The goods on the Gap

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Walk past the gap store in your neighborhood. It doesn't look much different now than a year ago, but the store's sales are down about 25%. The store still has a sleek design. The ads are hip. It's the goods that don't measure up. Gap is a slick marketer (and our 1997 Marketer of the Year) that's forgotten one crucial ingredient of being a merchant: the merchandise.

For 19 months, Gap Inc.-Gap, Banana Republic, Old Navy-has seen declines in comparable sales (that is, sales at stores open at least a year). Gap Inc.'s comp sales plummeted 25% in November vs. a year ago. The Gap division's comparable numbers are down by a mid-20s percentage; Old Navy's same-store sales have fallen by a third.

Gap doesn't look like your standard failing retailer. Stores are stylish; advertising is clean, confident and consistent. A Gap ad looks like a Gap ad; the retailer is fortunate to have a signature look. To be sure, Gap has marketing matters to resolve. The retailer needs to better differentiate its chains. It would do well to close under-performing stores to get its square footage in line with the market. It may need to put more emphasis on clothes and less on celebrity in Gap ads.

Yet the problem is not in the marketing. The problem is in the store. Formerly loyal customers roundly criticize Gap's out-there fashions and color palette. The perception is that quality has slipped. Many customers have figured out they can get better apparel deals at Target (our 2000 Marketer of the Year), whose product matches what its clever ads promise.

Gap must fix its merchandising problem, and deliver design, value and quality, to win back customers. A record of reinvention-re-staging the original Gap jeans stores, rethinking the old safari-look Banana Republic-suggests the retailer has the ability to plug its product gap. So we're not writing off Gap just yet. But now is the time for this marketer to be a merchant.

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