By Brooke Sinclair
- Gap resorted to pre-orders to validate and capture customer demand while eliminating the risk of overproduction for Yeezy’s $200 puffer jacket
- The Yeezy line could bring in almost $1B in sales next year, far ahead of the $1B Gap was aiming for by 2025
It has been almost a year since The Gap’s (GPS -0.36%) tie-up with West was announced and before spending thousands of dollars on a product nobody asked for, especially after a global pandemic, the company has resorted to the age-old trick of pre-orders. Wells Fargo stated Gap’s upcoming Yeezy line could bring in almost $1 billion in sales next year, far ahead of the $1 billion Gap was aiming for by 2025. The retail and hip-hop duo are clearly using the jacket’s debut as a way to gauge consumer interest in the collaboration and validate customer demand, all while eliminating the risk of overproduction.
Why This Matters: The Yeezy clothing line is unique to say the least, though its Flintstone shoes and puffy nylon smurf jackets are not for everyone. How difficult would it be to produce, ship, and then possibly return thousands of dollars in inventory? In short, it would be extremely difficult. Before risking thousands of dollars on inventory, Gap wants to use the momentum of Yeezy sales to trick customers back into brick-and-mortar stores. Logistically it’s a brilliant idea. Although Gap CEO Sonia Syngal remains hush-hush about details of the financial terms behind the Gap and West partnership, my guess is that Gap will require in-store pickups for the blue puffy jacket.
The best way for Gap to increase its margins, is to skip shipping large awkward packages directly to consumers’ homes. I predict Gap will close the majority of their retail locations, while creating select luxury retail and customer service pick-up destinations. Perhaps the legacy retail brand should make customers pick up their smurf jackets from the back of the store, give people a chance to look for the perfect $70 t-shirt to wear underneath a big puffy nylon jacket that will be shipped later this Fall.
Situational Awareness: Bloomberg values the Yeezy Gap collab, West’s sneaker and apparel with Adidas (ADDYY +0.50%) and Gap at as much as $970 million. Additionally, a previous report by Swiss bank UBS estimated that Yeezy’s separate collections with Gap and Adidas were collectively worth between $3.2 billion and $4.7 billion. Kanye owns 100% of Yeezy and earns 15% on all shoe sales from its Adidas line. This line has been a smash success, bringing in nearly $1.7 billion in revenue last year and the deal runs through 2026. West has publicly lobbied for a more significant position at both Gap and Adidas.
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