As part of a remodeling of the shops, Old Navy revamped its "cash wrap" — the area where customers wait to pay for clothes. It used to be a plain-old checkout lane. Now Old Navy has added freeze-dried astronaut ice cream and specialty sodas from Seattle-based Jones Soda, as well as superhero lunchboxes, glitter-covered piggy...
/ SAN MATEO, Calif. —
Tom Wyatt, president of Gap’s Old Navy chain, says the best part of shopping at his stores comes when it’s time to leave.
As part of a remodeling of the shops, Old Navy revamped its “cash wrap” — the area where customers wait to pay for clothes. It used to be a plain-old checkout lane. Now Old Navy has added freeze-dried astronaut ice cream and specialty sodas from Seattle-based Jones Soda, as well as superhero lunchboxes, glitter-covered piggy banks and Mad Libs books.
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They’re meant to stir nostalgia for the chain’s target customers, who grew up in the 1980s.
Even button-down bankers are susceptible, Wyatt said. During an Old Navy tour with analysts, one bought four packets of the astronaut ice cream, he said. “He hadn’t seen them in years.”
Customers shopping at the updated stores typically spend $1 to $2 more a trip than they did before, Wyatt said. Those results spurred Gap to greenlight an expansion from two test stores in 2008 to almost a third of its more than 1,020 locations by the end of this month.
About 100 locations will get the revamped look this year at Old Navy, which is Gap’s biggest source of revenue in North America.
Wyatt, 56, has led a comeback at Old Navy since he took charge in 2008. At the time, the brand was reeling from five years of declining same-store sales and its locations hadn’t been modernized since the apparel chain debuted in 1994.
Worse: Wyatt realized that no one seemed to know who Old Navy was designing its clothes for, he said.
“I had a holy heck moment,” he said while strolling through racks of clothing at an Old Navy store in San Mateo. “So we spent a lot of time re-engaging who our current customer is.”
The result was “Jenny,” Old Navy’s typical customer: a fictional 25- to 35-year-old mother who earns $50,000 and is pressed for time.
Deciding on one personality helped the company focus its clothing styles, marketing campaigns and store designs.
The change has helped increase same-store sales every year since Wyatt took over, even during the recession. Old Navy sales, which overtook those of Gap-branded stores in 2005, rose 2 percent in the fiscal year ended Jan. 29. That compared with a 1 percent drop for Gap’s North American stores.
“We have 45,000 associates that literally talk about Jenny,” Wyatt said. “What that did for us was normalized what the interpretation of what the product should be.”
Old Navy still faces challenges, including soaring costs of cotton.
In May, San Francisco-based Gap cut its full-year profit forecast by 22 percent as costs to make clothes rose faster than expected. The stock had its biggest one-day drop in almost 10 years.
Old Navy also has had some marketing misfires under Wyatt. After years of advertising with talking mannequins, the company switched back to people this year. That campaign has taken time to resonate shoppers, contributing to a 2 percent sales dip in the first quarter.
“It wasn’t really that fun,” Wyatt said.
Old Navy also faces mounting competition from Sweden’s Hennes & Mauritz (H&M) and other low-cost, fashion-oriented rivals, as well as Wal-Mart Stores and Target.
H&M plans to add more than 150 stores in the second half, and the United States is one of its biggest growth markets.
That’s the sort of expansion Old Navy had in its early days. The chain, named after a bar in Paris, reached $1 billion in sales in 1997. It was the first retailer to hit that milestone within less than four years of operation, according to the company.
The new cash-wrap area is a small part of helping reinvigorate growth, though it’s spurring sales of products besides clothes, Wyatt said.
The old setup was a “miserable way to end your shopping experience at Old Navy,” he said. “Mad Libs is a significant business for us, and didn’t exist a year ago.”