Gap Is in Need of a Niche

By MICHAEL BARBARO and HILLARY CHURA

In the fall of 2004, Gap put on a splashy ad campaign called, “How do you wear it?” with Lenny Kravtiz and Sarah Jessica Parker. It featured the pair dancing in customized Gap jeans — his with metal studs down the seam; hers with a waist-to-cuff velvet ribbon.

It was just the kind of envelope-pushing fashion Gap needed to compete with popular new designer-inspired denim brands like Diesel, Rock & Republic and Seven for All Mankind.

But there was a catch: the bedazzled jeans, which Gap called a “celebration of personal style,” could not be found at its stores.

Consumers had to buy a pair of basic, unembellished jeans at the store and customize them at a special training sessions held at some Gaps, or take a trip to Home Depot and Jo-Ann Fabrics and figure it out themselves.

The marketing tease is a small case study in what has ailed Gap, which ousted its chief executive, Paul S. Pressler, this week after years of dismal performance at its Gap and Old Navy divisions.

At a time when small, narrowly focused fashion brands — Coach, Juicy Couture, Tahari, Laundry — have become ascendant in American retailing, Gap has served up a steady diet of simple, unobjectionable casual clothing designed to appeal to everyone.

How do they wear it, as the ads asked? Increasingly, they just do not.

In an era of niches, when exclusion is as vital as inclusion, Gap has become an anachronism: a single chain, selling only its own brand, with one point of view, chasing shoppers from birth to death.

“If you stand for everything in fashion today, you stand for nothing,” said Paul R. Charron, the former chief executive of Liz Claiborne, who is credited with revitalizing the clothing company by purchasing fast-growing brands like Juicy Couture and Lucky Brand.

“Brands like the Gap, brands broadly available,” Mr. Charron said, “have a special challenge to be relevant in a period when focus and exclusivity are so important.”

Indeed, consumers are abandoning the chain in staggering numbers. Sales at stores open at least a year, a standard measure of a retailer’s health, have fallen or remained stagnant for 28 of the last 30 months.

And the declines have not been small. Sales fell 8 percent in December and November and 7 percent in October — the most crucial months of the year. The word “disappointing” became a common refrain in every monthly news release explaining Gap’s performance.

Gap operates three divisions: Gap, Old Navy and Banana Republic. All three have struggled, but only Banana Republic is on the rebound.

Niche brands, by contrast, have done so well that they have even reversed the fortunes of the American department store. In the last year, the performance of department stores like Nordstrom and Macy’s has quietly overtaken that of specialty clothing retailers like Gap.

The reason? “Consumers want brands, and we are all about brands,” said Stephen I. Sadove, chief executive of Saks Inc., whose sales have improved sharply in the last year on the strength of designer labels like Tahari and Theory.

“It’s very hard for the specialty clothing stores to keep themselves cutting-edge and fresh,” Mr. Sadove said. “There is a lot of sameness.”

Or walk into the handful of specialty clothing chains like Abercrombie & Fitch, American Apparel and Anthropologie, stores that, like Gap, design their own clothing but have managed to thrive by appealing to small slivers of the public.

Those stores’ environments leave no doubt who their shopper is supposed to be — vintage-loving, 30-something urban women (at Anthropologie); trend-obsessed, preppy teenagers (at Abercrombie & Fitch); and socially conscious hipsters in their 20s and 30s (at American Apparel.)

Abercrombie & Fitch is openly hostile to what it considers the wrong customer — typically anyone over 30 — warding them off with booming music, dark shades on the front windows and teenage employees standing out front.

Gap has veered to the other extreme, putting out a welcome mat to nearly everyone, with well-lighted, sparsely decorated stores and ageless fashions.

“The definition of a specialty store is focus,” said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting firm and investment bank.

Gap does not have that focus, Mr. Davidowitz said. And in trying to meet the needs of infants, teenagers, and even the elderly, its designers play it safe, season after season. “The merchandise is booooooring,” Mr. Davidowitz added. “Too basic.”

Patricia Longo, a 36-year-old makeup artist who lives in Manhattan, is the kind of style-obsessed shopper who has little use for Gap these days. She wears Ugg boots, a Betsey Johnson bag, a Pepe Jeans jacket and a cotton taupe Ella Moss dress.

“They don’t have the new fads,” she said of Gap. “When I look for something new and young and trendy, Gap is not coming to my head.”

And it is not that she buys only designer clothes. Ms. Longo covets designer knockoffs, which is why she shops at H&M, the Swedish retailer known for its fresh-from-the-runway fashions.

So what is Gap to do?

A Gap spokesman, Greg Rossiter, said the company was “totally committed to returning these brands to the leadership they enjoyed for so many years.”

For that to happen, retail analysts said, the chain could start by shrinking, to give its clothes the kind of cachet that Gap had decades ago, before it operated 1,295 stores (not to mention hundreds more Banana Republic and Old Navy stores, which bring the total to more than 3,000). Abercrombie & Fitch, for example, has 361 stores for its flagship brand.

