Gap's (NYSE:GPS) partnership with Kanye West looks like it's already paying off. The retailer and the rap impresario recently unveiled their first product collaboration, and it's generating positive reviews on style. The puffy down jacket that goes for $200 won't ship until the fall, but the presale is closed, suggesting it's already sold out and indicating Gap has more credibility with consumers than it's had in years.
While one product doesn't make the Yeezy Gap brand a success, there's buzz around the retailer that's been sorely lacking and that only bodes well for the future.
Changing how it sells to match how consumers shop
Gap, like many retailers, is in the middle of a transformation to account for how people shop today. Because consumers are no longer interested in shopping at malls, the transition to e-commerce is under way and starting to pay dividends.
First-quarter sales surged 89% to $4 billion as comparable sales jumped 28% year over year. Yet 40% of Gap's sales came from its digital channels, compared to 25% in 2019 (last year will rightly just be memory-holed for most retailers). It also added 62 million active online customers globally, 60% more than it had this time last year.
Gap is also focusing on its two strongest brands, Old Navy and the athleisure brand Athleta, which represented 66% of total sales, almost achieving the goal of 70%. Naturally, that means deemphasizing the Gap and Banana Republic banners, of which it plans to close 350 stores in North America by the end of 2023, some 30% of the total.
For too long, Gap has done little to capture the imagination of consumers, but its results indicate they're still willing to shop there if it offers the right styles. Which is where Yeezy can help.
Closing the enthusiasm gap
Gap needs to appeal to a new demographic without alienating the customer base it already has. Kanye West, although controversial at times, is truly an influencer across music, fashion, and social media.
CEO Sonia Syngal understands the opportunity the 10-year collaboration represents for the Gap brand and says the enthusiasm behind the project is welling up, telling analysts, "It's the number one question we get."
Last quarter she said the partnership was helping the brand to trend on social media.
"And what makes me the happiest, honestly, is to see the fact that the brand is trending," Syngal said. "It's trending with the younger customers. It's trending on TikTok." That's not something that was likely to have happened without getting West on board.
He's proven to be an effective salesman, at least for footwear, where he's sold sneakers first for Nike, then adidas, that today can fetch thousands of dollars on auction sites.
Last year Bloomberg placed a $3 billion valuation on just the sneaker side of the Yeezy business, even though they retail at relatively affordable prices. That could be key to making the Gap collection a success. Gap has a reputation as an affordable retailer, so pricing will be important along with style.
The challenge could be translating the scarcity associated with the sneaker market to regular apparel. Affordability could bridge the gap.
Ready for relevance
That Gap is even having these kinds of discussions is an achievement in itself. It wasn't all that long ago that virtually all of the Gap brands were in free fall and the retailer was looking at spinning off Old Navy as a way to generate some shareholder value.
Now it is playing to its strengths and is generating buzz among its own creative teams as well as on social media. There's still a lot that needs to play out and prove itself, but Yeezy's made Gap more relevant to consumers than the retailer has been in years.