Old Navy has reported positive same-store sales growth in the past five years.
Old Navy has become Gap’s saving grace.
Gap Inc, the parent company of its namesake brand, Banana Republic, and Old Navy, has reported negative same-store sales growth for the past two years.
Independently, however, the Old Navy brand has seen positive same-store sales growth for the past five years. Last quarter, sales were up 8%, boosting Gap Inc’s share price and rescuing it from an otherwise gloomy period.
We visited a Gap and an Old Navy store on a rainy Thursday afternoon in one of New York’s busiest shopping areas: Herald Square. We saw firsthand why the brand is resonating well with customers:
We timed our visit to Old Navy with the start of Memorial Day weekend sales. The first thing that struck us was the amount of clothing and accessories that were on sale.
The store was awash with signs offering discounts ranging from 20% to 60% off.
There were also several clearance sections around the store.
Even before discounts, however, Old Navy was still much cheaper than Gap.
A basic women's cardigan costs $24.94 here. At Gap, it's $49.95 (now on sale for $25 with the Memorial Day weekend discount).
The price discrepancies were evident in both the women's and men's jeans sections.
A pair of women’s jeans at Old Navy costs between $29.94 and $44.94.
The cheapest pair of women’s jeans at Gap is $69.95.
The focus on value at Old Navy is resonating well with price savvy customers in the US.
According to one Morgan Stanley analyst, the psychological impact of the recession is entrenched our spending habits. “Old Navy is one more proof point in the consumer's preference for value," Kimberly Greenberger told Business Insider.
There is a noticeable difference in the quality of similar items at Old Navy and Gap. These Gap espadrilles, for example, cost $49.95 (currently on sale for $34 and $29) and are made with real suede and 100% cotton.
At Old Navy, a similar pair costs $24.94 but are made with synthetic materials.
Dana McKay, a 39-year-old mother of two who does all her shopping at Old Navy and has done so since her college days, cares less about the quality of the products than the price.
“Maybe there is a little bit of difference [in quality],” she told Business Insider. “But not enough that is making me feel like I need to spend more money.”
Fast fashion has made disposable shopping a trend. “Once I’ve worn something for a season or two I am usually going to be sick of it and want to buy something else,” McKay said. “I’d rather buy a $30 dress than an $80 dress knowing that I am only going to wear it for a season or two.”
Old Navy is trying to capitalize on this by offering a quicker turnover in styles than its sister brands.
“I wouldn't call it fast fashion but they are replenishing the merchandise more frequently. You are constantly getting new stuff into the store and it tends to be what the consumer is craving,” Bridget Weishaar, an analyst at Morningstar, told Business Insider.
Old Navy has a system in place to trial products in smaller batches in order to see how successful they are before rolling them out on a larger scale, a spokesperson for the brand told Business Insider. This helps them to gauge what sells well.
Here, in the men’s section, there is a lot of variety. The colors and patterns are bolder and brighter than the clothing at Gap, which may appeal to younger shoppers.
In Gap, you typically see plain colors and a lot of denim.
Old Navy also has their own cheaper versions of popular products. These Vans-style shoes cost $29.94 (at Vans, a similar pair costs $55).
But while turnover is important, Old Navy is also valued for its staple items. “Their 'Rockstar' jeans are very consistent. When they come out with new colors, I can buy them and I am going to be happy with them,” McKay said.
Though they change the colors and styles of their products frequently, the shape often remains the same.
Old Navy's women’s pixie pants, which were launched in 2014, have become one of the brand's most popular products. Stefan Larsson, the former president of Old Navy, told The New York Times in 2015 that when the pants were first tested, they sold 2.4 million pairs in a year.
“It’s one of the biggest revenue-generating styles that we have,” he said.
The store has consistently low prices across all of its departments.
We noticed a big difference in prices in the baby clothing section. At Old Navy, it cost $24.95 for a pack of three "Babysuits."
At Gap, it costs $29.95 for one. The items at both stores are 100% cotton, though at Gap, the cotton is organic.
The issue is some consumers are unwilling to spend money on clothes that are unlikely to fit them for much longer than a few months.
The same can be said for maternity clothing.
“You're only wearing them for five or six months so I liked that I could get a bunch of stuff and only spend $100 instead of going to Gape where they are going to be double the price,” said McKay.
Old Navy is also trying to improve the shopping experience. The amount of discounted labels can make it confusing to know how much you can expect to pay. But there are stations throughout the store where you can scan and check prices.
We tried the scanners out and they worked well. This shirt, which scanned for $21.55, was originally marked at $26.94.
Old Navy also had a separate line for shoppers purchasing items with a credit or debit card, which sped up the process.
Overall, the shopping experience seemed just as good as at Gap, but the prices were considerably more reasonable.
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