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?
References https://www.forbes.com/sites/gracelwilliams/2021/04/29/retail-check-up- gap/?sh=46ef464370c2 https://www.businessinsider.com/gap-us-store-closures-uk-europe-cuts-retail- analysts-2021-7 https://www.retaildive.com/news/with-plans-for-350-store-closures-gap-flees-the- mall/587621/
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