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What Old Navy Got Wrong About Inclusivity

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What Old Navy Got Wrong About Inclusivity

Old Navy can be described as the national brand of North American families. Owned by Gap Inc., it offers clothing that is relaxed, sporty, and casual and available in lively, bright colours. Old Navy clothing is suitable for all ages, and they offer very affordable price points.

But recently, the Old Navy brand has been struggling. It’s an unexpected fallout since an ambitious announcement last summer that Old Navy planned to become the most size-inclusive brand.

While the announcement was publicly celebrated for its body positivity, Old Navy’s sales began to plummet soon after the plan was launched. In April, after less than two years on the job, President and CEO Nancy Green announced her resignation. Gap’s head office also issued a forecast that sales in the spring quarter would be lower than expected citing one of the main reasons being Old Navy’s size “inclusivity” line.


A Great Idea That Didn’t Match Its Promise

At last year’s press conference, Old Navy announced that all womenswear styles would be available in sizes 0-30 and XS to 4X. This size range was a first for any U.S retailer. While other retailers offered petite or plus sizes, Old Navy’s approach broke the traditional retail practice of separating super tiny and large sizes.

Offering every style in every sizes was a decision designed to be inclusive. It idea was to prevent plus-size customers from feeling singled out by having to go to a different area of the store to shop – a significant shift in their customer experience. At the time, Gap CEO Sonia Syngal said, “This is the largest brand integration in the history of Old Navy, and it will become an important driving force for Old Navy’s business growth in the next few years.”

At the time of the announcement, Old Navy also guaranteed that all sizes would also be priced the same, breaking the industry convention of retailers charging more larger sizes. The decision was driven by more than just inclusion. Old Navy was looking to strategically position itself for future growth by engaging this growing segment of its customer base. The expectation is that the plus-size market will grow significantly as over the last five years the average American woman has grown from size 14 to size 18. As of 2016, the average weight for American women 20 and older was 170.8 pounds up from 163.6 pounds in 2000. Reasonably, the market expects the plus-size offer to grow in demand.

A Struggling Strategy

The outcome of this launch was the opposite of what was expected. The strategy did not result in new profit or growth, but instead, it dragged down the original sales as Old Navy customers, new and old, struggled to find their desired size in an overflow of super small and extensive stock. In turn, the weak sales at Old Navy negatively impacted Gap’s sales and profits, as well as those at of Banana Republic.

So, what happened? How did this strategy go so awry for Old Navy?

First, there were the challenges posed by costs. Adding new sizing options requires adding extra dimensions to production costs, from developing news patterns to purchasing new materials. But since Old Navy had committed to pricing all sizes equally, Old Navy couldn’t pass these new costs on to the consumer.

Old Navy also struggled to provide the right quantities in each size, creating shortages in some of the more common sizes and surpluses in others. For instance, it was reported that at an Old Navy store in Queens, New York, the women’s clothing on the shelves was 50% off, but the items on sale were only available in sizes XS and XXL. As a result, although Old Navy’s inclusivity philosophy resonates with many consumers, it resulted in less and less customer interest in the brand – customers simply move to an alternative provider if they can’t find their size. And, there is no shortage of accessible price point clothing options.

In the third quarter of 2021, Old Navy’s sales were down 9%, and they remained low at 6% down over the fourth quarter in 2020. While the number of large-size customers in the Old Navy database has more than doubled, these new customers are not driving enough sales, or encouraging existing customers to buy more.

It’s a complex problem to solve, and a problem that was further complicated by the supply chain problems caused by the pandemic provoking factory closures and shipping delays, making it difficult for products to get to stores quickly. This inventory shortage continued into the fourth quarter of last year, perfectly missing the Christmas sales frenzy. Further compounding the sales challenge was that consumer demand for clothing was been dramatically reduced when work from home become the norm.

Building An Inclusive Brand Is Not That Simple

A brand is not just a logo, a beautiful advertisement, or a trendy slogan.

Brand value comes from a long-term and continuous commitment or, as we say at Level5, “Brand is the Value of A Promise Being Consistently Kept™.”
In branding, commitment is based on the in-depth experience and understanding of the current and potential audiences. It’s a deliberate process, and once this brand commitment is made, it should be maintained for a long time so that the brand will have vitality and will impact all aspects of the customer experience. Old Navy has struggled to do this. For instance, despite announcing that all women’s styles are available in sizes 0 to 30 you won’t find a size 30 in the Old Navy store, you will have to go to their website to buy it. It’s a small detail but a massive disappointment in their claim to inclusivity. And when the much-heralded commitment to inclusivity cracks, customer dissatisfaction becomes evident, and this dissatisfaction and alienation from the brand is directly reflected in Old Navy’s sales.

There’s another critical challenge with Old Navy’s inclusivity strategy. Like many companies, their “inclusivity framework” is shaped by the perceptions of the mainstream, and what surfaces are that many companies still have a superficial understanding of this consumer group. So while the mainstream media lauded Old Navy’s inclusion strategy, it ultimately seems this was a shallow promise that did not end up attracting the customers Old Navy wanted to target and, at the same time erodes their existing customer base.

Lessons From The Fenty Brand

Among the current brands, there is one brand that has indeed done an excellent job in inclusivity. It can be said that it does what it says above and beyond the superficial level of marketing and public relations. That is the Fenty brand series founded by global pop star Rihanna.

Rihanna is a self-made billionaire, not because of her music but because of her Savage X Fenty and Fenty Beauty brands. Savage X Fenty was founded in 2018 as an online-only brand but was an immediate success because of its aggressive body-positive message and affordable prices. Savage X Fenty, now valued at an estimated $3 billion, has underwear, pajamas, and loungewear in sizes up to 4 XL. Their ubiquitous social media ads feature models of difference ethnic backgrounds and gender identities, unretouched images and various sizes, celebrating the natural beauty of women.
Rihanna’s unique and diverse background allows her to authentically understand and fill a considerable gap in the fashion market. An immigrant to the US from the Bahamans, she started from scratch and pursued her American Dream. The story itself is essential inspiration for the Savage X Fenty brand, and her consumer base is evident across the brand experience and products. For instance, her hallmark Savage X Fenty Show is built on an exciting yet inclusive aesthetic.

Conclusion:

Old Navy has done something bold with its inclusivity commitment – but what its experience shows is that building a viable business around a disruptive brand promise is more complicated than it seems. It requires a holistic understanding of the market, the complete customer experience, and a savvy understanding of how core product lines must be adapted to meet these commitments.


This article is based on the “Turn Lemons Into Lemonade” podcast, a Chinese language podcast created by Hua Yu.


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