Gap Inc. Beauty Expansion: Smart or Risky? | Fast Five Shorts

Gap Inc.

Wants to bet big on beauty and accessories, according to retail dive.

Gap Inc. CEO Richard Dickson called these quote sleeper categories, which the company's internal research shows already resonate with its customers.

Efforts to expand are already underway, at least at Old Navy.

This fall, the value brand will launch beauty and personal care products in 150 stores, with some locations offering staffed shop and shops.

Gap Inc. Said last Thursday this is the test and learn phase of the plan to scale an Old Navy beauty business.

Next year, the company's other retailers, Gap, Banana Republic and Athleta, will also launch quote brand right expressions, end quote in the category.

The company is pursuing the growth potential in beauty, Dixon said, based on research from Euromonitor that found beauty and personal care sales surpass $100 billion this year.

And, and that the market is one of the fastest growing in the U.S. and yes, tease, we're going to spend some time on this, and that is because this is also the A and M. Put you on the spot.

Question of the week.

Are you ready for it?

Yeah, let's do it.

They're coming for you.

And all right, here it is.

What does GAPS move tell us about the evolving role of beauty as a driver of revenue growth and consumer engagement for the broader apparel industry and, and for brands considering a similar expansion?

What needs to be true for them to succeed in this crowded market in an authentic and differentiated way?

Ugh.

I mean, I think, I think Gap's move here tells us that they're going for, obviously, as Richard Dixon said, like, what's an easy thing that we could, you know, put into the stores, put into the Snake line for checkout that still exists, unfortunately, in many apparel settings?

Um, yeah.

Is there, is there potentially some areas of growth?

Should you put, you know, body sprays or whatever, you know, personal care items you want to throw in there?

I would caution, however, that we've seen some pretty significant apparel brands like Lululemon, like Athleta, like Zara, really invest heavily here in doing exactly what Gap's about to do here and not succeed.

And so in my mind, I think Gap has to be particularly careful about making this decision because I would argue that Gap still has a long way to come.

They're making some really good strides.

They've had some great collaborations here.

But Gap has a long way to come in terms of just doing apparel and accessories better and finding their footing in the cultural zeitgeist right now.

And so I think that's where I would be focused on is if I was Richard Dixon because of the dangers that we've seen from more successful apparel brands already than Gap.

The, the one thing I do think is important to differentiate here, I think beauty's getting a lot of the focus from this headline.

But he also did talk about accessories and that I feel very differently about that is an area where I think Gap should go full steam ahead.

The Old Navy, like more designer Zack Posen inspired handbags.

That's, that's perfect because you are getting to your consumers with a product that they're going to want to pick up.

It makes sense for them to add a nice handbag onto an outfit that they're, they're going for.

But I, this, this mass, mass market, you know, beauty and, and, and, and personal care products, they're not going to be at a, at a mass retail price point either, which is where you're seeing the increase in, in spend from consumers.

So I just, I really, really, really cannot caution Gap enough about making this move.

But you're, you're an ex Gapper.

What do you say about this?

Do you think they have a chance?

Yeah, I, I'm actually surprised on your take on this one.

I thought you were going to go the other way and I was going to come and have to come in and, and pour, pour water on the fire.

But no, I'm with you.

I, I agree with your accessories point.

And because there's a competitive, there's a, there's a, there's an actual competency there, you know, from Gap to make accessories, like they've been in accessories forever.

Like they should know how to make those and it should be a key part of their business and it's the highest margin part of their business too.

So yes, all in on that.

But the reason this story is getting the headlines is because 150 store pilot with old Navy.

That's a commitment.

Like you're, you're going into those stores and you're trying to, trying to do this.

But I'm with you.

I'm selling this hard and I'm selling it for a number of reasons.

And like, first of all, you know, and I'm asked what has to be true?

Well, that's my question is because just because a market is big and growing doesn't mean you have a right to win in it.

And for example, if I take that logic out and I extend it to other categories like trading cards is growing.

Nintendo Switch just launched and is growing.

Does that mean Gap should carry, you know, those products?

No, it doesn't.

Or vice versa.

Like if we, if we flip this on its head.

And we said, okay, apparel's growing and beauty is, like, kind of lagging, you know, if we switch.

If we switch the roles, does that mean Sephora and Ulta should now go into apparel?

No, probably not.

And so when you think about it that way, it just.

It doesn't make sense.

But with that said, Dixon is the master.

And sometimes it's about what you can sell, not about what is true.

And he's a master at that.

He's got the charisma.

So can you get people behind this in the short term?

Possibly.

I'll be watching, but I think this is a really long bet to make.

And to your point, not only have other brands tried it in the past, but Gap has tried it in the past as well at all of it, at many of its brands, and it hasn't worked.

And they tried home in Banana Republic, too, and that seemingly hasn't worked as well.

So, yeah, I'm very skeptical of this, but you get the word here.

Yeah.

I think the other thing for me, that was missing from this, and I wasn't able to track this down in my research, like, Old Navy's been selling all kinds of stuff at their checkout, and I think it's very important to, like, distinguish the.

The athletic experience, the Banana experience, the Gap experience, and the Old Navy experience.

Old Navy had, like, dunkaroos and, you know, chapstick and socks, and they have all kinds of stuff in their winding snake to get up to the checkout.

So I think I couldn't understand.

There must be some data that Dickson and the team are seeing that supports, like, oh, we're selling a lot of chapstick.

Maybe we should go into our own brand.

So there's parts of me that question, like, what categories they'll actually go into versus, like, beauty and personal care.

Like, I think that's still very broad.

And so they might see some success with, you know, going off of the numbers that they've already seen.

But I really am going to have to see this one to believe it.

And if there is a chance, I would say Old Navy probably is the best place for this to start.

But I don't know that that means that they should continue on across Athletic Gap and Banana.