Gap Invites Shoppers to Make a Deal

AdAge notes: Daylong Deal Echoes CEO’s Call for More ‘Surgical’ Promotional Activity by Retailer

Gap began promoting the site on its Facebook page today, allowing customers to name their price for a pair of men’s khakis. The deal lasts until tomorrow. The site keeps it simple: Clicking on the “Let’s Make a Deal” button takes users to a page where they select one of 18 styles of khakis, retailing for either $49.50 or $59.50, and make an offer. Gap then presents a deal, and users can either accept or make a counter-offer before Gap makes its final offer. Gap’s offers ranged from $35 to $45 for a $49.50 pair, according to the site’s winners tab.

In a retail environment that’s being overrun by group-buying sites and flash sales, the site appears to be yet another way to engage with deal-hungry consumers. Chris Donnelly, an executive partner in Accenture’s retail practice, said the trend toward alternative pricing models, popularized by the Groupons and Gilt Groupes of the world, is only accelerating.

“There’s all this focus on pricing,” Mr. Donnelly said. “You get to this space we’re in right now where, even though the economy is picking up, consumers still expect things to be on sale. That leaves the retailer to come up with ways to give discounts without completely eroding margins.”

To that end, Gap’s used-car sales approach is actually more sophisticated than couponing. “[The site] is a better way of price discrimination, because you’re trying to tailor the price to each individual,” Mr. Donnelly continued. “A coupon is a very blunt tool. If I give everyone a 30% off coupon, some would have bought full price and some still won’t buy.”

Glenn Murphy, CEO of Gap Inc., said during the company’s recent fourth-quarter conference call that the retailer would become “much more surgical” in its promotional activity this year. He said that in 2008 and 2009 promotions were overly aggressive, as retailers grappling with the recession attempted to drive traffic. In 2010, he said, there was still room for improvement.

“In general, [2010 promotions] could have been done more surgically. [There] could have been a little more thought and innovation and creativity brought to it. And that’s the expectation of a company like ours,” Mr. Murphy said. “Anybody can put an easel outside a door that says take an extra 25% or 30% off. We’ve fallen for that trick a few times, and that’s not smart as far as I’m concerned.”

Gap has already been experimenting with different types of promotions. It offered the first national Groupon deal last August. And sibling brand Banana Republic dabbled in flash sales, with a “three-hour lunch break” online sale last fall. is certainly creative and innovative, but it remains to be seen whether it will be a hit with consumers. Gap did not immediately return a call seeking comment. Early comments on Gap’s Facebook page were mixed. And Mr. Donnelly said it’s only a matter of time before consumers began sharing their strategies for getting lower final offers.

“I suspect some people will really like it,” Mr. Donnelly said. “But it all depends on the execution in the long run and whether people think they got a good deal.”