How Old Navy Got Everyone to Fall In Love With $19 Dresses

You know something's up when Gwyneth Paltrow, fine purveyor of $200 breakfast smoothies and a $1,652 beauty routine, will halt her regularly scheduled Goop programming to devote an entire newsletter to the treasure trove that is Old Navy. Last August, the newsletter gasped its way through the brand's back-to-school offerings (skinny denim overalls for $49.94! faux-patent leather slip-ons for $22.94!) by pairing up three "moms-from-the-web" and their daughters with complete Old Navy outfits.

This phenomenon has not gone unnoticed at Racked: two weeks ago, Alexandra Fiberwrote her own ode to Old Navy and the cool place it has become. "Instead of sad garbage, the store was full of clothes, bags, shoes, and jewelry that could've easily passed for designer," she noted, alongside a gallery of name-brand cool kid clothes and their corresponding Old Navy duplicates.

A photo posted by oldnavy (@oldnavy) on Apr 17, 2016 at 9:58am PDT

"Although we are in the body of a big brand, we're trying to behave like a much smaller, agile startup," Gap Inc spokesperson Liz Nunan says in an email. "That's a constant challenge. We need to be simple, fast, and nimble and always put product in the center." Old Navy isn't a fast fashion brand, Nunan explains, but it does try to be quick in pumping out trend-driven clothing. These stylish pieces are sent as samples to select stores to make sure they'll sell well before the brand buys larger quantities.

Old Navy didn't always act this way. In 1993, former Gap Inc CEO Mickey Drexler converted 48 underperforming Gap stores into Gap Warehouse, a new concept that was cheaper than Gap's regular merchandise, but separate from Gap's outlet merchandise. (Sound familiar?) Confusion ensued, and within a year, Gap Warehouse had been rebranded as Old Navy.

Within 10 years, it had overtaken Gap as the company's biggest moneymaker.

"This is not Gap merchandise at new prices," Warren Hashagen, Gap's former VP of finance, told the Chicago Tribune when the concept launched. "It's an entirely separate collection of value-priced merchandise. It's not a copy of Gap."

Post-name change, Old Navy soared. According to the New York Times, Old Navy hit $1 billion in sales faster than any other retailer, ever. Within 10 years, it had overtaken Gap as the company's biggest moneymaker.

At its peak in the early aughts, the brand was raking in annual sales upwards of $6.5 billion in North America. The stores — ginormous caves that didn't rely as heavily on mall real estate as Gap or Banana Republic —€” grew exponentially in the same time frame. By 2006, Old Navy had over 1,000 locations in the US and Canada.

But it eventually couldn't top its own growth, and sales started to go south. Same-store sales (sales at stores that had been open for more than a year) were particularly negative, and Old Navy was clearly having trouble figuring out what its customers wanted.

At the top level, management flowed in and out: Dawn Robertson was brought in to revive the brand as Old Navy's new president in 2006. She in turn hired Todd Oldham as the brand's creative director hoping a more fashion-forward approach would attract younger people into the stores. Within two years, the turnaround hadn't generated the revenue the brand was hoping for and both Robertson and Oldham were let go.

Old Navy was again facing the same problem: what does it want to be, really?

Tom Wyatt, a Gap executive formerly in charge of the outlet business, replaced Robertson and dreamed up "Jenny," a fictional customer that embodied the typical Old Navy shopper. She was a young mom in her late twenties making about $50,000 a year, and Old Navy was coming after her.

The concept worked —€” to an extent. Same store sale declines slowed from double-digit losses to single digits, but Old Navy was still wasn't generating a ton of growth. Wyatt eventually resigned from his position in 2012 to take up another job elsewhere, and Old Navy was again facing the same problem: what does it want to be, really?

Then, Stefan Larsson stepped into the picture. Larsson had spent the past seven years climbing the ranks at H&M, moving from a regional manager in the US all the way up to head of global sales, and the man knew how to sell clothes. Under his direction, the brand transformed from a discount basics brand aimed at harried middle-aged moms to the type of place that makes Gwyneth want to devote a whole issue of Goop to Old Navy.

Even though Old Navy isn't a fast fashion brand, Larsson still found ways to apply what he had learned at H&M. He shortened up the brand's supply chain so it could react quicker to trends of the moment, and he hired Jill Stanton, Nike's former head of apparel, to lead Old Navy's product design. Old Navy's customers were looking for a deal, sure, but they weren't looking to dress carelessly.

Old Navy dresses currently on sale. Images: Old Navy

"We value the value customer more," Larsson explained at Gap Inc's annual investor meeting last year. "They are more important. They are more savvy. It takes more to please them. I mean, there is no reason why, when you shop on a budget, why you shouldn't get the best products and combine that with big savings [. ] and have a really good experience."

Larsson's version of Old Navy resonated well with shoppers, and the brand's financial growth reflected it. Between fiscal years 2012 and 2015, Old Navy reported a billion-dollar leap in sales.

"I think the reality is we're all crazy about value," says Simeon Siegel, a retail analyst at Nomura Securities. "I don't think that's going away. The notion that that you have to have a certain logo on your shirt to be viewed as popular is a notion of the past. For better or worse, for the most part, the stigma of cheap price has been replaced with an allure of the bargain. And Old Navy definitely plays into that."

"We value the value customer more," Larsson explained at Gap Inc's annual investor meeting last year.

As Old Navy hit its stride, Banana Republic and Gap continued to falter. It also became increasingly unclear why shoppers should spend their money at Gap when Old Navy had similar-looking merchandise for a fraction of the cost.