Next, analysts said, it could experiment with brands, as several new specialty clothing stores have started to do. When Martin & Osa, a clothing store aimed at people in their 30s created by American Eagle Outfitters, opened in 2006, it carried its own store brand as well as bags from North Face, sunglasses from Ray-Ban and track jackets from Adidas.

Gap used to carry Levi’s jeans but stopped in 1991. Today, it stocks a single outside brand, Converse sneakers.

Finally, Gap could focus on a narrow group of consumers, and tailor clothing to meet their needs — a prospect that would probably require the chain to become much smaller. “They have to pick out a demographic and go after it with a maniacal focus, to the exclusion of anyone else,” said Bob Buchanan, an analyst at A. G. Edwards & Sons.

“If there is one thing you cannot be in the middle of the mall anymore, it is all things to all people,” he added. “And that is what Gap has been trying to do.”

Just browsing at the mall?

That's what you think

By Mindy Fetterman and Jayne O'Donnell, USA TODAY

As you step in the door of a retail store — whether it sells Gucci handbags, jeans for teens or hardware — you're being lured to shop and spend in ways so subtle you probably don't know what's happening to you.

Or your wallet.

Retailers know how you'll approach a store, where you'll hesitate, how to affect your mood, how to pique your desires, how to play to your aspirations. Everything in a store, from lighting to floor color to music to how goods are displayed, is meant in some way to get you to not just shop, but spend.

PHOTOS: Think you're just browsing?

"It's like a Broadway musical," says Deborah Mitchell, a marketing expert at the University of Wisconsin. "Nothing was put into that musical that wasn't thought through. It's the same in a highly orchestrated retail environment."

At a Sony Style store, for instance, the subtle fragrance of vanilla and mandarin orange — designed exclusively for Sony — wafts down on shoppers, relaxing them and helping them believe that this is a very nice place to be.

ADVICE: Understanding why you're shopping can help curb it

Everything in the store is designed to encourage touch, from the silk wallpaper to the smooth maple wood cabinets to the etched-glass countertops. Products are displayed like museum pieces and set up for you to touch and try.

Once you touch something, Sony figures, you'll buy it.

At a new Home Depot in the Atlanta suburb of Buckhead, the entranceway lures shoppers in with an open floor plan so they get a better "vista" of the store.

Floor-to-ceiling racks of goods, long the signature of the warehouse store, are further back. Lower displays of expensive goods — riding lawn mowers, upscale porch furniture and a home design center for redecorating kitchen, bath and flooring — are clustered so they're visible from the front door.

At a JCPenney, a "decompression area" at the front of the store lets shoppers get acclimated and calm down from the noise in the mall or on the street. Three dressed mannequins offer a taste of the season's hot trends and set up a line of sight to the shopping ahead.

At a Macy's department store, salespeople stand about 10 feet inside the entrance, ready to spritz visitors with perfume.

All are ways to engage you in the store and draw you in.

The sound
Music has been used by retailers for decades as a way to identify their stores and affect a shopper's mood, to make you feel happy, nostalgic or relaxed so you linger. Think of '50s cocktail bar music in a Pottery Barn.

But retailers are becoming more sophisticated in how they use music. JCPenney has just finished installing a new system for its stores that allows certain music to be played at certain times of the day. It can "zone" music by demographics, playing more Latin music in stores where there's a higher Hispanic population — all controlled by headquarters in Plano, Texas.

"Most people know they are being influenced subliminally when they shop," says Bernadette Schleis, whose company studies consumer behavior. "They just may not realize how much."

To help you understand what's happening when you go shopping, here's a guide: How Retailers Lure You to Shop and Buy.

The aroma
Anyone who's walked into a mall has been enticed by the smell of cinnamon buns or chocolate chip cookies. Now, retailers such as Sony and shirtmaker Thomas Pink are developing "signature scents" that you smell only in their stores.

"Scent is so closely aligned with your emotions, it's so primitive," says David Van Epps, president of ScentAir, a Charlotte company that develops exclusive scents for businesses, including Sony. His firm's revenue, number of employees and output have tripled in the past two years, he says.

"Imagine you're trying to create the same level of brand loyalty that Harley-Davidson has when a guy is willing to tattoo his arm with the words 'Harley-Davidson.' That's what we're going for."

Other retailers might not have signature scents, but they use fragrance. Bloomingdale's uses different essences in different departments: baby powder in the baby store; suntan lotion in the bathing suit area; lilacs in lingerie; cinnamon and pine scent during the holiday season.

"We even fragranced their outside (display) windows in New York last year," says Van Epps. "They did a Phantom of the Opera display, and we fragranced it with rose."

Thomas Pink pipes the smell of clean, pressed shirts into its stores. The essence of lavender wafts out of L'Occitane skin-care stores.

