Today I am simply going to let this picture talk for itself. There is something in this for any business in the game of selling products. Whether it be clothing, technology, ball bearings, you name it.
Most fashion retailers place orders for a seasonal collection months before these lines make an appearance in stores. While overseas contract manufacturers may require hefty lead-times, trying to guess what customers want months in advance is a tricky business. In retail in general and fashion in particular, there’s a saying: inventory = death. Have too much unwanted product on hand and you’ll be forced to mark down or write off items, killing profits. For years, Gap sold most of what it carried in stores. It was led by a man with a radar-right sense of style. Micky Drexler, the iconic CEO who helped turn Gap’s button down shirts and khakis into America’s uniform. Drexler’s team had spot-on tastes throughout the 90s, but when sales declined in the early part of this decade, Drexler was left guessing on ways to revitalize the brand and he guessed wrong – disastrously wrong. Chasing the youth market, Drexler filled Gap stores with miniskirts, low-rise jeans, and even a much-ridiculed line of purple leather pants6. The throngs of teenagers he sought to attract never showed up, and the shift in offerings sent Gap’s mainstay customers to retailers that easily copied the styles that Gap made classic.
The inventory hot potato Drexler left crushed the firm. Gap’s same-store sales declined for 29 months straight. Profits vanished. Gap founder and Chairman Dan Fisher lamented “It took us 30 years to get to $1 billion in profits and two years to get to nothing” 7. The firm’s debt was downgraded to junk status. Drexler was out and for its new head, the board chose Paul Pressler, a Disney executive who ran theme parks and helped rescue the firm’s once ailing retail effort.
Pressler shut down hundreds of stores, but the hemorrhaging continued, largely due to bad bets on colors and styles8. During one holiday season, Gap’s clothes were deemed so off-target that the firm scrapped its advertising campaign and wrote off much of the inventory. The firm’s model of drawing customers in via big-budget television promotion had collapsed. Pressler’s tenure saw same store sales decline in 18 of 24 months. A Fortune article on Pressler’s leadership was titled “Fashion Victim”, BusinessWeek described his time as CEO as a “Total System Failure”, and Wall Street began referring to him as DMW for Dead Man Walking. In January 2007, Pressler resigned, with Gap hoping its third Chief Executive of the decade could right the ailing giant.