Thanks, Gap (GPS) for making my Monday even harsher. Today came the official announcement that Gap is shuttering its trendy online shopping offshoot, Piperlime, at the end of April.
To be fair, we’ve known this was coming for a few months now, and Gap already closed down the one Piperlime store in New York. But I was still hoping Piperlime, one of my favorite sites, might get a last minute reprieve.
Gap’s reasoning is the same one we’ve seen from quite a few corporations this past year: consolidation. You don’t even have to look further back than last Friday, when GE (GE) announced it was selling off its GE Capital arm. The message has been consistent, whether it comes from a tech company, conglomerate, or retailer: “we’re selling off our outlying brands to focus on our core business.”
The same goes for Gap. Piperlime had about $100 million in revenue, which while nothing to sneeze at, is only 1% of Gap’s $16 billion in total revenues. According to Gap, Piperlime wasn’t big enough of a business to be worth the distraction to run it.
I don’t agree with Gap’s move here. For all intents and purposes, Piperlime was a successful brand. It had a loyal following (in part thanks to its fantastic branding and customer service), appealed to a younger demographic, and helped give Gap a bit more fashion cred. It exposed Gap to young, fashion savvy consumers who might not have otherwise shopped on the “stodgy” main site.
I will venture a bold prediction. This may actually hurt Gap’s future revenues. I think Piperlime’s sales impact went beyond the $100 million attributed to it. It’s likely that Piperlime had an effect (even though likely a small one) on sales at Gap’s other businesses, from young consumers brought into the Gap family through the lure of Piperlime. Personally, there are plenty of times I’ve browsed Gap and Old Navy only after clicking a link from a Piperlime email.
I’ll be interested to see the effects, even if they are small, of the closing in the next few quarters of Gap’s earnings reports. Given this, plus the pains felt by a lot of retailers recently, I’ll be neutral or bearish on Gap for the near future.
For those looking for a silver lining, look no further! Piperlime shutting down means it needs to get rid of its inventory ASAP. As such, the entire website is on sale!