Monday, November 27, 2006

GAP is struggling

This WSJ article is about the ongoing struggles of the clothing company Gap. Although a company like the Gap is best modeled using "monopolistic competition," even that type of industry is subject to competitive pressures:

"None of these projects addresses the once highflying retailer's major problem: how to revive sales broadly at the uncompetitive Gap and Old Navy divisions. The enormous chains, with 1,338 and 1,008 stores, respectively, in the U.S. and Canada, need to appeal to broad audiences, which has made them vulnerable to growing competition. Gap's classic styles have been widely copied, and it now competes with everything from department stores to teen-focused specialty retailers such as American Eagle Outfitters Inc. Old Navy has failed to stay ahead of discount competitors whose fashion sense is growing"

One way for a company like the Gap to continue to earn economic profits is through constant remodelling of its brand (new sweaters and jeans) and advertising (the whole Red line thing). But lets be honest, how good are the new Gap sweaters? Anyone? And how many Polo shirts can one buy before enough is enough?

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