A Closer Look At Gap’s Augmented Reality Initiative

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As it struggles to compete with fast fashion retailers and improve its time to market, Gap Inc (NYSE:GPS) is embracing newer technologies to attract customers. The company recently partnered with Google to develop an augmented reality shopping app. This application provides users with a digital mannequin to try different clothing on. Using this app, the customers can take a closer look at the clothes, try out different sizes on the mannequin and get a “near real” experience while purchasing apparel online. E-commerce companies such as Alibaba and eBay are already experimenting with virtual reality stores and Gap’s foray in this technology is an indication that the brand is looking at new technologies to attract users. Gap is pioneering this technology in the apparel retail industry and whether it will lead to higher online sales remains to be seen.

See our complete analysis for Gap Inc.

Capturing The Growth In The Online US Apparel Market

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Online sales of apparel in the U.S. are surging. According to a report published by Internet Retailer, online sales of apparel in 2015 registered a nearly 20% growth, reaching $ 80 billion. In the same year, store sales grew only by around 1% reaching $ 375 billion. As online sales of apparel increase, using interactive technology to attract users can give Gap a competitive edge. The augmented reality app which is likely to be released next month is still at a nascent stage and can be developed further to improve the customer experience. With this version, consumers can choose from five pre-determined body types to “try” the clothes on. The user can physically walk around the digital avatar to see how the clothes look from different directions.  However the app will work only with phones that have Google’s Tango augmented reality technology. For a wider adoption, the company might have to look at ways to make this app available in other smartphones as well. We believe this technology should provide consumers an interesting way to shop apparel online through a “real” look and feel experience.

According to our estimates, Gap’s Old Nay and namesake brand together account for nearly 80% of its valuation. We do not expect any significant growth in the store and online revenue per square foot of both these brands over our forecast period.

While the company is struggling to grow revenues and inventories are piling up, a new way to shop online can attract curious customers and generate higher e-commerce traffic. The ability to closely look at garments and their fit can also lead to higher conversions. However, for Gap to revive its brand the company needs to focus on fresh designs, faster time to market so that customers can see “new” apparel every time they visit a store or open the augmented reality app.

 

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