BUS690CurrentEvent (1)

BUS 690 Week 7: Business-Level Strategy Current Event: Gap and Banana Republic are planning to close 350 brick and mortar stores and shift focus to online sales. I. Brief Review • Gap Inc. announced plans to close roughly 350 Gap and Banana Republic stores in North America by the end of 2023. • That represents a 30% drop in its total number of locations. • Gap said that in 2023 roughly 80% of its revenues will come from online sales and locations outside of malls. II. Relation to Selecting Business-Level Strategies A. Driving toward a Best-Cost Strategy by Reducing Overhead • The Gap and Banana Republic will reduce overhead costs by closing brick- and-mortar locations. • The reduced expenses will allow the company to pass the savings on to the customer. B. Stuck in the Middle • The shifts reflect changing consumer behavior and the widening gap between in person and online shopping. • The increase in online shopping was exacerbated by the pandemic, leaving stores empty. • Transitioning their focus from brick and mortar to online will allow The Gap to compete with other online retailers that offer similar products at a lower price. • Banana Republics cost structure is too high to allow them to attractively price their products. • Products are not sufficiently differentiated from similar products sold for less online. III. Analysis of Strategy • Ecommerce operating costs are a fraction of the cost of operating store fronts. The Gap Inc. will save millions per year by closing stores. • Having a larger online presence will allow The Gap and Banana Republic to reach more customers. • The simplicity of online shopping and the reduced pricing will improve the customer experience and help attract new customers. • Embracing the shift in the industry to technology will allow The Gap Inc. to continue to maintain and grow their market share. IV. Question • Should the gap focus on building their online business while continuing to maintain store fronts so online customers will have a place to make exchanges and returns? Or should they only sell online?