GAP boosts customer loyalty, as offer hits sales

Fashion brand Gap is the latest apparel company to see supply issues affect sales. Its third-quarter net sales fell 10% from 2019 figures, with permanent store closings contributing to the decline.

Similar figures were reported by rival clothing brand, Banana Republic, which saw its net sales drop 18% from the 2019 figure, with store closings causing an estimated 10% drop in sales.

Gap – which includes clothing brands Old Navy and Athleta – has slashed its financial outlook for the full year in line with the supply chain challenges it continues to face.

Headwinds in the supply chain affected sales

Company CEO Sonia Syngal said that although Gap entered the third quarter with increasing momentum, “the sharp headwinds in the supply chain have affected our ability to fully meet strong customer demand. “.

She added that she had succeeded in limiting the damaging effects of supply issues by investing in air freight to meet customer demand and prevent the erosion of brand loyalty.

Its shift to customer retention in this way is precisely the kind of strategy McKinsey management consultants recommended just this week, in its 2021 U.S. Holiday Shopping Report.

McKinsey said supply issues have a profound effect on brand loyalty and customer behavior, with product availability now the most important buying factor.

Availability now promotes customer loyalty

“Consumers won’t hesitate to shop elsewhere if they can’t find the products they’re looking for, which is why satisfaction is key,” says McKinsey. He also advised retailers to address supply chain issues “with short-term fixes and long-term planning,” just as Gap has done.

Fashion retailers across the board are experiencing similar problems.

Speaking to Vogue Business, Nikki Baird – vice president of retail innovation at retail technology company Aptos – said: “Everyone’s telling the same story: ‘We can’t get products “.”

In the United States, booming consumer demand has put pressure on port and warehouse capacity, while labor shortages have resulted in fewer drivers on the road and less product being delivered in timely.

According to a recent National Retail Federation Report, journeys that previously took 25 days take up to 60 days. And 70 percent of those surveyed said they had to add two to three weeks to their supply chain schedules.

Retailers facing record freight costs

Sea freight prices also hit record highs, reports show Flexport, a United States-based freight forwarding and customs brokerage company. Flexport reports that in July 2019, shipping a 40-foot container from Asia to the west coast of the United States cost between $ 1,600 and $ 2,100, but is now between $ 21,000 and $ 23,000.

“The margin of increase over the past 18 months is pretty much unknown,” Jefferies equity analyst Kathryn Parker told Vogue Business, adding that higher shipping costs have prompted retailers to delay orders. and reduce inventories, in the hope that prices will normalize.

But Jefferies was speaking in September, and now we are at the end of November. With Christmas quickly closing in the rearview mirror, it looks like companies like Gap are taking the exact opposite approach, paying lip service to stockpiling, to protect the most fragile of things: brand loyalty.

Joseph P. Harris