From Levi’s Retailer to Its Own Fashion Brand, Gap Reinvented Itself

Gap Inc., a multinational clothing and accessories retailer headquartered in San Francisco, California, began its journey in 1969. Founded by Donald Fisher and Doris F. Fisher, the company's initial concept was inspired by a unique retail model and a specific need in the market. What started as a single store focused on Levi's products quickly evolved into a major player in the apparel industry, eventually encompassing several well-known brands. The

early decisions and strategies laid the groundwork for its significant expansion and transformation over the decades.

The Founding Vision and Early Strategy

Donald Fisher, a California commercial real estate broker, conceived the idea for Gap after observing the success of 'The Tower of Shoes' in Sacramento. This shoe store attracted crowds by advertising a vast selection of brands, styles, and sizes. Fisher noted that even large retailers like Macy's frequently ran out of popular Levi's sizes and colors. This observation led him to approach Walter Haas Jr., then President of Levi Strauss & Co., with a proposal to replicate the 'Tower of Shoes' model for Levi's products.

Haas initially referred Fisher to his Director of Advertising, Bud Robinson, expecting a quick refusal. However, Robinson and Fisher collaborated to develop a legal test plan for what would become The Gap. The name, suggested by Donald's wife Doris Fisher, was a reference to the "generation gap." A key part of their agreement was that Gap would stock only Levi's apparel in every style and size, organized by size. Levi's, in turn, guaranteed that Gap would never be out of stock, promising overnight replenishment from its San Jose, California warehouse. Robinson also offered to pay 50% of Gap's radio advertising upfront, structuring the marketing package to avoid antitrust laws by making it available to any store exclusively selling Levi's products.

Initial Expansion and Diversification

The first Gap store opened on August 21, 1969, near City College on Ocean Avenue in Ingleside, San Francisco. Its initial merchandise was limited to Levi's and LP records, aiming to attract a teenage customer base. The concept proved successful, leading to rapid expansion. In 1970, a second store was established in San Jose, California. The company's corporate headquarters were set up in Burlingame, California, in 1971, with a small team of four employees.

By 1973, Gap Inc. had grown significantly, operating over 25 locations. Its reach extended beyond California, with the company entering the East Coast market through a store in the Echelon Mall in Voorhees, New Jersey. A pivotal moment in Gap's evolution occurred in 1974 when it began to introduce private label merchandise. This move marked a shift from exclusively selling Levi's products to developing its own branded apparel, a strategy that would become central to its identity and future growth.

Leadership Changes and Strategic Shifts

The 1990s saw Gap Inc. assume a more upscale identity and revamp its inventory under the leadership of Mickey Drexler. However, Drexler's 19-year tenure ended in 2002, following issues such as over-expansion, a 29-month sales slump, and tensions with the Fisher family. Despite his departure, merchandise he had ordered prior to leaving contributed to a strong rebound in sales a month later. Drexler went on to become CEO of J. Crew, having refused to sign a non-compete agreement.

Following Drexler's exit, Robert J. Fisher recruited Paul Pressler as the new CEO. Pressler was credited with closing under-performing locations and reducing company debt. However, his efforts to regain market leadership through focus groups were ultimately unsuccessful. In 2007, after two disappointing holiday sales seasons, Pressler resigned. Robert J. Fisher stepped in as interim CEO, having previously held senior executive positions within the company, including president of Banana Republic and the Gap units. The board's search for a new CEO emphasized deep retail and merchandising experience, an understanding of the creative process, and the ability to execute strategies effectively in complex environments while maintaining financial discipline. Glenn Murphy, previously CEO of Shoppers Drug Mart in Canada, was announced as the new CEO in July 2007, bringing with him new lead designers to help redefine the fashion image of Gap's brands.