Gap Inc. is chasing after younger shoppers and fatter profits with beauty products and accessories.
Speaking at the Goldman Sachs Global Retailing Conference Thursday, Gap Inc. CEO Richard Dickson called these “sleeper categories,” which the company’s internal research shows already resonate with its customers.
“We believe that those are two very big opportunities for us to go after attracting new generations as well as high-margin businesses that will complement our apparel business,” he said.
Efforts to expand are already underway, at least at Old Navy. This fall, the value brand will launch beauty and personal care products in 150 stores, with some locations offering staffed shop-in-shops, Gap Inc. announced Thursday. This is the test-and-learn phase of a plan to scale an Old Navy beauty business next year. The company’s other retailers — Gap, Banana Republic and Athleta — will also launch “brand-right expressions” in the category.
The news comes a day after Old Navy announced a “reimagined handbag collection,” which Old Navy Chief Creative Officer Zac Posen said “is thoughtfully designed with clean lines, great proportions, and materials that feel elevated without being overworked.”
Gap Inc. brands sell, or have sold, some beauty items and accessories, but Dickson is aiming high.
“There’s some small pockets of beauty within Old Navy and a historical fragrance collection at Gap, but we intend to really start to invest in those categories and start to build them up as true businesses within our brand and within our portfolio,” he said.
The company is pursuing the growth potential in beauty, he said, citing research from Euromonitor that found beauty and personal care sales could surpass $100 billion this year and that the market is one of the fastest growing in the U.S.
Growth in the mass beauty market outpaced prestige beauty in the first half of this year, according to Circana research last month. Based on dollar sales, mass fragrance sales in particular rose 17% — the category’s fastest-growing segment — compared to a 6% increase in prestige fragrance. Moreover, just 14% of U.S. beauty consumers believe higher prices mean a product is of better quality, Circana found.
Gap Inc. also has a “nice accessory business,” Dickson said.
“Nice is nice, but we believe it could be much more important,” he said. “Our customers want it. It resonates with our customers, we just haven’t really gone after it with intent.”
The company has been exploring these areas by speaking to thousands of consumers nationwide, conducting rigorous research about the potential reception. There’s a high level of excitement around the idea, which has given the company confidence, especially given that the company’s brands already stand out in the market, Dickson said.
“We have scale,” he said. “It’s an incredibly powerful engine for us that has opportunity for even more growth. We’re the largest specialty apparel business in the U.S.”