respect from British consumers.

But it's not just in advertising that Gap has got out of synch with consumers.

"Gap benefited when denim was out and khaki was in, but it was too slow to make the readjustment when denim returned,

says Dawson. "It has also suffered from the collapse of the dotcom economy - all these new economy whizz-kids in their khakis seem slightly out of date now. The fashion seems to be for people to look more 'serious'. One of Gap's major issues is that it's on the wrong end of that change in fashion and outlook."

Yet at its inception, and for decades following, Gap was very much in tune with its customers.

Started by Donald Fisher and his wife Doris in 1969, The Gap was a San Francisco store that sold nothing but Levi's and records. This was a counter-culture business for a time when denim was the badge of youth, resistance and rebellion.

Gap's brand roots

Fifteen years later the store had moved on; becoming more corporate, if not in its clothing, then certainly in its outlook and aspirations.

Millard Drexler, an experienced retailer, was brought in to devise a new brand strategy and is largely responsible for its brand values today.

He worked out what kind of clothes and values the baby-boomer would want to be seen wearing. He developed the classic casual air of Gap's stock and retail environment - and he and the brand followed the baby-boomer through to have their own children - and dressing them in GapKids and Baby Gap.

The Gap brand was about consistency, quality, and a casual style for the baby-boomer professionals in their dress-down time. The brand moved beyond the US. But over the past couple of years its product strategy has gone awry.

In its efforts to win new customers, Gap made the mistake of trying to become more trend driven, moving away from simple essentials to more high-fashion products. It confused its existing customers without winning enough new ones.

Add into the mix new retail brands such as Uniqlo, which are offering similar lines and casual wear, but often significantly cheaper, and you have the makings of crisis at Gap.

"Gap has lost its edge,

says Sally Bain, senior analyst at Verdict Research.

"It has not delivered the desirable basics we associate with its brand - or the right fashions when it tried to make its lines more fashion driven. You're either right or wrong when you go with fashion lines - and Gap has been wrong."

Part of the problem, says Bain, is that Gap's brand is not associated with fashion by young people, more with casual basics. It has failed to provide the constant newness that young shoppers demand and has not moved the brand on in the casual market.

Bain says that while Gap may have been opening new stores at a rapid pace in recent years, increasing by 30% in the year to March 2001, the crucial measure of sales per square foot has been falling. So while its UK market share grew from 1% to 1.1% last year the UK sales density for Gap has fallen over the past two years.

This picture of increasing space, but declining density, is one of the reasons Gap has said it will increase total store square footage by just 3% this year, from 110 to 120 locations, and halt all real estate developments for 2003.

So can Gap get back on track? On one level it looks impossible. Its core market is ageing and disappearing from its stores. Younger shoppers seem impervious to its charms.

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