Gap x Zalando: “Not a single thumb screw was used”

American apparel brand Gap has recently become available online via Zalando. This is a milestone for the two companies; the sale of Gap via an online retail platform is a first for the brand and the move is being closely monitored by headquarters in San Francisco. Gap is of interest to Zalando because it does not have any stores in the latter’s biggest markets: Germany, Switzerland and Austria.

However, the collaboration also raises some questions. Is Zalando planning a move into the United States or Latin America and taking this path as an easier entry point into those markets? And why would Gap, which already has its own European webshop, relinquish a share of its margins and sell via Zalando? FashionUnited had 20 minutes with Gap Senior Vice Present Stefan Laban and Zalando founder David Schneider and asked the pertinent questions.

The Gap.eu webshop delivers to 25 European countries, with Poland, Croatia, Romania and Bulgaria the most recent additions to the list. The collaboration with Zalando ‘only’ delivers to 14 countries. So what makes this proposition interesting for Gap?

Stefan Laban, Senior Vice President Gap: “There are three reasons. Our customers shop in different ways and through different channels, both in the physical stores and online via various webshops. Directly through us, but also through online retailers like Zalando. Our goal is to be where our customers are and customers - also - shop at Zalando. Because Zalando combines our products with those by other brands, we also hope to appeal to a new target audience. Moreover, Zalando sells in countries to which Gap does not deliver yet, such as Switzerland and Norway.”

Gap has no stores in Germany, the brand was active here in the Eighties and Nineties but not anymore. Will Gap try to reenter the German market through its collaboration with Zalando?

Laban: “A collaboration such as this one naturally provides interesting information about the market and the products that are popular here, but, as of yet, there are no concrete plans to open stores in Germany again.”

Gap’s presence and growth in Europe (198 stores, 2 new locations in 2014) is smaller than in Asia (266 stores, 42 new locations in 2014) and in its domestic market of North America (960 stores). Why is Gap so reticent when it comes to Europe?

Laban: “Gap is not reticent when it comes to Europe. Europe is an important market for us. Several years ago we entered Italy. But if you look at the global picture, Asia offers the biggest growth opportunity. Within the timespan of five years, we opened over 100 new stores there. That is why it is given the priority. That does not mean that the situation in Europe is static, we are always looking for new growth opportunities. Either through directly-owned stores or franchises (the latter mainly in Eastern Europe) or through collaborations with department stores like El Corte Inglés, where we use Gap corners.”

Usually the brands are the ones to call the shots. They decide which stores will sell the brand and what the minimum order are. Zalando is now the most popular girl in the room with whom everyone want to dance. Which conditions did Gap have to accept to be able to sell via Zalando?

Laban: “Ha! What shall I say about that? Not a single thumb screw was used, if that’s what you mean. Gap believes in collaboration. We have numerous partnerships with companies all over the world and the situation must be beneficial to both parties. Not like only we are profiting from the situation, and they aren’t. We had some good discussions with Zalando and we came to an agreement quite quickly. The whole thing actually proceeded very smoothly.”

David Schneider, co-founder of Zalando: “I agree. Zalando provides a good platform for brands to present themselves, their stories and appeal to new target audiences, but Zalando is not a retailer in the traditional sense of the word. Furthermore, that is not how we present ourselves in the relationships with our suppliers. We want brands to joins forces with us because they enjoy working with us. I’m convinced that the basis for a long-term partnership.”

Laban: “It’s also a risk for Gap. What we are basically doing is handing over a 40-year-old iconic brand to Zalando. They take care of the photography and the online presentation, things we normally control ourselves. So they can’t mess this up.”

Gap CEO Art Peck, who took over the reigns from Glenn Murphy in February, has made conquering what he terms the age of ‘Retail 3.0’ a key part of his policy. Peck, formerly in charge of Gap’s omni-channel strategy, believes in a future where the emphasis is on mobile shopping and physical stores play a new part. How does the collaboration with Zalando fit into this policy?

Laban: “Gap is a pioneer in employing technological advances and a collaboration with a digitally advanced company like Zalando therefore makes perfect sense. It is our first time working together with an online retail platform such as this, so the collaboration is being closely monitored from our headquarters in San Francisco.”

Gap Inc, which also oversees the brands Old Navy, Athlete and Banana Republic, has been struggling with declining results for a while now, with the Gap brand and the Gap collections in particular being blamed for the decline. According to experts, the iconic brand is losing touch with the consumer and is not keeping up with the trends. In January of this year, creative director Rebecca Bay left the company after joining from H&M’s COS brand two years earlier. Why is the Gap brand a valuable addition to Zalando’s offering?

David Schneider: “Gap is a great label, an iconic brand, known the world over and with terrific products. With the opportunity to work together presented itself, we didn’t hesitate. Germany is our domestic market and we also have many customers in Switzerland. These are countries where Gap has no physical presence but is nevertheless well known. For Zalando, it’s primarily about the product and not about what the media writes about the brand. If consumers like it, can combine it and want it, then we want to sell it. Our strength is the technical aspect, the infrastructure and the contact with the customers. A brand like Gap has great products and a story, which is of crucial importance to us.”

Zalando mainly offers well known classics by Gap, t-shirts with logo’s, hoodies and casual denim. How is the reception?

Schneider: “Sales in the first ten days have exceeded expectations. Gap children’s apparel has done noticeably well. Children’s fashion is a strategic segment for Zalando. We started it because women in particular shop with us. In just a short time, Gap has emerged as one of most successful children’s apparel brands.”

By working together with Gap, is Zalando hoping to present itself as a reliable partner for American brands with a goal to enter the North and South American markets in the future?

Schneider: “That was not the intention and we have no concrete plans, but I won’t rule it out. I still see many growth opportunities for Zalando in Europe. We have invested a great deal to be able to operate successfully in this differentiated market, in which every country requires a different language and approach. This is an aspect of the European market which American players sometimes misjudge, but is in fact our strength. Zalando invests substantially in technology, in customer experience and in the future of mobile shopping. But certainly, if you know how to do all that and have the capabilities, it is a concept that can easily be exported.”

(A move towards Latin America would actually make sense for Zalando. Founder Robert Gentz and David Schneider launched their first internet company Unibicate - a networking website comparable to Facebook - almost 10 years ago in Mexico, where both were temporarily studying at the time, ed.)

What is next for Zalando? What does the future have in store?

Schneider: “Online retail is the future, it just works better than offline. I think we’ve proved that. The selection is bigger online, your reach wider and you never have to give ‘no’ for an answer. A next step could be to link the systems of different online retailers with each other and to also include offline retail. I don’t believe in restrictions, the end goal is to lift all restrictions. For example, why should a customer only be able to buy at Zalando? Or only purchase products we have in our warehouse? The consumer decides and the mobile phone has turned everything on its head. People sit in the train or the bus and shop on their phones. Ideally, we should some day be able to deliver such an order to your door by bike messenger within 20 minutes.”

Photos: Gap x Zalando launch in Berlin, by: Nils Krüger