Another Gap in the market: fashion chain Gap to close 19 stores

July 10, 2021

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2 min read

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What's going on here?

The US-owned fashion chain, Gap, has announced the closure of 19 stores in the UK and the Republic of Ireland, with a distribution centre in Rugby also at risk of shutting down.

What does this mean?

Having reported losses of £740m in just three months, Gap’s 19 store closures come after the company decided not to renew store leases that are due to expire at the end of July 2021. It has not yet announced which stores will close or how many jobs will be lost. According to the Centre for Retail Research (CRR), between the start of the COVID-19 pandemic and 31 March 2021, 190,000 jobs have been lost in the retail sector alone, a figure which will only be aggravated by Gap’s store closures.

Gap permanently closed 204 stores globally in 2020 due to the pandemic. The UK/ROI closures are part of the company’s strategic review of Europe announced in October 2020, whereby the chain hinted at the closure of Europe-wide stores. However, it claims that retaining a European presence is important, and may result in a greater focus on online sales.

What's the big picture effect?

This story should be viewed within the greater COVID-19 context. The pandemic has taken a series of prominent high street fashion chains when non-essential retailers were forced to close during lockdown periods. The CRR claims there were 14,809 permanent retail store closures between March 2020 and February 2021. Unlike Topshop and Debenhams, Gap will not completely vanish from the high street just yet; 50 UK and ROI stores are set to remain open.

However, lockdown measures have led to deserted high streets and accelerated a trend towards e-commerce: in-person sales are unlikely to revert to pre-pandemic levels. Therefore, it is increasingly important for brands to strengthen their online presence and digital power, evidenced by the success of Asos and Boohoo who have been able to buy out Topshop and Debenhams respectively. Whereas, Primark has refused to sell online resulting in it remaining stagnant throughout lockdowns. Consultancy firm McKinsey notes how total retail sales volumes fell by 1.9% in 2020 compared with 2019, the greatest annual fall on record. Conversely, online sales rose to a record high of 33.9% as a share of all retail spending. Gap will likely need to capitalise on this shift to e-commerce, in order to remain competitive and stay afloat.

As well as this e-commerce shift, another key issue is the job losses that could result from Gap’s closures. In 2020, McKinsey estimated that 7.6m jobs (24% of the UK workforce) were at risk due to COVID-related lockdowns. Those most at risk are in low-paid roles: Gap’s retail workers fit this description. At a time where money is tight and many operations are moving online, retailers will inevitably cut jobs to reduce costs, and there will be less demand for retail employees in brick and mortar stores. Governments may need to expand financial support to suffering companies, for example by extending furlough schemes to enable the retail sector to weather the storm. 

Report written by Lauren Ainscough

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