Gap closes the gap between e-commerce and stores

April 17, 2014 12:30 PM

Gap Inc.’s reserve online, pickup in store program will expand to all Gap stores by the end of summer, a Gap executive said in a call with investors this week. The apparel retailer, No. 19 in the Internet Retailer 2013 Top 500 Guide, also plans to test a program that enables consumers inside stores to order products online.

The ongoing blurring of the line between stores and e-commerce emerged as one of the main themes this week in Gap’s 2014 investor day presentations to Wall Street analysts. The anticipated moves for the coming year build upon the steps Gap has already taken to further bind its store-, web- and mobile-based retail initiatives, and to continue its e-commerce revenue growth—Gap’s online sales increased 21.5% year over year in fiscal 2013, which ended Feb. 1, 2014.

“We  are  leaders  in  bridging  our  physical  stores  with  our  innovative  digital  technology  to  make  our  customers’  shopping  experience  convenient,” Art Peck, the chain’s president of growth, innovation and digital, told analysts yesterday. He credits that success in part to Gap generally constructing its e-commerce technology in-house. According to data from, Gap handles internally such systems as content management, customer relationship management, fulfillment and order management rather than farming them out to vendors.

“Our  technology  is  our  own  and  it  gives  us  the  speed,  scalability  and  flexibility  to  design  customer  experiences  across  channels,” Peck said.

At the same time as it invests in digital technology, the retailer is cutting back on its store footprint. Gap Inc. managed 7.6% fewer square feet of retail space in the United States in 2013 than it did in 2010. But online sales and an increasing integration of the web in the stores, such as the “reserve online, pick up in store” program that it rolled out to 652 stores in November, helped the retailer generate 19.3% more in sales in 2013 than three years earlier.

The retailer plans to extend its reserve online program to all of its more than 1,600 Gap stores by the end of the second quarter. Gap’s first fiscal quarter will end in early May, meaning the second quarter will last until August.

So far, consumers have reserved some 500,000 items through the program, Peck said, and the program is “driving higher transactions” inside stores from those consumers, though he gave no figures for that. The retailer plans to highlight the program on its e-commerce sites, for instance by displaying a “reserve” button prominently on a product page.

Gap also wants to enable consumers to order items online while inside stores. For instance, when a particular store doesn’t carry the right size of a desired pair of jeans, Gap will deliver the item to that store or any address the customer wants. Besides building sales, the program will help ensure that consumers do not leave stores disappointed, creating more loyalty, he said. “Order in store, we think it’s going to be huge,” he said. Gap had previously said consumers would order from self-service kiosks or with the help of store employees.

Peck also told investors yesterday:

• Gap plans to bolster its personalized online-marketing efforts, generally by offering product recommendations to shoppers based on their web browsing and shopping histories. “We are in the very early stages of this,” he said. He acknowledged that online personalized marketing has to be “cool, not creepy. [But] cool comes from offering relevant experiences to consumers.”

• The chain will replace its - checkout systems inside stores with web-connected register technology that connects to its e-commerce back-end. That will enable transactions and digital shopping features to work inside stores the same way as on PCs or mobile devices, he said.

• E-mails sent to customers that promote new inventory earn higher click-through rates than do e-mails offering price promotions, though he did not detail those rates.

Another Gap executive spoke broadly about the retailer’s plans in China. Gap earned about $300 million in revenue from China in 2013, said Jeff Kirwan, the president of the chain’s China division. Gap has been selling online in China since November 2010 on, which is No. 275 in the 2014 China 500, with Internet Retailer-estimated online sales of $22.5 million in 2013. This year, the chain opened its first Old Navy store in China, in Shanghai, and the retailer plans to open four more Old Navy stores in China this year.  Simultaneous with the opening of the Old Navy store in Shanghai, Gap launched its Old Navy e-commerce site for China. The web will play a huge role for Gap in China, Kirwan said. “Online is strength in a country where the consumer is more engaged in digital and mobile than in any other market in the world,” he said. While he didn’t project online sales in China, Kirwan added, “We believe our Gap Inc. revenue in China can reach $1 billion in the next three years.”




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