Gap claims marketing “with conviction” is central to its reinvigoration efforts, after a reliance on tactical executions stopped the business focusing on effectiveness.
Speaking to analysts yesterday (16 November), Gap Inc CEO Richard Dickson admitted the company does “a lot of marketing that could be more effective”, describing the need for financial discipline to apply to marketing and media effectiveness.
Dickson, who joined the business in August from his previous role as chief operating officer of Mattel, promised consumers will see more “creative, consistent, bold narrative breakthrough marketing” from the business. He cautioned this does not necessarily mean ramping up spend.
“It’s about being more effective with what we spend. Over the years, I’d argue that our marketing execution has been very, very tactical. And in some cases, on some brands, we’ve lost relevance and a narrative edge,” he said.
“But when you look at our company history, we have legendary marketing. And I am very confident that we will again, it is a critical part of our reinvigoration work.”
It’s not about spending more, it’s about getting more value from what we spend.
Richard Dickson, Gap
Total net sales fell 7% to $3.8bn (£3.06bn) in the third quarter to 28 October, with store sales down 6% compared to the same period last year.
The company ended the quarter with 3,533 store locations across more than 40 countries. Gap pulled out of the UK high street in 2021, at which time it entered a joint venture with Next that sees the British retailer manage Gap’s UK website and some store concessions.
Globally online sales fell 8% compared to 2022 levels, representing 38% of total net sales. Despite failing to stem the sales decline, the company has been praised by analysts for exceeding expectations.
Reflecting on the figures, Dickson singled out media and marketing as an example of where Gap can do better.
“Media and marketing is [one] area where we can up our game, leveraging the scale of our media spend to derive greater efficiency and effectiveness overall,” he said. “And let me be clear, it’s not about spending more, it’s about getting more value from what we spend.”
Gap blames product mix ‘imbalances’ as it swings to loss
On a brand specific level, Gap’s sales were down 15% over the period to $887m (£715m). However, taking into account the sale of Gap China in January and the shutdown of Yeezy Gap – the firm’s collaboration with rapper and designer Kanye West – net sales fell around 6% on 2022 levels.
Among the wider portfolio, Old Navy chalked up third quarter sales of $2.13bn (£1.7bn), down 1% on last year. The repositioning work continues at Banana Republic, which delivered an 11% drop in sales to $460m (£371m).
The company is looking to re-engage customers of its Athleta sportswear label with “brand right marketing” after sales fell 18% to $279m (£225m).
Tapping into brand heritage, Dickson claimed the business needs to strengthen its portfolio with “crisp identities and purpose,” combined with a “clear and compelling pricing strategy”.
“We have to communicate through innovative marketing to regain a powerful ongoing voice in the cultural conversation and we need to do this while consistently executing with excellence at every touch point and interaction,” he added.
The business sees an opportunity for Gap to invest in storytelling, leveraging what Dickson claims is 90% brand awareness among US consumers alone.
The intention is to rely on “big ideas and culturally relevant messaging”, with the CEO pointing to the release of Gap’s festive campaign in October as an example of a new creative consistency.
“If you go online today and if you’ve been tracking our brand, you will see a much more definitive, creatively consistent marketing story in our online experience,” Dickson added. “So, our storytelling is going to be much more prominent. And we are going to start to really infuse Gap in the cultural conversation.”
This storytelling is also a priority for Old Navy, where the focus going forward is on “reasserting” the brand. The CEO pointed to the success of a dedicated women’s marketing campaign, combined with online activity focused on “compelling creative and value messaging”.
At Banana Republic efforts to enhance marketing effectiveness are being combined with a wider repositioning strategy. Work is underway to transition Banana Republic into a “quiet luxury” brand free from a reliance on promotions.
The picture was less rosy at Athleta, where the CEO admitted a series of “marketing misfires” had resulted in the brand going off track.
A focus on “cleaning up the brand” does, however, appear to be bearing fruit, with Dickson citing positive NPS scores and sales growth across key products marketed with the new brand voice. While a new “digital dialogue”, store experience and product mix are live, the Gap CEO admitted the “full brand reset” would take time.