Should Gap sell on Amazon?

Discussion
Source: gap.com
May 31, 2016

In answer to a shareholder’s question at its annual meeting, Art Peck, Gap Inc.’s CEO, said the retailer would be open to selling its merchandise on Amazon or other third party sites in the U.S.

“To not be considering Amazon and others would be in my view delusional,” Mr. Peck said. “

While asserting that no discussions were in place, he further elaborated two days later on the company’s first-quarter conference call, “Amazon’s presence in e-commerce is undeniable in this country, and therefore, to not fully consider all the options of distribution for us would be to not be thinking about things that were important to us.”

The discussion comes as Amazon has persuaded Calvin Klein, Levi Strauss, and some other department store mainstays to sell on its online marketplace as part of its fashion push.

Ugg, the fashion boot brand, admitted last week it is in “early days of discussion” with Amazon, partly because nearly half of all searches online start on Amazon.com. Dave Powers, president of Deckers Brands, told analysts last week, “As we look at the realities in the marketplace and how things are shifting and where the consumers are shopping, I believe it’s in our best interest to partner closely with them and control our destiny.”

While seeing benefits in gaining access to Amazon’s massive consumer reach, many potential sellers remain wary about how the online giant could exploit customer data. Retailers would also lose total control of the shopper experience.

The Wall Street Journal noted that as early as 2014, Abercrombie & Fitch was one of 10 popular retailers in discussions to list products on Amazon’s online marketplace. Any searches would have directed browsers to the retailer’s site and not Amazon.com.

On its first-quarter conference call, Abercrombie & Fitch’s executive chairman Arthur Martinez wouldn’t rule out selling on Amazon. He said, “As our brands come back to their status and health, we will be looking for additional channels to take our products. I would never say never to anything.”

DISCUSSION QUESTIONS: Should national apparel chains sell on Amazon.com given Amazon’s online dominance? How would you assess the potential benefits and risks?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Gap, instead of waving the white flag, show us some updated merchandise."
"It’s as if Gap is distributed in X percent ACV and now will be in 1.5 x X percent ACV."
"Having a global brand like Gap under Amazon's wing would be MUCH more beneficial to them than to Gap. Don’t do it, Art."

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17 Comments on "Should Gap sell on Amazon?"


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Max Goldberg
Guest

For national apparel chains, selling on Amazon is a double-edged sword, which is why they are not all flocking to the site. On one hand that’s where the shoppers are, on the other they would need to give up valuable shopper data and share revenue. Selling on Amazon would not necessarily be a panacea for Gap and others. Brands first must have clothing that consumers want. For Gap, in addition to needing a more desirable line of products, it needs a fully-integrated omnichannel approach.

Cathy Hotka
BrainTrust

Gap executives, put the computer down and back away from the keyboard!

If you think selling your clothes on Amazon is a smart idea, you should also try selling them at Forever 21, in Macy’s and at J.C. Penney. You’d have more control of the product and the presentation at those brick-and-mortar stores than you will online. This whole thing sounds like a stunt by Amazon to bring more apparel shoppers to its site.

Gap, instead of waving the white flag, show us some updated merchandise.

Shep Hyken
BrainTrust

In the most simplistic way of thinking, Amazon is a mall — it just happens to be online. Why wouldn’t a store take advantage another sales channel? The Ugg comment sums it up perfect: “As we look at the realities in the marketplace and how things are shifting and where the consumers are shopping, I believe it’s in our best interest to partner closely with them and control our destiny.”

Paula Rosenblum
BrainTrust

What a perfect idea! Show your products at Amazon and then see Amazon write right beneath those skinny jeans, “People who looked at these jeans also looked at … ” and then show Amazon’s private label at half the price.

Ugg is not the same as Gap. Uggs already can be bought through other retailers. Gap is Gap.

There are minimal potential benefits and numerous potential risks. Delusional indeed.

Lee Kent
Guest

Let’s not be too quick to drink the Kool-Aid. If more and more brands see Amazon as another channel then let’s do some negotiating with how and what control/access Amazon has over the data.

In the mean time, if the brand isn’t selling in it’s own channels what makes it any more appealing on Amazon? Seems like it’s time to roll up our merchants’ sleeves.

But that’s just my 2 cents.

Anne Howe
Guest

Selling on Amazon makes sense for brands with very distinctive products. Ugg is a perfect example, since the product and the fit is well known and the shopping experience is fairly standard. If Gap had a specific signature style collection that was distinctive, that same strategy could work. But because they’ve eroded the merchandise strategy and the clothes are all over the spectrum of quality and fit, it doesn’t make sense and could perhaps further damage the brand. Cathy H. said it best: show us some better merchandise!

Nikki Baird
BrainTrust
Nikki Baird
VP of Strategy, Aptos
6 years 2 months ago

I’m a little torn on this one. Gap is its own brand. If you’re into Gap, then anything not Gap isn’t going to cut it. If Amazon sells a ton of Gap merchandise, Gap doesn’t lose — they win. You can’t get Gap anywhere but from Gap. But the percent of people who feel that much loyalty about Gap in particular seems way smaller than in the past. Gap khakis? Meh. Not the must-haves they used to be.

So I think it’s a totally viable strategy as a brand to sell on Amazon — in that sense, Amazon is no worse of a monster than Macy’s, so why the heck not? But if your brand doesn’t have the strength in its own right to stand up against knock-offs and close-enoughs, then yeah, an Amazon strategy seems more suicidal than smart. And Gap these days seems about as meh as the khakis they sell.

