16. Distribution Plans
Manufacturer Distribution Center Retailer
Distribution CenterManufacturer
Customer
CustomerFranchisor Franchisee
Manufacturer Distribution Center Customer
NORMAL DISTRIBUTION PLAN
FRANCHISOR DISTRIBUTION PLAN
ONLINE DISTRIBUTION
Opened by Donald Fisher and his wife, the store was created to sell Levi & Straus Company jeans, and catered to teenagers and college students. The store, which sold various different sizes and styles of the jeans, was immensely popular upon first opening—so much so that by 1976 the Gap had opened 200 stores across America. In the 1970’s and 80’s the retailer began to expand into their own brand of clothing—active wear, khakis, casual wear, etc.—and while the brand still relied on teenagers with 500 stores across the country, their reliance on Levi’s fell to 35% of their sales.
Prior to 1976, Levi’s had been able to demand that retailers who sell their brand only sell Levi’s Jeans at the full price, and never on sale. However, in 1976, the Federal Trade Commission passed into law that companies could not require retailers to sell at a minimum price. Other retailers began to lower prices on their Levi’s offerings, and therefore The Gap—losing profits—had to follow suit. While The Gap would not cut all ties with Levi’s until 1991, they did dramatically cut down on their Levi’s offerings, and began to design their own brand of jeans.
1983 Fisher hired Mickey Drexler. He began to overhaul “the motley clothing lines to concentrate on sturdy, brightly colored cotton clothing. He also consolidated the stores' many private clothing labels into the Gap brand”. The Gap continued to expand into creating its own style and brand, which constituted “comfortable, simple clothes” and combined The Gap’s “ease of shopping and inventory of classic styles” experience.
Despite these changes, The Gap brand continued to slump, even while the company overall grew. The Banana Republic, a high-end retailer with designer brands, was bought by Drexler in 1983, becoming profitable by the end of the decade. Old Navy, which was bought in 1998 after Drexler had been replaced by Robert Fisher, the original founder’s son, would focus on family-focused bargain clothing. What’s more, by the 2000’s—when Drexler was re-appointed—the company would begin to successfully launch The Gap stores across seas, even as stores stateside were beginning to close.
The Gap was just missing the mark with the needs of their consumers. Admits Donald Fisher, in BusinessWeek, "We were looking at ourselves as a store rather than a brand. When you do that, you draw thick, heavy lines around your freedom”. With the continued success of their other brands, The Gap, Inc. was having a difficult time separating The Gap from its other brands. While not as stylish as Banana Republic, The Gap was more expensive than Old Navy, and many customers felt as if the “Simplistic” style of The Gap cost too much in comparison to the bargain brand. What’s more, they had expanded from teenage customers to a “broad spectrum” of ages and people, which led to confused marketing campaigns. Moreover: in order to turn themselves around, The Gap had to change their differentiation from “simple styles”—a trait customers associated with the much cheaper Old Navy brand—to “style adaptability.”