In June of this year, the famous American music producer Kanye West (known as “Kanye”) announced that his fashion company Yeezy and GAP have reached a cooperation.
Yeezy once collaborated with Adidas to launch the globally popular coconut shoes, and Kanye himself is also a star with his own traffic. As soon as this cooperation was announced, the market value of GAP, which was in decline, soared. .
What are the considerations for the cooperation between the two parties? Can Kanye’s star power bring GAP back to life? The author gives his own analysis in the article.
This article comes from Medium, written by Herbert Lui, and the original title is “Why The Gap Is Betting Its Future on the Kanye Effect”.
Key points:
Yeezy and GAP announced their cooperation on June 26 to create a clothing series “Yeezy GAP”. The actual effect of this agreement is In 10 years, Yeezy will distribute dividends based on equity incentives.
In the past two decades, GAP has lost a large number of consumers due to various decision-making mistakes (including changing its logo and changing its design style). Now, brands such as Zara and Uniqlo have occupied the fast-moving market. Hard to beat.
GAP needs to rely on the “Kanye effect” to quickly rebuild its brand, and Yeezy needs to rely on GAP to break into the fashion industry. From this perspective, this is nothing short of a mutually beneficial cooperation. But the author believes that in the long run, the biggest winner is still Kanye rather than GAP.
Cooperation to extend the life of GAP
After Kanye West announced his cooperation with GAP on June 26, all GAP employees breathed a sigh of relief.
In the eyes of many people, GAP is an old brand that is about to be eliminated by the market: poor design, failed transformation, and the scandal that broke out in the Bangladesh factory, coupled with the recent Due to the epidemic, this once popular fashion giant is now teetering on the edge of bankruptcy.
But as soon as Kanye announced his cooperation with GAP, the latter’s stock price soared 42% in one day, breaking the record since 1980. At the end of the day, GAP’s closing price was up 19%.
Earlier that day, the “New York Times” reported the news that Kanye’s brand Yeezy and GAP signed an agreement to create a clothing series “Yeezy GAP”. The agreement will be effective for 10 years. It is reported that GAP hopes this series of clothing will generate sales of US$1 billion in the next five years.
This goal shows GAP’s expectations for this series. You must know that in 2019, GAP had a total net sales of only US$4.6 billion, and its sub-brands (Old Navy, Banana Republic and Athleta) revenue totaled US$16.4 billion. If this 1 billion goal is achieved, the Yeezy GAP series will become GAP’s most profitable series.
How do Yeezy and GAP split their shares? It is reported that in addition to paying the license fee, if the Yeezy GAP series reaches the expected revenue, then GAP will give Yeezy corresponding equity incentives, that is, 8.5 million shares. The current price per share of GAP is $12, and the value of these shares will exceed $100 million.
In 2016, the coconut shoes jointly launched by Adidas and Yeezy became a global hit. The best-selling coconut shoes made Kanye’s worth soar to US$1.3 billion, and he was listed on the 2019 Forbes rich list. Adidas CEO Kasper Rörsted once publicly stated that the reason why coconut shoes are so popular is entirely because of the “Kanye Effect.”
Kanye announced the news of his collaboration with GAP on social media, and then released a music video for his never-released song “Spaceship” with the hashtag #WestDayEver. This MV was shot in a GAP store, and you can see the logo with white letters on a blue background. It is said that it was inspired by Kanye’s experience working in GAP when he was 15 years old.
In addition to seeking new cooperation, Kanye has not stopped his old business. While developing new business with GAP, Kanye also released the 2020 Coconut “Crogo Shoes” on Yeezy’s official website. The shoes were quickly sold out as soon as they were released. At the same time, he is also releasing a new song “Wash Us in the Blood” online, promoting his next album to fans, and promoting a children’s animation online, etc.
Kanye West: From Rapper to Billionaire
The reason why domestic Being familiar with Kanye may be due to his feud with Taylor Swift and his recent announcement of running for President of the United States. In fact, outside of these topics, West is first and foremost a music producer and rapper. Around 2010, his album was named one of the 100 best albums of the decade by the music magazine “Rolling Stone”. He later won 9 Grammy Awards.
He once dabbled in the fashion industry, but it got off to a bad start – his brand’s debut at the 2011 Paris Fashion Show did not receive the expected acclaim.
However, he quickly found his niche at the intersection of fashion and business. In 2013, Kanye terminated his cooperation with Nike and began to establish a partnership with Adidas, which provided him with a lot of creative space. Coconut shoes have become a big success since 2016. He took this as an opportunity to loan $53 million and persuaded Facebook founder Mark Zuckerberg and former Google CEO Larry Page to ) is waiting for billionaires to invest in him. After a few years of development, he himself became a billionaire.
