After a few weeks of lauding the likes of Walmart and Best Buy, this week I am turning my attention towards the Gap. Albeit in a much different direction.
Last week at the Goldman Sachs Global Retailing Conference, Gap Inc. CEO Richard Dickson announced plans to introduce accessories and beauty products into Gap Inc.’s portfolio of stores, going so far as to call them “sleeper categories.”
“We believe that those are two very big opportunities for us to go after attracting new generations as well as high-margin businesses that will complement our apparel business,” Dickson said.
Accessories?
Fine. I’m good with that. Knock yourself out one Zac Posen-designed handbag at a time, Mr. Dickson.
I can get on board with accessories because accessories – e.g. handbags, scarfs, hats, socks, even underwear – are all something with which Gap, across its portfolio, has done well in the past and yet somewhere over the years lost its way. Will it right the ship? No, but accessories are great margin, are in Gap’s product development wheelhouse, and, if designed right, should help fuel performance.
Beauty, however?
I’m not buying it.
To explain why, I have to take you back to 1998 when I was in college and took this amazing history class with Professor Stephen Haber at Stanford University. I can’t remember the name of the class, but it had to do with assumption testing the strength of historical arguments.
Every week we would read a different account of an historic event and then all roughly 12 of us in the class would come together and debate the logic chain posited by the historian. If you know me at all, then you know that this class sounds exactly like something that would get my motor running.
Anyhow, two books that we read for the class continue to stand out in my memory to this day. The first was Hell in a Very Small Place: The Siege of Dien Bien Phu. Haber claimed this account was the tightest historical argument he had ever read (and coincidentally was also the inspiration for the first article I ever wrote for Omni Talk).
The second was a book about the railroad industry in 19th century Mexico. Porfirian Mexico to be exact.
The book was called Growth against Development: The Economic Impact of Railroads in Porfirian Mexico. It was written by John Henry Coatsworth. Coatsworth put forth the argument that Mexico experienced a form of “growth without development,” a rapid increase in economic activity that undermined the foundations for sustainable economic advancement, thereby creating the conditions for social upheaval and long-term economic dependency rather than genuine modernization. At least that’s what Google tells me because I don’t remember that much about the book and, according to that last paragraph, if you decide to stop reading from this point forward, at least you can all say you learned something today.
What I do remember is that Coatsworth was quite persuasive. His writing was beautiful, he articulated his arguments well, and his logic was conveyed in such a way that it was quite easy to follow. My classmates and I ate it up. That is until Professor Haber opened our eyes to why Coatsworth was wrong.
Haber, for lack of a better way to put it, tore Coatsworth a new one, dissecting every if/then argument within Coatsworth’s logic chain. I wish I could remember the specifics, but the class was almost 30 years ago, and, regardless, it was a marvel to watch in person and forever changed my approach to critical analysis.
So, what does this little anecdote about historian one-upsmanship over Mexican economic development from three decades ago have to do with the Gap?
A heck of a lot.
Dickson, in his announcement (and via an official company press release that followed), cited research from Euromonitor to back up his strategy that found beauty and personal care sales could surpass $100 billion this year and that the market is one of the fastest growing in the U.S.
“Gap Inc. sees a clear and meaningful opportunity to expand into this category with plans for a phased launch, starting with an initial test-and-learn expression at Old Navy later this fall. This will include 150 Old Navy stores featuring a curated assortment of beauty and personal care products, with select stores offering dedicated shop-in-shops and Beauty Associates. In 2026, the company plans to seed to scale its Old Navy beauty business, as well as launch brand-right expressions across the portfolio,” the press release stated.
The logic, on its surface at first, may seem strong. The beauty segment is growing. Beauty and fashion are kind of related, so, yeah, sure, why shouldn’t the Gap enter the beauty business?
Well, for one reason, just because Gap sells clothes and because people coordinate beauty products with said clothes, that does not mean Gap will be successful selling beauty products. In fact, it is probably a very long shot. Not impossible. Just not likely, but more on that later.
Think of the reverse of the argument.
For example, if fashion apparel was the booming market and the fastest growing consumer segment in the U.S., would it make sense for Ulta or Sephora to start creating their own lines of apparel and dedicating “shop-in-shop” space, buying new fixturing, increasing payroll spend, and developing new operational procedures around the idea, as Dickson is planning for Old Navy?
Seems like a stretch. Just because a market is growing doesn’t mean you have the right to succeed in it.
Moreover, Gap Inc. has gone down the product line extension route before. They have done beauty in the past, and, most recently, Banana Republic (admittedly via a project that was greenlit before Dickson’s tenure) also tried to reenter the home business after having failed via a similar attempt around the early part of this century, an attempt that I remember vividly because I was working there at the time.
The fundamental issue that arises or the question that one needs to ask with any attempt at a product-line extension is why do you want your customer to shop in your store? For Gap, the answer to this question is to buy clothes, pure and simple. People whose mission it is to purchase home furnishings or makeup will gladly venture to IKEA or Ulta before going to the Gap. If the opposite intention were true, Gap should dedicate space to every fast growing category in its stores, from trading cards to Nintendo Switches.
Come to think of it, you know what else has historically been aligned with fashion?
Cigarettes.
Thank the maker that cigarettes are in decline. Or else it wouldn’t take much for me to imagine Dickson, in a producer’s chair, bringing back the Marlboro Man and giving him a full length biopic.
With all that said though, charisma still matters, so caveat emptor.
Dickson is right out of central casting. He’s a salesman. He’s a showman. He stands as good of a chance as anyone of getting the media to buy into the hype and then putting together a fancy marketing campaign around the initiative that draws customers in.
None of which makes the bet any less risky or expensive. It is still a bet placed on a category in which Gap has no expertise and is crowded with more players than one can count, and a bet that, to be successful, requires reversing the reason people go to the Gap – that is, to buy clothing. Otherwise, the whole thing starts to feel very “department store-sy,” the space likely won’t earn its keep, and Old Navy would have been better off saving the capital and just putting beauty items within the impulse section near the cash wrap from the start. It all comes down to the difference between “why” and “while.”
As is often the case in business, however, what is true is far less important than what you can sell, at least in the short-term. But, in my experience, the sheen of charisma always wears off in the long-run, and that strategy you thought was solid gold soon turns into vermeil.
I, for one, am not buying into the hype cycle. It is the prudent position to take based on the logical testing of the assumptions at play.
Or said another way, if Gap’s beauty is in the eye of the beholder, I clearly am not that beholder.
Omni Talk® is the retail blog for retailers, written by retailers. Chris Walton and Anne Mezzenga founded Omni Talk® in 2017 and have quickly turned it into one of the fastest growing blogs in retail.