More Brick-and-Mortar Stores to Implement Digital Strategies: Augusto Beato

Portland SEO's Augusto Beato expects holdovers from the traditional brick-and-mortar model to leverage appropriately scaled operating platforms with digital capabilities in delivering products and experiences. He was reacting to news that Gap Inc. will be splitting Old Navy from its business to create two independent publicly traded companies.

The company said that there would be a healthier channel mix after the restructuring, with nearly 40 percent of sales coming from online, and the remainder split evenly between the specialty and value channels.

“To position for growth at this current age, brands need to build their digital capabilities and expand the omnichannel customer experience," notes Beato, who is the CEO of Portland SEO. "Some are left behind in implementing a digital strategy and suffer the consequence."

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As part of its restructuring, Gap will be closing around 230 Gap specialty stores, mainly in the US over the next two years. As a result of these store closures, the company estimates an annualized sales loss of approximately US$625 million.

The remaining specialty stores aim to serve as a more appropriate foundation for future growth of the brand across the specialty, outlet and online channels.

Robert Fisher, Gap Inc.’s board chairman, said that following a review by the Gap board of directors, it was clear that Old Navy’s business model and customers have increasingly diverged from its specialty brands over time, and each company now requires a different strategy to thrive.

Old Navy will become a standalone brand while brands such as Gap, Athleta, Banana Republic, Intermix and Hill City will go under a new yet-to-be-named company. The five brands under the umbrella bring in a total of approximately US$9 billion in annual revenue.

Gap said that this spin-off would enable each company to maximize focus and flexibility, align investments and incentives to meet its unique business needs, and optimize its cost structure to deliver profitable growth.

Through this separation, Old Navy aims to have the flexibility, focus, and control needed to increase customer access by further applying its strategic real estate strategy. It also looks to evolve its omnichannel model and expand its product categories to continue to resonate with value-focused customers.