The Ever-Changing Face of Retail

Yesterday, I stopped by the mall in the evening to return a fleece that I bought the week before. I was awestruck that the mall was completely empty. When I was a bit younger, it would have been nearly impossible to find a parking space at that time of day!

My very first jobs were in retail, working in shopping malls. My first “real” job was working at JCPenney in the catalog department. It was gruelling (and boring,) but I learned a lot. I learned how not to run a business, and I learned the importance of easy-to-understand systems for maintaining order in a large organization. I didn’t last long at the job, because my boss, Rhodie, wouldn’t let me out on to the sales floor unless I cut my hair. I refused to cut my hair (and frankly, it wasn’t that long to begin with.) Keep in mind, this was the mid 1980s, when JCPenney was a retail behemoth and IBM culture (á la Army-rigid culture) dominated corporate America.

I left JCPenney after a particularly miserable Sunday morning inventory, and took a job working at the Gap. The Gap had, at that time, an interesting history and had already turned its business model around completely. The first Gap store was founded in San Francisco in 1969 by a husband/wife team Don and Doris Fisher. The original Gap store sold only two items, records and Levi’s. As the store grew in popularity, the merchandise mix grew in kind and other products and clothing styles were added. By the early 1980s, their stores had grown jumbled and chaotic, and their core customers—hippies—were growing older and less interested in mish-mash retail. Don and Doris had presided over tremendous growth, and precipitous and rapid decline. In a last-ditch effort to save the company, they brought in a young merchandiser from the New York retail scene. Riding high on his successes at Abraham & Strauss and Ann Taylor, Mickey Drexler re-imagined the Gap from top to bottom. The merchandise mix was refined, stores were remodelled, distribution was streamlined, and every system in every store was simplified and standardized. The Gap slowly climbed its way back to success and became the leading speciality retailer in North America for more than two decades.

Mickey through his interventions at the Gap, single-handledly, reinvented the retail market for the next thirty years. By 1990, the Gap was grossing more than a billion dollars in sales and was setting the pace for marketing, and cultivating the retail of desire. Over the years, I have—many times—reflected on the golden age of the Gap and what made it—and retail—successful. I’ve also watched it great sadness as the empire has crumbled. Other retailers emulated the Gap and rode a wave of success along with it. Those stores that didn’t perished or struggled (and there have been legions of popular contenders over the years that ultimately failed: The Lodge, Aeropostale, The Nature Store, Charter Club, The Limited, Structure, Eddie Bauer, Chess King, Merry-go-Round, and too many others to count. Many others have nearly failed or are barely surviving, like Abercrombie & Fitch and Express.) The Gap seemed unstoppable.

In my latter years at the Gap, my role was to support the district manager in administering “store standards” to the 10 stores in the district. I would help to train new hires, educate sales people about various new styles and colours, collect sales data, cheerlead various sales efforts, and—my favourite—drive from store to store in the district to do the dreaded “white glove” test. The “test” was a 10-page assessment of the degree to which each store was abiding by company standards. The 18-year old me would look for dusty soffits, unvaccumed areas under sales racks, and give each store in the district a general once-over. I loved the job and enjoyed the relaxed structure that the company advocated. What I didn’t realize at the time is that I was effectively part of a small army of young people charged with guarding the secret formula for Mickey and his team. It is the magic that made the Gap a success, and changed the face of retailing in the later half of the 20th century and the early part of the 21st.

The “Individuals of Style” campaign brought together some of the world’s most iconic personalities, the world’s best photographers, and the Gap.

The Gap, during its golden age—from about 1987 to 1997—sold very basic clothing that was well made and affordably priced. With it, Mickey blended a sprinkle of California casual that was the perfect counterbalance to the zeitgeist of East Coast yuppie success. This, along with a dash of aspirational preppiness, Mickey and his team, packaged the whole idea and merchandised it in a very subtle manner. For its time, color palates changed quickly, silhouettes reflected upscale trends, and prices were attainable. These facile reactions to a broader language of fashion and style put fashion, affordably and unpretentously, in reach of millions of Americans.

And those millions ate it up.

