Clothing retail giant Gap looks at expansion -- both on and off the World Wide Web

In Las Vegas

In Metro Las Vegas, Gap Inc. operates five Gap stores, three Banana Republic outlets and one Old Navy store.

Mickey Drexler believes bricks and mortar retailers should embrace, rather than fear, the world of online shopping.

Drexler, president and chief executive officer of San Francisco-based clothing giant Gap Inc., delivered that message during a keynote address Tuesday to delegates at the International Council of Shopping Centers conference.

"Bricks and mortar retailers need to think about having a website the way they do a phone number," Drexler said. "I urge you to not be afraid of the web, but to join it."

Drexler said one reason for his enthusiasm for marketing online is the propensity for web-based customers to spend more than other shoppers.

"Our e-customers are more familiar with our products, and they tend to spend money both online and in stores," he said.

"We also use our marketing online to promote our bricks and mortar stores. For example, we often offer free in-store coupons online and that encourages customers to come into the stores."

Drexler said online customers also tend to be more vocal in their opinions.

"We get far more feedback from our online customers than from our other customers," he said. "Through e-mails and messages we get a wide range of opinions -- not always praise -- from them, but it's really helpful for us in maintaining our connection with our customers."

Over the last 15 years, Gap Inc. has evolved into one of the world's largest brand-name apparel chains. In 1983, the company reported sales of $480 million from its 530 stores.

Last year, Gap Inc. reported $11.6 billion in sales from more than 3,000 stores worldwide. In addition to the Gap brand, the company separately markets its Old Navy and Banana Republic brands in their own respective outlets.

The National Retail Federation's Stores magazine reported Gap Inc. is the fifth-largest specialty retailer in the nation and is set to surpass Columbus, Ohio-based Limited Stores as America's largest fashion retailer.

Despite his enthusiasm for e-commerce, Drexler said little is known about the intricacies of Internet marketing.

"Bricks and mortar stores are not going to go away, but I think we will really understand more about the online shopping in about five years.

"Things are changing so fast in this industry -- at warp speed, really -- that if I came back in six months I'd probably have a clearer idea about online shopping."

Drexler said much of his company's success is due to its brand name recognition, and he urged retailers to recognize the critical importance of controlling their own product name.

"We offer customers brands they know they can trust worldwide," he said. "It's part of our answer to the question 'what do you offer customers that they can't find anywhere else. You can't find Gap line clothing anywhere but in our stores.

"It's part of the seemless (shopping) experience we are trying to convey to our customers."

Still, Gap's strong market position doesn't preclude the company from continuing to grow exponentially, he said.

"We have almost 100 percent brand awareness, yet we have less than 6 percent of the $170 billion U.S. market," said Drexler. "By comparison, Nike, McDonald's and Coke have over 30 percent of their market.

"That's why I believe we can and should still grow this franchise aggressively, in spite of the the growing impact of online commerce."

As part of that growth, Gap Inc. is expanding its Old Navy line of clothing to include an older demographic. In addition, the company is also looking to enter new, inner city markets.

"We are looking to diversify our markets, and I am proud to say we recently opened our first store in Harlem," said Drexler.

But Drexler cautioned against growth for its own sake.

"Return on investment is critical," said Drexler. "We have a strict policy that we will open only where it's appropriate. We also pay a lot of attention to Zip codes, and examine what our market share is in each Zip code."

Drexler said future growth is also contingent on the company's willingness to constantly re-examine its business practices.

"Our company attracts about 750 million customers each year, but we also know that the customer loves you until they don't anymore," he said.

"That's why we are always asking ourselves 'what can we do better today?"'

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