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Gap CEO seeks partnership with centers

By Nancy Cohen

Gap President and CEO Mickey Drexler offered to work with developers to test new ideas such as coat checks and parcel storage.

LAS VEGAS — Gap President and CEO Millard S. “Mickey” Drexler called on developers at the convention to join with his company in partnership.

“We’re only as good as your shopping centers are,” Drexler told the crowds packing a luncheon session here in May. “It’s an extremely competitive environment, moving at warp speed, and together we have to be more creative and smart about our business.”

His remarks contrasted sharply with his last ICSC presentation at the 1994 Fall Convention in San Francisco where he railed against CAM charges. Six years later, he struck a more collaborative posture, noting that retailers and shopping centers share one goal — to provide customers the experience they want — and that Gap will join with its landlords to do just that.

“You have to work hard with us to be as innovative as we can, because believe me the customer figures it out first,” Drexler said, noting that Gap’s own “reinvention” efforts are an attempt to satisfy the customer and stay ahead of the curve. “You can help us,” he added, inviting developers to voice complaints and observations so that his company can improve its stores.

Returning the favor, Drexler used the occasion to stimulate developers to improve their projects, too. “I look at the shopping center — rightly or wrongly — as a town square or village,” he said. “What do you have to do to bring people there? You can do one little thing and be famous for it.”

Noting that Gap’s operative strategy is to keep things simple, Drexler encouraged developers to do the same: “Keep it simple and easy, convenient and accessible. Why won’t consumers buy online if stores and shopping centers are a hassle? Convenience is important to all of us. What can you do to make it easier?”

He not only suggested ways — such as providing coat checks and parcel storage — that shopping centers could enhance their convenience; he also offered to help. He said that Gap stores could test out such ideas, serving, for example, as a drop-off point for shopping bags — even those filled by other tenants.

Challenging developers to continuously rethink their formulas — including tenant mix — to keep them fresh and appealing, he said, “Treat the entire mall like a department store — turn [the inventory] upside down if you have to.”

San Francisco-based Gap Inc., which scored $11.6 billion in sales last year, operates more than 3,100 stores worldwide, 570 of them newly opened in 1999. Despite slumping same-store sales, which have given rise to concerns of cannibalization, plans are to open another 600 this year.

Drexler defended the company’s aggressive expansion plans, explaining that it owns less than 6% of the apparel market. “Look at Nike, Coke and McDonald’s — they have over 30% of their markets. So we’re lagging in market share — and for us, that’s an exciting statistic.”

Opportunity remains enormous, he said. “We look at our market share by zip code to see where we’re not,” he said. “We’re also looking at our share in your centers. We want to partner with you on getting our fair share.”

So despite Drexler’s willingness to work with developers, his comments suggest that the added value he feels his company brings to centers may entitle it to special privilege.

“We spend more than half a billion dollars on marketing to drive traffic into stores and shopping centers — how many tenants do that?” he said. “It’s an important difference we can make. Gap, Old Navy and Banana Republic are attracting three-quarters of a billion customers each year. That’s a lot of people visiting our stores and your centers.”

The fact that Gap’s three brands are available only in the company’s three chains is another asset to centers, he said. Offering consumers something they can find nowhere else (even if they are T-shirts and jeans) “prevents our products from being commodities.” So don’t expect Gap to ease up on lease negotiations, “We’ll continue to make tough deals to get the right returns on the value of our brands,” he said.