Good morning. Gap is trying to keep its revival going with a new line of handbags from the designer who made Coach a household name, Suzanne Kapner reports exclusively this morning for The Wall Street Journal.
Reed Krakoff's bags, in fleece and denim, could help Gap seize a bigger piece of the roughly $15 billion accessories category.
"Accessories are not a new business for Gap, but we've never been in it with distinction or conviction," said Gap Inc. CEO Richard Dickson.
Handbags have the added allure of having higher profit margins than apparel and for driving foot traffic to stores and websites, Dickson said.
I asked Suzanne two quick questions about Gap's new direction.
Reed Krakoff built Coach into a premium powerhouse, while Gap is an accessible, everyday mall brand. Is Gap trying to open a lane for higher-end business and branding?
Suzanne: Gap is definitely not going higher-end. It's sticking with its value proposition and pricing for this new handbag line. The prices range from $29.95 to $148, which are similar to other Gap items. Instead of leather, Krakoff is using faux suede, denim, fleece, canvas and other less expensive materials that help keep costs down and align better with Gap's casual vibe.
The handbag market is crowded with some very big names and aspirational products. How is Gap, which is much more known for apparel than accessories, trying to stake its claim?
Suzanne: Gap is trying to carve out a niche in this crowded market by sticking with what it's known for, such as jeans and hoodies. The Five-Pocket Tote is made from denim and the Hoodie Tote is made from fleece. Those are unusual choices for handbags, but they signify that these are Gap bags.
The marketer's takeaway: It could be tempting to use higher-margin handbags to elevate Gap's prestige, but the retailer has instead found ways to amplify its core brand signatures. That could help justify Gap's new products to consumers while reinforcing what the brand stands for. It's the same playbook that made Dyson's Airwrap and Stanley's Quencher hits-one that less-successful extensions like Peloton's apparel line could have used.
Sub Culture
Jersey Mike's Subs has cashed in on its long cultivation of affluent, older customers, riding their imperturbable spending, exposure to TV advertising and steady brand loyalty to a $7.5 billion valuation on the New York Stock Exchange.
But its new plan to grow from about 3,300 stores to 15,000 worldwide depends on a younger generation that's less well-off and more focused on viral trends, the WSJ's David Wainer writes today.
Gen Z diners aren't as likely to shell out $15 to $20 for a sub combo no matter how many commercials star Danny DeVito and Eli Manning.
Part of Jersey Mike's play will be to boost its presence in social media, where it spent about 1% of its marketing budget last year compared with 10% to 25% at some rivals.
A customizable, protein-heavy sub that's sliced to order has a decent shot online, David writes.
Its subs have gone viral before. Nick Jonas, for instance, posted his own off-menu turkey and provolone creation on TikTok, inspiring other viral posts. This won't pass as health food, but it can pass as fresh. Properly marketed, it is the kind of splurge a Gen Zer might happily make.
That social-media stat has me daydreaming, though. What would you do if you had to expand social media from 1% to 25% of your marketing budget overnight?
The Magic Number
Valuation of Shein, the fast-fashion power that won young American shoppers with $3 T-shirts and $10 jeans, after a subdued stock-market debut. Shein was valued at $100 billion in a 2022 funding round but has been hit hard by the loss of a U.S. loophole that had let it ship low-cost products tariff-free.
Mod Squad on the Pod
We recently shared Katie Deighton's fascinating look at the growing skirmishes between marketers who want to use Reddit to influence AI chatbots and Reddit moderators who want nothing of the sort.
If you missed it or just wanted more, Katie just sat down with The Journal podcast host Ryan Knutson to talk through the trouble, along with one of those very same, protective moderators. Click here to listen.
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