I remember specifically the introduction of “hand-knit” sweaters at the Gap for Holiday 1989. After years of selling various color pocket T’s, jeans, and other basics, the “hand-knit” seemed to catapult the store into a different stratosphere. Each “hand-knit” sweater cost $88. Only select stores in each district stocked “hand-knit” sweaters. Those stores that did stock them, had only one size-run of each style. So there were rarely more than 5-10 “hand-knit” sweaters in stock at any store at any given time. The experiment was a tremendous success. The sweaters flew off the shelves. Keep in mind that $88 in 1989 (when the minimum wage was $3.35 an hour) represented nearly half a week’s wage for most folks. The “hand-knit” craze was the natural progression of the Cabbage Patch Doll craze a few years earlier. People were literally fighting to score a “hand-knit” sweater. I was flabbergasted by the demand experience and jealous of the folks that could afford the weighty, flat-style knit sweaters with intricate patterns.

I didn’t have to wait long, however. By January, the sweaters had been marked down to $39.99, then $29.99, then $19.99, and eventually, I scored my “hand-knit” for $3.99 minus my 30% employee discount. I wore the sweater for years, but considered the purchase many years later and many times since. How could this company product so many “hand-knit” sweaters so quickly? How could they sell them for $3.99 and still make a profit? Eventually, I learned the answer. The sweaters cost about $1.00 to purchase, process, and distribute to stores. They were, somewhat confusingly, not actually hand-knitted, but hand/knit. The knit part was done piece by piece on a machine in Malaysia, run cheaply by child labor. The pieces were then “hand stitched” together making the hand part. Despite this slippery moniker, the Gap was selling the illusion of hand knitt-ed sweaters to legions of people willing to pay premium price, or an amazing 8800% premium. Desire certainly comes at a cost!

When the Gap came under fire for using child labor in the mid 1990s, each and every employee was asked to sign an “honesty pledge” (it was a less formal precursor to a NDA that most employees now sign routinely) stating that we wouldn’t talk to the media or discuss sourcing, distribution, or “company secrets.” Clearly Gap management was worried about their trade “secrets” leaking out. Many outstanding documentarians and not-for-profit groups have exposed the Gap’s use of child labor. Regardless of their questionable ethics, the Gap to some extent became a victim of its own model of success.

Fast forward 30 years, the Gap has been usurped by retailers who have refined the fast-fashion model that the Gap pioneered. Zara, H&M and Forever 21, beat the Gap as the new kids on the block were even faster. However, with the speed at which the industry now moves, something has been lost in the blur of constant movement: the illusion of desire that the Gap so carefully curated. The newer retailers price merchandise to move at a lower margin which incites less discounting, but also limits the supply. “Get it or forget” it is the new mantra in today’s mass-market fashion retailing. While the golden age retailers cultivated a slow-burn desire (that prompted customers to part with significant sums), newer retailers feed a constantly hungry consumer-beast without any emotional payoff beyond the immediate gratification of the hunt and purchase. The desire is gone, and with it, the magic of retailing.

This psychological shift has eviscerated the retail industry. Constantly on, constantly available, constantly cheap has had the same effect on retail as CNN has had on hard news. The yield is a marketplace full of meaningless, constantly available fluff that has no value. It’s always there, in the background, devoid of any importance or meaning. Golden age retailers, like the Gap, further undercut their own business model and cannibalized their own existence through the introduction of off-price “outlets” and down market affiliates like Old Navy. Why would a consumer buy full price when a substantially similar product is available for half the price? Why would a retailer cultivate desire when quick-pop “bargain” sales provide a higher margin of profitability and a greater rush of satisfaction for the customer?

As millennial shoppers shift from consumption to experience, the problem has compounded. Millennials have only the most minimal desire to flaunt their purchasing power, if indeed they do at all… especially when it comes to clothing. Millennial hipsters—the last bastion of brand and quality-conscious consumers—blend the quest for quality with the experiential. This full-on reset has shifted the retail landscape more toward curated mom-and-pop style shops and away from mall-based chain retailers and left malls across America empty and has—unwittingly—transitioned the American consumer into uncharted territory of immediate-gratification purchases in an era of post-consumption without any true desire or magic.

The fascinating turn of retail is again, changing. Uncertainty abounds: What will the future bring? How will it change? However, one thing is for sure, we’ll need another visionary to save the industry from itself.