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Gap Inc's Diversification Strategy

Question:

Discuss about the Customer loyalty through social networks.

Diversification is one of the chief marketing strategy of Gap Inc. Being a highly well-known company, Gap’s marketing strategy is to capture a broad demographic of consumers (Caniato et al. 2012). The company is one of the four largest retailers dominating the apparel market of U.S. The company has five brands since 2010, namely, Old Navy, Banana Republic, Atheleta, Gap and Piperlime. This diversification is done in order to attract consumers having different taste of fashion and style. While Gap targets consumers who prefer classically styled casual apparel within a moderate cost range, Old Navy focuses on fun, value and fashion for young consumers and family. Apart from reasonably priced casual family apparel, Old Navy also offers shoes, maternity wear, various personal care items and accessories to the consumers. Banana Republic deals with highly sophisticated tailored and casual apparels, accessories, shoes and personal care products targeting the higher middle class and elite consumers of US (Arrigo 2013). The brand Athlete offers high quality athletic apparels for women and the cost range is little higher. Apart from these four brands that are available in the offline stores, Gap Inc also has a brand called Piperlime which is an online store which offers both casual and high end fashion footwear and handbag to men, women and children.

While this diversification strategy for market expansion of Gap was initially successful, in the middle of 20s, the company lost a good number of consumers (Galbreth and Ghosh 2013). Clients of the company got confused and eventually frustrated due to the complicated diversification of the company. This result in loss of consumers and the company is still struggling to gain back its consumer loyalty. 

Considering the fact that Gap Inc is facing a huge lot of competition, Zara is considered to be the chief competition of the Gap Inc.  In 2008, Inditex, the parent company of Zara has officially overtaken Gap Inc. and has become the world’s biggest fashion retailer.

The main reason behind Zara’s success is the multi-pronged approach of Inditex that creates a closed loop. The company is very fast to get fashion to stores. The strategy of the company of utilizing the shipping containers when sending back unsold merchandise for recycling purpose, has not only reduced the manufacture cost of the company but also has gained consumers attention as an eco friendly act. Besides that, Zara has expanded it business all over the world and has registered a commendable profit of 6.3 billion dollar. Zara has reported to be responsible for 66 percent of the overall growth of Inditex, the expansion of the company is touching a new high (Kapferer and Bastien 2012). Another reason for the rapid growth of Zara is considered to be its social media advertisements. According to survey, before the emergence of social media, I was not possible for consumers to follow the latest trends in the market. However, due to its 24*7 presence in social media, Zara is successfully attracting consumers with their highly updated fashion apparels and accessories. The credit goes to highly successful business model of Zara that keeps the consumers stick to the brand (Gamboa and Gonçalves 2014).

Zara's Success and Business Model

On the other hand, the story of Gap is completely different from that of Zara. Out of the five brands of Gap Inc., only Banana Republic has performed well in the market. Old Navy, the brand that sells apparel and accessories at a cheaper rate is still struggling to obtain consumer equity. 

Considering the fact that Gap Inc. is gradually losing its consumers in the international market, new market strategies including addition and removal of products is required to cope up with the current market situation. One of the chief reasons behind Gap’s decision to close 25 percent of its North American Stores is issues with its women’s wear. The women’s wear with knits and woven were manufactured during the winter (Jin et al. 2012). Majority of the consumer did not like the collection due to the poor fitting and unappealing esthetic. Negative feedbacks from the collection shook up the entire management team of Gap and the whole issue resulted in departure of Gap’s Creative director Rebecca Bay.

Another issue was the crop tops of the brand Banana Republic. Even the brand president Andi Owen accepted the fact that the company had made a too large bet on Crop tops. According to Owen, the crop top collection not only lacks color varation and has chiefly focused on black and white, but also is boxy and oversized. All this disasters has not only imposed negative impact on the profit market of Gap Inc but has also resulted in loss of a huge amount of customer loyalty.

Considering the fact that the company is still struggling to get back its equity, it is high time for Gap Inc to introduce new products in its collection to attract consumers. Since Zara is currently ruling the apparel market, Gap can look into their popular products collections like leather plaited shopper bag, Navy double-breasted blazer or casual apparels like embroidered boho jackets with pompoms, which are currently in rage (Kim and Ko 2012). Part from this, since consumers are highly getting inclined towards animal printed coats and jackets, Gap Inc can manufacture this product with a twist of their own innovative ideas.

Strengths

  • Dealership Teamwork of Gap is strong and hence the company can reach easily to Global consumers.
  • Being an experienced apparel industry, Gap has good Working knowledge. This helps the company to adapt the current trends easily.
  • Apart from apparels and accessories, the company also produces baby products. Considering the fact that baby products are always in demand irrespective of market fluctuations, this can be considered as strength of Gap Inc (Cortez et al. 2014).
  • Efficient marketing through television, online and print media is another strength of the brand.
  • The brand manufactures several times less iconic products and has a reputation of selling products that are long lasting and durable.

Weaknesses

  • Highly competitive market along with limited market share has resulted in loosing consumers and therefore decrement of overall profit of the company (Gap.com. 2018).
  • Excessive fragmentation of the brands has imposed negative impact on the company since the good number of consumers switched to other brands due to confusion and frustration.
  • High dependence of the company on external manufactures is another weakness of Gap Inc.
  • The company is failing to utilize social media and online marketing efficiently. As a result, it is failing to stay updated with current consumer’s choices and thus is loosing the market since past five years.