And if brightly colored window displays aren't enough to lure you into a Williams-Sonoma kitchen store, the scents from frequent cooking demonstrations may. "It feels like you are in someone else's house," says Michelle Bogan, a retail consultant for Kurt Salmon Associates.

Sony decided to create its own scent for its Sony Style stores as one way to make the consumer electronics it sells less intimidating, particularly to women. "From research, we found that scent is closest to the brain and will evoke the most emotion, even faster than the eye," says Dennis Syracuse, senior vice president of consumer retail sales. "Our scent helps us create an environment like no other."

How retailers use scent can be tricky, though, Mitchell says.

"Not everyone agrees what smells good."

The entrance
The scent may have lured you near, but what's in the entrance is the spring on the trap. That's where you'll see some of the glitziest, most expensive stuff in the store — the stuff you wish you could buy.

"The key businesses that draw women — the high-volume, high-profit goods — are right up front: handbags, cosmetics, jewelry and sometimes, intimate apparel," says Dan Butler, a National Retail Federation vice president.

The entrance is important because it hints at what's inside that you must have. "We're trying to give her ideas right as she's walking into the store," says Karen Meskey-Wilson, vice president of store design for JCPenney.

Stores that cater to teens often pick one hot item and heavily promote it in their windows to increase demand, says consultant Bogan. Gap is doing that this fall with denim. The new "skinny" jeans style may push people to update their wardrobes, she says.

"The idea is that there is so much excitement about great new jeans that you'll want to go out and buy some, even if you don't need jeans," she says.

Others use a less-is-more tactic. Abercrombie & Fitch lures teens into its Ruehl stores by not having merchandise visible from the mall. You have to go into the store, which looks like a Greenwich Village apartment inside, to see if you like anything. Once inside, the retailer hopes its soft lighting, couches and books will make you want to stay and buy.

In department stores, merchants battle to get the best spots up front for their goods; those that sell the most get the prime positions. Cosmetics, which never go on sale, are among the most profitable items sold in department stores, Butler says. Free makeovers lure clients in and create a "sense of connection and obligation," says consumer psychologist Kit Yarrow.

"A nationally known makeup artist can sell $30,000 in cosmetics in one day," says Butler of the NRF.

The flow
How you as a shopper move in and around a store is not, really, up to you.

You're funneled from the store's entrance past its most expensive goods through a maze of aisles and into departments that are set up as stores-within-a-store. Then you find yourself on "the racetrack," an oval aisle that carries you around the entire building to get a look at everything.

It's the same at a department store or a home renovation store or, on a different scale, in a specialty retailer

Mini-displays called "trend stations" are parked in the middle of aisles to stop shoppers' progress and entice them to look and buy.

Lifestyle vignettes, such as carefully constructed mini-bedrooms or mini-bathrooms, make shoppers stop and look. Home Depot is using such vignettes in its Buckhead store to showcase its expanded kitchen and bathroom goods, including new vessel sinks and architectural designs for cabinets. The displays may be adopted in other new and renovated stores.

"Customers are so much more sophisticated in décor and wanting to take a risk in their home. So we're getting more sophisticated in our presentation," says Kim McKesson, senior vice president of store merchandising. "Our bathrooms aren't just knock-down white cabinets anymore."

If you like the look, whatever the look is, you can have it right away. All goods in the displays are within arm's reach.

"It's incredible to watch people as they walk up, see the mannequins and pick up the whole outfit," says Meskey-Wilson of JCPenney. "We're seeing great sell-through."

Sony Style has mini-living rooms set up to showcase what its 40-inch flat-panel TV would look like over a fireplace. "We've had customers bring in their architect and say, 'Re-create this in my house. I want the whole setup,' " says Syracuse of Sony.

Narrow aisles crammed with goods are going away.

"Twenty years ago, the founders wanted you to get lost in the store," spokesman David Sandor says of Home Depot's founding partners, Bernard Marcus and Arthur Blank. That's why Home Depots were laid out with long narrow aisles and no cut-across in the middle of the store.

Now, Home Depot is widening its aisles and lowering displays so customers can touch and feel products. JCPenney is "really weeding out the stuff in our stores," says Mike Boylson, chief marketing officer. The retailer used to have eight to 10 rows of merchandise in each area. As it opens new stores or renovates existing ones, it's cutting that to four.

"You don't have to go through a sea of racks anymore," says Meskey-Wilson.

Most consumers come into a store and head to the right, says consultant Bogan. That's why retailers, including Williams Sonoma, put high-priced impulse items to the right of the front door, such as a $150 wine opener.

"The No. 1 thing retailers are trying to do is to get people to make impulse purchases," says Yarrow, also a business professor at San Francisco's Golden Gate University.

And you thought you had a list and were going to stick to it.

abercrombie casting call

I got this email today, and it cracked me up. Like they'd pick me, or anybody who'd look like me.

I think all of us who aren't the prototypical Abercrombie models (the non-white, non-tall, non-thin, non-androgynous) should inundate them with photos for their next photo shoot...just for the hell of it ;-)