Competition
Gap's three major brands target different customers with very differing merchandise mixes. As such, each brand competes with a different set of other retailers:
Gap's middle-of-the-road approach to providing basic pieces of apparel (T-shirts, khakis, blouses, jeans, etc.) at mid-range prices puts it in competition with stores such as American Eagle Outfitters (AEO) and Aeropostale (ARO):
- American Eagle Outfitters sells moderately-priced apparel for men and women between the ages of 15 and 40. As of the end of FY 2008, the company has 1,098 stores in the United States and Canada, much less than the Gap. Its revenue is also much smaller than The Gap's: American Eagle made $3 in sales in 2008[1] compared to the Gap's $14.5 billion. In addition, American Eagle is entering the Middle Eastern market through a deal with M.H. Alshaya, a move that the Gap inc. has yet to make. The retailers have similar product lines (apparel, underwear, some footwear) with a few notable exceptions. The Gap has a kids line and acquired the athletic line Athleta in 2008. In addition, American Eagle does not do designer collaborations and its three brands (American Eagle, MARTIN + OSA and aerie) do not span three different price points like the Gap's brands.
- Aeropostale sells budget-conscious clothing to boys and girls between the ages of 7 and 15. The company has a total of 903 stores and in FY 08 made $1.9 billion in sales.[2] Since its focus is on affordable clothes, Aeropostale does not have a "near-luxury" brand like the Gap. The brand's price point has made it especially attractive in 2008 and 2009 due to the recession in the American economy. Although its sales are still dwarfed by those of the Gap, Aeropostale is one of few retailers whose revenue and same store sales actually increased from 2007 to 2008 ($1.6 billion and 3% to $1.9 billion and 8%, respectively).[2] Although the mainline brand serves teenagers ages 12 to 15, the brand has started a new retail concept "P.S. from Aeropostale" that is geared towards the 7-12 demograhpic. The P.S. line competes with the Gap's kids line.
Old Navy targets middle-class families who seek basic apparel and accessories at low prices and consequently competes with value-based department stores like Kohl's (KSS) and discounters such as Wal-Mart Stores (WMT). Old Navy has seen decreasing same store sales growth from 2006 to 2008, largely due to merchandising issues. Management believes that in time the brand will recover after refocusing the merchandising.
- Kohl's is a discount department store that operates in the United States. It's 2008 sales were $16 billion[4], higher than Gap's $14.5 billion. The company also operates 1,004 stores[5], close to Old Navy's 1,067.[6] Although both retailers sell apparel and footwear for both men and women, Kohl's also sells home goods. In addition, Kohl's participates in the industry trend of designer collaborations--it has a clothing line designed by high-end designer Vera Wang. Although The Gap has followed the same trend, Old Navy does not. Both stores saw a decrease in comparable store sales in 2007 and 2008, however in both years Kohl's decrease was much lower than that of Old Navy.
- Wal-Mart is a discount department store that sells clothing, electronics and housewares. The company had 2008 sales of $400 billion and has a total of 3,656 locations in the United States.[7] Wal-Mart's total sales and comparable store sales increased in 2007 and 2008. The company's size dwarfs that of the Old Navy brand and Gap, Inc. In addition, although Wal-Mart's clothing does not have the same brand recognition as Old Navy or The Gap, clothing forms only a part of its business. Wal-Mart also sells food, electronics and home goods.
Same Store Sales Growth %
| Retailer
| 2007
| 2008
|
| Old Navy
| (7%)
| (17%)
|
| Kohl's[4]
| (0.8%)
| (6.9%)
|
| Wal-Mart[7]
| 1.6%
| 3.5%
|
- Polo Ralph Lauren is an international clothing, accessories and footwear retailer. It possesses a number of different brands that span all income levels, from low-priced (Chaps) to luxury (Ralph Lauren Collection). The company's 2008 sales were $4.8 billion
[8] whereas the Gap, Inc. made $14.5 billion. The company does not do designer collaborations like The Gap; however Ralph Lauren Collection does a runway show twice a year (spring/summer and fall/winter), which heightens its luxury image. In addition, the company's brands cater to a wide range of incomes. Although Banana Republic is The Gap's near-luxury branch, its price point is still lower than that of the highest Ralph Lauren brands. Polo Ralph Lauren's exposure to multiple geographical regions and income levels lowers its exposure to factors such as recessions or spending decreases that can affect some segments more than others.
- J. Crew is based only in the United States and sells a wardrobe of conservative apparel like Banana Republic. The company's same-store sales were higher than Banana Republic's in 2006 and 2007 and in 2008 it decreased only 4%[9] compared to a 10% decrease for Banana Republic. Since 2007 J. Crew has attempted to give itself a more luxurious image though collaborations with high-end brands such as Globetrotter luggage and Barbour outerwear. This has resulted in the introduction of higher-priced items in their collections that outstrip their usual price point. Banana Republic has made the same move through the introduction of its Monogram Collection, a higher-quality, higher-priced line in order to increase the brand's luxury cache.
Same Store Sales Growth %
| Retailer
| 2006
| 2007
| 2008
|
| Banana Republic
| 0.0%
| 1%
| (10%)
|
| Ralph Lauren[8]
| 6.4%
| 7.9%
| (5.2%)
|
| J. Crew[9]
| 13.0%
| 5.6%
| (4.0%)
|
Note: A figure in parenthesis corresponds to negative growth, i.e. in 2007 Abercrombie & Fitch had a 1% decrease in same store sales.
Intro and Overview | Trends and Forces | Competition
References
- ↑ 1.0 1.1
AEO 2008 Annual Report
pg. 17
- ↑ 2.0 2.1 2.2
ARO 2008 Annual Report
pg. 17
- ↑
GPS 2008 Annual Report
pg. 20
- ↑ 4.0 4.1
KSS 2008 Annual Report
pg. 18
- ↑
KSS 2008 Annual Report
pg. 10
- ↑
GPS 2008 Annual Report
pg. 21
- ↑ 7.0 7.1
WMT 2008 Annual Report
pg. EX-13
- ↑ 8.0 8.1
RL 2008 Annual Report
pg. F-56
- ↑ 9.0 9.1
JCG 2008 Annual Report
pg. 29
