E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
An effort to upgrade Gap’s technology becomes a four-year odyssey into implementing a web-based communications infrastructure.
When Ken Harris moved into his position as CIO of Gap Inc., he brought with him impressive technology credentials. Harris held similar positions at Nike and Pepsico and thus was thoroughly familiar with enterprise networking on a big scale. Still, there was little in his background that likely prepared him for the herculean challenge he encountered.
Sales of the apparel retail chain had been exploding-from $1 billion in 1987 to $14 billion last year. What had started out as a youth-oriented clothing store to bridge the “generation gap” had blossomed into a diversified retail chain with 3,800 outlets in six countries and three brands, that include Banana Republic and Old Navy, the fastest-growing apparel chain in America. Yet, the IT system Harris inherited clearly had not keep pace with the chain’s growth. "Nobody ever trusted the information they were getting,” Harris told Retail Systems 2001 attendees yesterday. “The network infrastructure was killing us.”
Actually, that infrastructure was not unlike what many other chains struggle with. The systems architecture was 30-year-old mainframe technology. Databases were not centralized, and management access to data was limited. Sales, inventory and other management reports were being delivered late, because the network polling of the stores was slow, and data gathering was batch, not real-time. Worse, there were multiple applications technologies running on multiple systems, not all of them compatible.
In the space of just nine months, the Gap’s management information system was transformed from a Smithsonian exhibit into a data network that provides real-time sales and inventory information down to each store manager, on-line employee access to certain HR records, e-mail communications throughout the chain, and web access at every store through a 56K or greater data communications system.
How did Harris and his IT team do it? First, by partnering with leading technology vendors who replaced an outdated patchwork of homegrown systems with packaged technology based on open systems standards. “We realized that we were an apparel merchandiser, not a technology company,” Harris said. “And in a market where there is so much change, it’s not good to go it alone.”
But the key to the overhaul was unleashing the power of the Internet. Every system Gap installed in its IT overhaul was web-based. “We started with the belief that we have to make sure that everyone in the company had access to the data network,” Harris explained. “Previously, our focus was to keep our network costs down, but we couldn’t afford to do that anymore. We used the Internet to create a global virtual private network which gives every store around the world the ability to access the network with a local call to an ISP.”
Tardy batch reporting was replaced with “minute-by-minute” web-based sales reports, which allows for faster restocking of merchandise and helps avoid product shortages during peak sales periods. When those do occur, sales clerks at the stores now search nearby stores for out-of-stock items by tapping into the Gap’s web-connected inventory database. Store managers in one part of the country e-mail counterparts in another region to exchange success stories or troubleshoot problems. Employees use the web-based system to access key benefits and other personnel reports.
The goal of this web-based network, said Harris, is to “move toward a real-time processing operation” by taking the technology out of the store and accessing all data via the web. It was a theme often repeated at Retail Systems 2001 as chain executives discussed using the Internet to empower local store managers. “We had to look at our store managers as what they really are-operators of significant local businesses,” said Harris.
Harris was guarded about the size of the investment that Gap is making to convert to an all-web network. But he explained that the operating costs associated with the more advanced Internet-based data communications system are about the same as Gap was spending to operate its older network, in part because access to the net is based on a local data link. “The operating costs of the network really surprised us,” said Harris. “The economics are virtually the same as what we had before.”
The Gap’s network overhaul is far from complete. Harris projects that the company has another three years of work to fully extend Internet applications throughout the chain. One future use of the web-based network, he said, will include downloading to all 3,800 stores a graphical presentation that shows managers how new merchandise is to be displayed, something the Gap now does every two months through written instructions that can be misinterpreted. Another likely application includes centralized web-based training programs for store managers and staff. “This is about a four-year upgrade from start to finish,” said Harris. “But that’s okay, because now we have a road map to follow.”