The Gap is shutting down its advertising agency because of the state of the current market.
The Gap will be dissolving its advertising business GPS Media. Instead, the popular retailer plans to focus on its custom apparel and B2B logistics services. This decision was confirmed by a company spokesperson who told Business Insider that the retail media project “was part of the company’s test-and-learn culture.”
“Our B2B team is focused on the businesses with the strongest demand and greatest momentum,” The Gap spokesperson explained. This includes GPS Platform Services, which provides warehouse storage and logistics like next-day shipping. There is also GPS Apparel, which creates custom programs for various global brands.
Both endeavors leverage the company’s massive supply chain, customer insights, and technical and digital capabilities, which are still in the early stages of development. “We are excited about their prospects,” the spokesperson told the publication. GPS Media was announced in February 2022 by Sally Gilligan and Mark Donahue.
The concept allowed brands to purchase advertising space on The Gap’s e-commerce site to attract shoppers. The retailer hoped to tap into the new revenue stream at the time, with an estimated projected value of $45 billion. But as companies started to expect more from marketing campaigns at a lower cost, the clothing outlet decided to scrap the platform.
However, the situation isn’t unique to The Gap. The entire advertising industry is facing an “existential need for change,” The New York Times says. Agencies need to dismantle the remnants of their outdated advertising models or risk becoming completely irrelevant. The industry is struggling to adapt as Google and Facebook reshapes ad delivery.
In 2024, Facebook, Google, YouTube, and other digital outlets are expected to rake in more funds than traditional advertising platforms. Once the giants of advertising, these marketing areas are facing increased competition from their digital counterparts, which offer more targeted and effective options. The Gap’s decision to dissolve its ad business is also a response to consumers changing preferences.
People are increasingly turning to ad-free entertainment options like Netflix and becoming more resistant to traditional advertising. As a result, the advertising industry is facing a future where people hate ads. In response, companies are looking for new and innovative ways to reach consumers. While The Gap’s decision to dissolve its advertising business is a bold move, it may be necessary.
The advertising industry is in flux, and The Gap experienced considerable challenges competing for retail media revenue. Speaking via Media Post, Chief Revenue Officer of Retail Media Network Provider Cooler Screens, Lindell Bennett, explained the impact of an increasingly crowded advertising landscape on the retailer.
“They only sell their own brands,” Bennett said. By contrast, Amazon, Walmart, Target, and Kroger sell across multiple categories and have a grander online scale. He added that The Gap needed to differentiate itself to be successful in advertising.
Founded in 1969 by Donald and Doris Fisher, The Gap began as a single store in San Francisco. In the 1990s and early 2000s, the company experienced significant growth and success, becoming a cultural icon and a staple in American fashion. However, the retailer has struggled to maintain its relevance in recent years and has faced declining sales and profits.
In 2019, The New York Times published an article titled “Was the Gap Ever Cool? A Look at 50 Years in Denim and Khaki.” The article discussed how the retailer’s brand identity has become bland and corporate and how the company has struggled to keep up with changing fashion trends. But despite these challenges, the Gap remains a well-known and iconic American clothing company.