GAP: From a fast-moving giant to no one cares
GAP was once a fast-moving retail company in the United States A giant in the industry, known to a whole generation of young peopleChong, at the end of the 20th century when it was most popular, even the singer Madonna was endorsing it.
How did GAP get to where it is today? In a nutshell, it is slow to respond to the ever-changing marketing environment and always makes wrong decisions.
Around 2010, GAP experienced a logo change controversy. Faced with declining sales, management thought that changing the logo would attract consumers again. As a result, this decision was strongly opposed by consumers and people in the design industry, and GAP’s image was severely damaged.
In addition, it also has flaws in its design. It initially started by making jeans, but later it wanted to cater to the tastes of young people and launched clothing with sequins, diamonds and tight-fitting effects. As a result, it failed to attract new customers and even discouraged old customers.
Finally, similar fast-moving brands were established one after another in the early 21st century, and GAP had too many affordable substitutes. Reporter Rob Walker described GAP’s current situation this way: “It is like being thrown into the no-man’s land of the fast-selling industry. Target and Uniqlo have enough basic models; Zara and Madewell follow fashion more closely than it does. , it is easier to win the favor of female consumers. GAP seems to want to occupy a little bit of everything, but in the end it loses everything.”
By 2019, GAP’s stock price fell by 5%, and 141 stores were closed around the world. store. The epidemic at the beginning of this year made its economic situation even worse.
Now that Kanye has announced a high-profile cooperation with GAP, this is unintentionally great news for GAP. Kanye also appointed designer Mowalola Ogunlesi for Yeezy GAP, who has already made a name for himself in the design world and has designed clothes for many stars. This adds more confidence to Yeezy GAP investors.
GAP relies on the “Kanye effect”
GAP cooperates with Kanye not only to gain With more design resources, they also want to use Kanye’s own fame (just like Nike and Adidas) to increase sales. According to relevant data, Yeezy Adidas sales account for half of all Adidas sales.
Adidas CEO Casper Rossiter praised Kanye’s own promotional skills. In the industry, this “halo effect” also applies to explaining Apple’s popularity. Through the vigorous publicity of the Apple brand, even people who are not familiar with Apple’s series of products will gradually develop a favorable impression and established impression of the brand (think of the popularity of Steve Jobs back then), and thus have the desire to buy an iPhone or even a Mac.
Yeezy and Kanye themselves are very well-known. When they cooperated with Adidas, consumers already had a good impression of Yeezy. Some people even counted that after the cooperation between the two parties, not only coconut shoes sold well, but also Sales of Adidas’ own sneakers have also begun to grow.
Now GAP wants to use Yeezy’s reputation as a “guarantee” for itself and re-establish its reputation in the market.
Yeezy and GAP’s newly launched “YZY” trademark, the YZY store in Chicago is currently being renovated｜Picture from Youtube screenshot
But analyst Matt Powell denied the so-called Kanye effect, pointing out that Yeezy had no substantial impact on Adidas in 2017 (although sales and sales increased). Powell believes that as Adidas launches more and more products, or as coconut shoes become easier to buy, consumer demand for Yeezy Adidas will continue to weaken. After the market is saturated, Yeezy Adidas sales will decline, and star halo cannot save sales.
Therefore, Powell is not optimistic about the cooperation between Yeezy and GAP, believing that the popularity among consumers will not last.
GAP in the Yeezy ecosystem
For Kanye, cooperation with GAP It will be an important step in expanding the Yeezy ecosystem. It marks that Yeezy no longer focuses on sports brands, but is moving towards the fashion world. GAP can produce a large amount of affordable clothing for it (GAP does everything from design, production to retail by itself, without looking for middlemen) and provide ready-made stores. Yeezy can also take the opportunity to display its new sports shoes in GAP stores. and other products.
Today, Yeezy is not just a brand selling coconut shoes. While announcing his cooperation with GAP, Kanye also said that his team has projects in various industries and fields. For example, before the epidemic, they would hold a West concert every weekend and invest in plays, TV series, etc. In addition, Yeezy is also involved in the real estate and beauty industries.
It can be said that Yeezy spans the fashion, sports, music and architectural design industries. Coupled with Kanye’s own popularity, all Yeezy projects can gain high exposure.
As early as 2015, Kanye publicly stated: “I want to be the Steve Jobs of GAP.” He compared himself to Jobs in order to highlight his mission: to serve for a declining company. Inject new vitality into well-known brands.
But his meaning to GAP is not exactly the same as what Jobs meant to Apple. What needs to be warned is that such cooperation may become another legendary story of Kanye, but it will not achieve lasting benefits for large retailers like GAP. </p