"In the past it felt like there was a big difference in the quality level but I'm not sure there's as much difference nowadays," says Lisa Walters, co-founder of Retail Eye. "And I think the customer's mindset has changed —€” she's willing to accept a little bit lower quality for a very sharp price point. And I think that makes Old Navy the more attractive destination for her in purchasing in those basics categories."

For example, Old Navy's v-neck tees start at $6, and Gap's tees are $24.99. Even with a reliable 40 percent off discount, Gap is still doubling the price of Old Navy. The new dresses at Old Navy may be a linen-rayon blend instead of linen-cotton, but how much does that matter when one's half the price of the other?

"Gap denim, there are people who will pay for that because it still has the legacy of having better quality but there's definitely the majority of people who are just about price," says Walters. "The world has changed and I think if you can walk into Old Navy and get jeans for $12 to $15, that's very compelling."

"The world has changed and I think if you can walk into Old Navy and get jeans for $12 to $15, that's very compelling."

Delivering on value and trendiness (without reaching too far) has served Old Navy well, but, after years of sales growth under Larsson, it was inevitable that the brand was going to hit a wall.

"I think, to some degree, Old Navy is to people raising families in the last 20 years what Kmart was in the ‘60s, ‘70s, and ‘80s," says Marie Driscoll, founder of Driscoll Advisors and an adjunct professor in international marketing at FIT. "Kmart had the blue light specials, and Old Navy always had lots of fun shopping events. And it was cheap. But you know, these companies get so big, and how do you keep getting bigger?"

The sales slide started late last year; in November, Old Navy reported a 9 percent decline in same-store sales vs. an 18 percent increase in sales over the same month in 2014. In December, the brand reported a 7 percent decline in same-store sales. In January, it was a 6 percent decline. In February, sales were flat, but by March, Old Navy was back to a 6 percent decline. It's the worst sales streak Old Navy has reported in the past four years.

"There were a combination of factors that unfortunately came together in recent months," Gap Inc spokesperson Liz Nunan explains, citing lower-than-expected store traffic, styles that didn't sell as well as had hoped at the end of last year, and excess clearance inventory in the following months. "The team is on it and making the right changes to get Old Navy back on track in the second quarter."

On top of the internal mistakes, the competition in Old Navy's market has only been growing. Amazon doubled down on its fashion business and launched a slew of inexpensive private labels; Primark set up shop in the US with clothes so cheap that it makes Old Navy look pricey.

A photo posted by oldnavy (@oldnavy) on Apr 14, 2016 at 4:02pm PDT

"At the end of the day, even though it's basics, they're in the fashion business," says Driscoll. "Fashion is about newness and trend. People want to see new."

Larsson is no longer at Old Navy —€” he took over as Ralph Lauren's CEO last fall —€” and the brand just announced his replacement last week. It's an internal hire: Sonia Syngal, Gap Inc's former executive vice president of global supply chain and product operations, will be taking over at Old Navy, effective immediately. Jill Stanton, the brand's interim president, will be stepping into a strategic advisor role and Ivan Wicksteed, Old Navy's chief marketing officer, left the company last month. Larsson had hired Wicksteed in 2013; Stanton had started at Old Navy as a creative advisor in early 2012.

Syngal has her work cut out for her, but even with the slowing sales, Old Navy still remains by far Gap's most profitable brand. Even so, all that success continually sets the bar higher and higher, and Old Navy can't keep beating its own results forever.

"I think the reality is that even the fast fashion players are feeling some pressure," says Siegel. "So at the end of the day, if we're saying value is what reigns supreme, and Old Navy has had a very strong regime, there comes a point when you have to lap your results. You become your own worst enemy."


Wait, did we just pay too much for our favorite pair of Old Navy jeans?

How much does old navy pay

Old Navy has some ‘splaining to do.

Every woman knows how hard it is to find a good pair of jeans: a pair that is the right fit at the right price. That’s why I was shocked when, during a recent visit to Old Navy’s website, I noticed that they were charging $12-$15 more for plus-sized womens jeans — but not upcharging jeans for “big” men. If they are charging plus-sized women more to cover the cost of the fabric being used, then why aren’t they doing the same for men?

Posey uses the following example to demonstrate Old Navy’s “sexism and sizism”:

Old Navy’s Rockstar Super Skinny Jeans cost $27 in a size 6. The same jeans in a size 26 cost $40. Alternatively, the men’s Slim-Fit Jean costs $25–no matter the size.

Posey goes on to explain that Old Navy doesn’t just single plus-sized women out in their pricing, it also enforces a double standard when it comes to displaying their wares:

Old Navy even takes it one-step further, by separating out “Women’s Plus” clothes into a completely different section of the website, but keeping all of the mens clothes together. I don’t understand why myself and women like me are being singled out and forced to pay more by Old Navy, when our male counterparts are not.

The petition currently has 35,000 signatures. And it completely makes sense why so many people are rallying around Posey and her demands that Old Navy stop singling out and upcharging its plus-sized female customers. The double-standard makes no sense. If you, as a manufacturer, are going to charge more for a plus-sized garment ( a practice Posey has no problem with, in her petition, she states that she “was fine paying the extra money as a plus-sized woman, because, you know, more fabric equals higher cost of manufacture.”), then you have to charge more for all the plus-sized garments you make, not just the clothing you’re manufacturing for women.

What you, as a company, are saying when you separate out female plus-sizes from the rest of your sizes is that being plus-sized means being separated out from the rest of the female population. When you treat all your male sizes as being equal, both in how you price and how you position the stock, you’re saying that men, no matter what their size, are equal. The double standard makes no business sense and it seems that separating out female plus-sizes is creating some problems.

We still love you Old Navy, and we have a solution: Just treat your male and female customers (of ALL size jeans) equally. That’s all you got to do.


How much does old navy pay

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How much does old navy pay

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