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Gap to Step Beyond Clothes, Launch Shoe Site

From Times Wire Services

Gap Inc., the leader in online sales among apparel specialty chains, plans to move beyond its brands to enter one of the fastest-growing segments in e-commerce: shoes.

The San Francisco-based chain today is slated to begin testing Piperlime.com, a website with 100 shoe brands including $24 flip-flops from surf-clothing brand Roxy and $900 boots from orthopedist/designer Taryn Rose.

Gap, which will officially launch the site Nov. 1, believes that a stylish selection hand-picked by its staff can set it apart from online-only shoe merchants such as Shoes.com and Zappos.com, which offer massive selections.

“Online footwear is growing rapidly. And it is so complementary with apparel,” said Toby Lenk, president of Gap Direct, the company’s online division. “It’s like peas and carrots. Apparel sells footwear, and footwear sells apparel.”

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Gap’s venture to sell outside its own brands is reminiscent of how the company got its start in the 1970s by selling Levi’s jeans and corduroys to teens.

This time around, Gap, which operates stores under its namesake brand, Old Navy, Banana Republic and Forth & Towne, is counting on its marketing power and its database of customers to make a big footprint in shoes and help spur overall sales. But analysts are wondering whether Gap should first fix its merchandising problems before venturing into yet another new business.

Gap is counting on a merchandising makeover and increased marketing to climb out of a two-year slump. In August, it reported a 53% drop in second-quarter profit. Sales were unchanged at $3.72 billion.

Gap’s sales at stores open at least a year, known as same-store sales, have declined for eight consecutive quarters, although analysts say merchandise improvements are winning back customers. After averaging a 7.1% decline in same-store sales in February through September, Gap reported a 3% drop last month, smaller than analysts had expected.

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Gap’s shares are trading at the high end of a 52-week range of $15.90 to $19.98 as investors seem to believe the worst is over. The shares fell 36 cents to $19.49 on Monday.

Still, some analysts question the latest move.

“My first thought is, doesn’t it make a lot more sense to make sure the foundation is stable before you add things on top of it?” asked Patricia Edwards, portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle. “Management is flailing, trying to figure out some way to grow the business and show success.”

Only a year ago, Gap launched Forth & Towne, its first new store chain in 10 years, to cater to baby boomers.

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The website is “a real cheap way to get some revenue and customers into the door,” Edwards said, but it’s not the right time for Gap to take its eye off its core business. She pointed to once highflying Chico’s FASInc., whose sales at its namesake stores have stalled because of what she believes is overexpansion in other store concepts.

Gap, which rebuilt its e-commerce platform last year, generated sales of about $600 million in 2005, making it the biggest specialty apparel chain online, according to Internet Retailer magazine. For the first half of fiscal 2006, which ended July 29, Gap’s online sales growth averaged 21%.

Catherine Beaudoin, senior vice president and general manager of Piperlime and a 10-year Gap veteran, said there was enormous potential for Gap as the online shoe market was very fragmented.

Beaudoin noted that a survey of its online customers showed that although they’re interested in buying shoes online, they consider it a “stark, utilitarian experience.”

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Piperlime, which will offer 150 brands when it is officially launched, will feature free advice from experts, starting with celebrity stylist Rachel Zoe. Each page will feature what’s hot in shoe styles and highlight the brand of the moment; customers will be able to search by style or brand.

Competitors say they’re unfazed by the new entry. Established rival Shoemall.com has redesigned its website to make it more user friendly, and online shoe leader Zappos.com, which expects to generate sales of $600 million this year, has expanded into other accessories such as handbags and eyewear.

“Customers shop online to have a larger choice,” said Fred Mossler, senior vice president of merchandising at Zappos. It offers more than 700 brands in 40 categories, from running shoes to special occasion. “We want to be a destination in each of the categories.”

Gap also said Monday that it had hired Dawn Robertson, from Australian department store chain Myer Ltd., to serve as president of its struggling Old Navy chain. Robertson, a former Federated Department Stores Inc. executive, replaces Jenny Ming, who said in July that she was leaving the company.

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The Associated Press and Reuters were used in compiling this report.


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