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Shoppers will soon be able to reserve online for pickup in all Gap stores, and to order web inventory from bricks-and-mortar locations. The added responsibility from digital initiatives is one reason Gap is raising its minimum wage to $10, says CEO Glenn Murphy.
There was a lot of growth online for Gap Inc. in its just-concluded fiscal year, but not much in its more than 3,500 apparel stores. Maintaining most consumers still want to buy clothing in stores, CEO Glenn Murphy promised today new digital initiatives in the coming year to personalize Gap's e-commerce sites and use them to drive consumers into stores.
The retailer reported today a 21.5% increase in online sales in fiscal 2013, which ended Feb. 1, 2014, while total sales increased 3.2%. Of the $497 million in overall sales growth for the year, roughly $400 million, or more than 80%, came from the web. The retailer notes that there were 52 weeks in fiscal 2013 versus 53 in fiscal 2012, which makes the recent-year growth appear lower than it was.
The disparity between stores and the web was even more obvious in the fourth quarter. In the 13-week fourth quarter of fiscal 2013, Gap’s online sales grew 15.9% to $698 million from $602 million in the 14-week quarter a year ago. However, total sales fell in Q4 2013 3.2% to $4.575 billion from $4.725 billion. Taking out online sales, store sales decreased 6.0% in Q4.
Gap is No. 19 in the Internet Retailer 2013 Top 500 Guide.
Murphy emphasized the importance of tying stores and the web together, and said Gap made big progress on that in 2013. "It takes a long time for a company like ours to make that mindset shift, but in 2013 we did it," Murphy told analysts on a call today.
Among the new web-related initiatives planned for this year are:
- The option to reserve online for pickup in store will expand to all stores, from half at the end of the fourth quarter; the company also plans to market this offer aggressively this year, Murphy says. "We have to make sure all customers, especially Millennials, are aware of this service we have that no one else has," he said.
- Gap will test enabling consumers to order in store, either from self-service kiosks or with the help of store employees.
- The company will move to responsive design of its web site so that web pages adapt to the size of the screen the consumer is using. That will make it one of the biggest retailers to move to this emerging technology for better serving consumers on smartphones and tablets.
- Gap's e-commerce sites will be more personalized, for example with the home page changing based on whether the visitor is new or returning, a frequent shopper or one who visits occasionally, Murphy says. He said the company started working on this personalization plan three months ago and that significant results will show up in the second half of 2014.
Murphy also noted that Gap's well-publicized plan to increase the minimum wage of its employees to $10 an hour by June 2015 is driven in part by the added responsibilities store associates will have to accommodate consumers reserving online or ordering in store for home delivery.
In addition, Murphy noted that as Gap opens its first store in mainland China for its Old Navy brand March 1, it will also launch an Old Navy e-commerce site the same day. Gap has been selling online in China since November 2010 on Gap.cn, which is No. 275 in the newly published 2014 China 500, with Internet Retailer-estimated online sales of $22.5 million in 2013.
Murphy said more than half of Gap shopping trips start online, whether on a PC, smartphone or tablet. "The question is: How do you get that customer into the physical store? Reserve in store is one of the tools to make that happen," he said. While he said many Gap shoppers buy online, "the vast majority prefer to engage online and even bring their smartphone into the store to get onto social media while they shop, but they want to have that shopping experience in the store that involves the fitting room, service and looking at different choices."
For the fiscal year ended Feb. 1, 2014, Gap reported:
- Online sales increased 21.5% to $2.26 billion from $1.86 billion a year earlier.
- Total net sales increased 3.2% to $16.148 billion from $15.651 billion a year earlier.
- Net income of $1.280 billion, up 12.8% from $1.135 billion.
For the fiscal fourth quarter ended Feb. 1, 2014, Gap reported:
- Web sales of $698 million, an increase of 15.9% from $602 million in Q4 of fiscal 2012.
- Total net sales of $4.575 billion, a decrease of 3.2% from $4.725 billion.
- Net income of $307 million, down 12.5% from $351 million.
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