(Image Source: Supply Chain Dive)
As the pandemic significantly changed the shopping habit of customers from in-store to online, retailers have had to quickly adapt to meet demand and enhance the fulfillment process for online orders. Last year, Gap’s online sales reached $6 billion, equivalent to a 54% YoY growth. This result was due to its powerful omnichannel platform.
To cope with high demand, Gap intends to increase its inventory replenishment for the 6 first months of the year, but it might not go as planned. The company foresees port delays, higher transit costs, and airfreight expenses which will cause a decrease in the inventory levels.
“We will leverage our responsive supply chain to adjust replenishment within the first half of fiscal year 2021 and believe this strategy will enable us to maximize gross margin over the life of these products,” Gap CFO Katrina O’Connell said on the earnings call.
Gap Inc. is planning to spend roughly $900 million in 2021 for investments in e-commerce, customer loyalty program, and distribution center capacity expansion. The company’s fulfillment system is designed based on customer loyalty.
Under the system, delivery speeds and options will be divided as gold, silver and bronze, “to optimize the speed of delivery fulfillment based on our best customers and manage fulfillment costs effectively,” said CEO Sonia Syngal. This is a way to show gratitude to its “most valuable lifetime” shoppers and manage fulfillment costs more effectively.