Ken Cassar
Guest
Ken Cassar
Principal, Cassarco Strategy & Analytic Consultants
6 years 2 months ago

Slice found that Amazon (including first- and third-party sales) accounted for the majority of online holiday sales growth in 2015. Online is growing far faster than brick-and-mortar. And shopping malls, in particular, are suffering. Gap really has no choice but to find a way to sell through Amazon’s marketplace. Yes Amazon is a threat, as it tries to cultivate its own private label apparel brands, and you have to assume that it will try to knock off popular Gap styles. But as long as Gap is able to understand and shape consumer fashion styles more effectively than Amazon it will be a net win for them. If Gap cannot do that, it’s got far bigger problems than channel conflict.

Rick Moss
Staff

Ken — just wanted to say welcome to the BrainTrust! We’re fortunate to have you on board. Thanks for joining.

Joel Rubinson
BrainTrust

Yes, Da, Ja, Oui! Amazon is a marketplace and its branding does not conflict with the brands it makes available. It’s as if Gap is distributed in X percent ACV and now will be in 1.5 x X percent ACV.

Lee Peterson
BrainTrust

How quickly we forget. Barnes & Noble sold on Amazon for a while, didn’t they? So, open your books to the competition when you’re weak and see what happens; they eventually do it themselves. Amazon’s signal that they’d develop their own fashion merchandise should be a clue for Gap, i.e., forget it.

Amazon’s goal has always been about world domination, not profit, and having a global brand like Gap under their wing would be MUCH more beneficial to them than to Gap. Don’t do it, Art.

Brian Kelly
Guest
6 years 2 months ago

No, specialty retailers shouldn’t sell on Amazon. I agree with Ann (physician, heal thyself) and Paula (no brand protection). Seems a quick call to Target might enlighten folks as to the risks of releasing your brand to Amazon.

Brand Gap is lost — it is hopelessly out of date. Corporation Gap needs to edit its portfolio and fix Old Navy and Banana Republic. I am more surprised by the failure of Old Navy at this time of austerity.

As we like to say, “retail ain’t for sissies.”

Roger Saunders
Guest

Peck is taking the right approach to begin to explore this avenue. While many may point to Amazon as the threat, best to borrow from Don Corleone — keep your friends close and your enemies even closer.

It has been clear for the past three years that Amazon has opened up to pursue apparel/clothing. Type in “denim” or “blue jeans” — yes, I know that The Gap sells more than just these lines — and you find Levi’s, Wrangler, Lee, Dickies, Calvin Klein, and numerous other players.

The stakes are too high NOT to have select offerings on the Amazon site.

Ken Morris
BrainTrust
Ken Morris
Managing Partner Cambridge Retail Advisors
6 years 2 months ago
I think Amazon needs to be viewed as simply another distribution point, much like traditional wholesale is viewed today. In the past the wholesale ending distribution point was a brick and mortar retail store location, but in today’s economy that distribution point is to an online property or entity like Alibaba or Amazon. Online marketplaces, like Amazon, are “just another door or store” for retailers to sell their products. As many shoppers think of Amazon as being synonymous with online shopping. Similar to how “Googling” has become a verb for online search, “Amazoning” is a likely to become the generic term for online shopping. As consumers flock to Amazon for their shopping destination, unless you are a destination retailer, you will need to offer your products on Amazon or you will miss out on many sales opportunities. As demographics and shopping habits morph, retailers need to shift to new market requirements without the long term commitment. Retailers need to avoid long term commitments to these online behemoths and stay nimble to be able to match… Read more »
Carlos Arambula
BrainTrust

National apparel chains need to create effective and efficient online commerce sites that extend their brick & mortar brands to the consumer’s laptops and smart phones. Apparel brands like Ugg are in a different space and in their case Amazon is simply another distribution point.

Amazon is not going to solve any problems GAP or A&F have. Apparel chains need to focus on their brand, proprietary distribution systems, and promotion.

While Amazon might bring new eyes to the apparel chains brands, it also brings the potential consumer the ability to compare branded products to other non-apparel chain brands. The moment they become part of Amazon’s product offering the brand will begin to devaluate.

Brian Numainville
BrainTrust

One really must assess the risk versus reward here. On one hand, Amazon offers the opportunity for another channel of sales and exposure for the Gap brand. On the other, this opens up the possibility of comparison against other brands, Amazon’s private brand, and then there is the data that Amazon gets out of it. Seems like stronger merchandising for Gap would be the first order of business before anything else is considered. But to simply rule out Amazon … that’s just not realistic in today’s world.

Adrien Nussenbaum
Guest
Adrien Nussenbaum
U.S. CEO and co-founder, Mirakl
6 years 2 months ago

Although in the short term Gap could increase sales via Amazon, it would be a strategic mistake: Amazon would use the sales data to improve their own apparel inventory and undercut Gap, while Gap would dilute its brand and lose its direct relationship with the customer. Gap should consider adding a Marketplace to its website, and sell products from brands aligned with its target: it would turn gap.com into a destination website, increase revenue, and optimize inventory and traffic in-stores. What’s more, Gap.com already links to Banana Republic and Athleta, its sister brands. Gap could invite smaller, complementary brands to sell on its Marketplace, and turn its website into a destination for all things casual wear.

I suppose Gap considers Amazon as just another shopping mall it should open a store in. The problem is, this mall also sells its own apparel, and owns your customer data.

wpDiscuz
Braintrust
"Gap, instead of waving the white flag, show us some updated merchandise."
"It’s as if Gap is distributed in X percent ACV and now will be in 1.5 x X percent ACV."
"Having a global brand like Gap under Amazon's wing would be MUCH more beneficial to them than to Gap. Don’t do it, Art."

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