Two years into his tenure at Gap Inc., chief executive Richard Dickson is still finding ways to shake things up.
The American retailer, which also owns Old Navy, Banana Republic and Athleta, announced this week it would make a major push into beauty and accessories.
Dickson tapped two industry legends to steer those efforts. Reed Krakoff, who as creative director of Coach in the 1990s and 2000s was instrumental in that brand’s heyday, will help develop handbags, jewellery and leather goods across Gap’s brands. On the beauty side, Gap has recruited John Demsey, who ran a huge portfolio of brands, including MAC Cosmetics, at The Estée Lauder Companies, for three decades. Both will operate as consultants, with Nordstrom veteran Deb Redmond and former Kate Spade chief merchandising officer Michele Parsons overseeing the rollout of beauty and accessories, respectively. As general managers, Redmond and Parsons will report to Eric Chan, Gap Inc.’s chief business and strategy officer.
It’s certainly an impressive roster that Gap has assembled. But the task at hand will be difficult. Gap is undertaking these new projects when it’s just begun to rehabilitate its image.
To be sure, Dickson and Zac Posen, Gap Inc.’s creative director, have made strides in reinserting Gap into the cultural conversation in the last year, with viral ads like its recent campaign with Katseye and major red carpet moments. Most recently, 15-year-old Owen Cooper wore a custom Gap Studio suit designed by Posen when he became the youngest male actor to win an Emmy.
Translating these cultural moments into sales has been slow going. In the second quarter, net sales of $3.73 billion were virtually unchanged from a year earlier, and a bit below analysts’ consensus forecast. The company’s stock trades at more than double its pre-Dickson price, but has barely budged in the last year. That indicates investors have faith in his project, but are still waiting for him to deliver.
The risk in introducing new categories — especially ones as competitive as beauty, handbags and jewellery — is that they could prove distracting both internally and to customers, especially shoppers who are new to the brand or hadn’t shopped it in years.
Other apparel retailers like Zara, H&M and Forever 21 have entered beauty with lacklustre results. Zara has had success with its fragrances by duping popular scents, but Gap is unlikely to try that strategy. It could instead tap into nostalgia for its ‘90s-era scents, including Dream and Grass.
Beyond fragrance, Gap will need to convince customers that they should buy their perfumes from the same retailer selling them t-shirts and jeans. That will require heavy investments in marketing and product development. A lifestyle play — soap, candles and the like — could also work.
Old Navy, which will introduce branded products and a third-party assortment has a different opportunity as a value player, and will likely compete with Ulta Beauty, Target and Walmart for the mass-market customers. That’s not as far-fetched as it might initially sound: there are over 1,200 Old Navy stores, not far from Ulta’s 1,450 locations. Customers have also been eager to find a destination that fills the void that CVS and Walgreens have left behind in beauty.
Still, beauty remains a tough environment for new entrants. Sephora and Ulta Beauty are perfecting their globalised approach. Newness continues to drive the industry, which could work in Gap Inc.’s favour, but will mean a constant grind to find new brands and products to encourage repeat purchases.
Handbags feel like safer territory. Gap can bank on the success of its recent handbag line at Old Navy, which garnered glowing coverage and, presumably through Posen’s Hollywood connections, was seen on the shoulders of various actresses including Jenna Ortega on her “Wednesday” press tour.
Handbags and accessories are logically and emotionally closer to apparel than beauty. Gap already carries an assortment of shoes, bags, hats, belts, socks and other small accessories. Its jelly flip-flops and flats went viral for being dupes to The Row earlier this summer. Whereas Old Navy has an opportunity in the affordable trend-driven space — alongside Target, Amazon and Shein — Gap can expand into potentially higher-end or statement pieces as a natural extension of Gap Studio, the elevated line designed by Posen that launched in April.
Ultimately, the goal may not even be to turn Gap or Old Navy into a major beauty or handbag powerhouse, but to position the brands as cross-category lifestyle destinations. Success on that front isn’t measured in blockbuster sales; it’s about creating a perception of Gap as a place to shop for more than just a T-shirt and a pair of chinos.