Opportunities

  • The company should work on increasing its social media efficiency and online marketing in order to understand the requirement of its consumers and to enhance its consumer loyalty.
  • Considering the fact that the company has still not expanded itself in global market, it should open stores globally keeping the market of Asia and China as its chief focus.
  • The company should merge with other fashion houses to boost sales.
  • To increase consumer loyalty the company can get its brands endorsed by popular celebrities.

Threats

  • Highly efficient global competitors like Zara and H&M offer more fashionable clothing in a much lesser value. This is one of the major threats for the company.
  • Another major threat for the company is that the management of Gap Inc is still struggling to turn around the business.
  • Increased labor costs, risky global sourcing and manufacturing along with rapids changes in the fashion industry are other factors that can be considered as threats for the company. 

Marketing mix of Gap Inc analyses and explain the market strategy of the company that is needed to expand its business in UAE with the help of 4 Ps namely, Product, Price, Place and Promotion (Armstrong et al. 2015).

Gap Inc's Struggles with Consumer Loyalty

Product

Being a well-known international apparel and accessories company, Gap Inc offers products like jeans, jackets and T-shirts for daily life usage and in accessories they provide handbags, shoes, jewelry, sunglasses and perfumes. In order to expand its business successfully in UAE market, Gap needs to introduce conservative and multiple layer clothes beside their original apparel collection (Khan, Rodrigues and Balasubramanian 2017). Gap can introduced popular women and men wear like Shayla that is a popular traditional scarf and disdisha in its collection to attract consumers in UAE. Short or body revealing dresses are strictly prohibited in UAE. Thus Gap should keep in mind that UAE will not provide a good market for short skirts or hot pants (Fernandes 2013).

Price

Considering the fact that Gap targets a vast range of consumers from middle class to elite financial condition, it will not be tough for the company to attract consumers in UAE. Initially the chief target of the company was elite consumers (Baker 2014). Since 2014, Gap understood that consumers are getting inclined towards affordable products and hence it changed it strategy of pricing its products. 

Place 

Being a popular company, Gap has a vast distribution network and a huge global presence. There are over 3700 stores of Gap across the world. In UAE, the major marketing of Gap is performed through online marketing. Offline stores of Gap are available in metro cities like Dubai.

Promotion

In UAE, the company uses several numbers of promotional techniques like offering e-gift cards or offline cards, which can be used in any stores within UAE. Other promotional techniques of Gap Inc include online and print media advertising. The company also organizes competitions and uses their own products as gifts (Okonkwo 2016).

One of the chief strategies that need to be implemented by the company is to efficiently use the social media as a online marketing platform. Gap needs to post more advertisements in Facebook and Instagram not only to attract consumers but also to understand the requirements of `consumers of UAE. Apart from this, the company can offer special discounts, e-gift cards and gifts to consumers. Another major strategy that can be implemented by the company is endorsement of itself by well-known celebrities and sponsoring popular fashion shows. 

Reference

Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education.

Arrigo, E., 2013. Corporate responsibility management in fast fashion companies: the Gap Inc. case. Journal of Fashion Marketing and Management: An International Journal, 17(2), pp.175-189.

Baker, M.J., 2014. Marketing strategy and management. Palgrave Macmillan.

Caniato, F., Caridi, M., Crippa, L. and Moretto, A., 2012. Environmental sustainability in fashion supply chains: An exploratory case based research. International journal of production economics, 135(2), pp.659-670.

Cortez, M.A., Tu, N.T., Van Anh, D., Ng, B.Z. and Vegafria, E., 2014. Fast fashion quadrangle: An analysis. Academy of Marketing Studies Journal, 18(1), p.1.

Fernandes, C., 2013. Analysis of counterfeit fashion purchase behaviour in UAE. Journal of Fashion Marketing and Management: An International Journal, 17(1), pp.85-97

Galbreth, M.R. and Ghosh, B., 2013. Competition and sustainability: The impact of consumer awareness. Decision Sciences, 44(1), pp.127-159.

Gamboa, A.M. and Gonçalves, H.M., 2014. Customer loyalty through social networks: Lessons from Zara on Facebook. Business Horizons, 57(6), pp.709-717.

Gap.com. (2018). Shop Women, Men, Maternity, Baby & Kids Clothes Online | Gap. [online] Available at: https://www.gap.com/ [Accessed 4 Jan. 2018].

Jin, B., Jung, H., Matthews, D.R. and Gupta, M., 2012. Fast fashion business model: what, why and how?. In Fashion supply chain management: Industry and business analysis(pp. 193-211). IGI Global.

Kapferer, J.N. and Bastien, V., 2012. The luxury strategy: break the rules of marketing to build luxury brands. Kogan page publishers.

Khan, Z.R., Rodrigues, G. and Balasubramanian, S., 2017. Ethical consumerism and apparel industry-towards a new factor model.

Kim, A.J. and Ko, E., 2012. Do social media marketing activities enhance customer equity? An empirical study of luxury fashion brand. Journal of Business Research, 65(10), pp.1480-1486.

Okonkwo, U., 2016. Luxury fashion branding: trends, tactics, techniques. Springer.. Luxury fashion branding: trends, tactics, techniques. Springer.

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