At 8:50 on a Wednesday morning, nearly two dozen shoppers hovered in front of H&M’s new global flagship store on the corner of West 34th Street and Avenue of the Americas in Manhattan, eager to get inside as soon as the doors were unlocked at 9.
Directly across the street, a Gap store was also preparing to open. A lone woman stood in front. She was handing out fliers for a Cuban restaurant as pedestrians hurried by.
The contrast summed up the state of American retailing. One by one, iconic brands like Gap, J. Crew, American Apparel and Abercrombie & Fitch have reported slumping sales, while chic and cheap foreign fast-fashion brands like H&M, Uniqlo and Zara are opening bustling stores and luring away customers once devoted to a more basic American style.
American midmarket fashion has lost its way, and no other company epitomizes that as much as Gap. The company announced last week that it would close a quarter of its 675 North American stores over the next few years.
But the closures represent the latest in a decade of stumbles for a brand that was once so cool that the actress Sharon Stone wore one of its turtlenecks, with a Valentino skirt, to the 1996 Oscars. In 1998, its “Khaki Swing” television commercial, all smiles and American optimism, aired to 76 million viewers during the final episode of “Seinfeld.” The brand also became seared in popular consciousness that year as the maker of Monica Lewinsky’s infamous stained blue dress.
In a presentation to investors last week, Art Peck, Gap’s chief executive, spoke somewhat poignantly about the brand’s downward trajectory. When Gap’s latest round of store closures is done, its footprint in the United States will fall to just two-fifths of its peak in 2000.
“We had our moments of glory, but they’re not followed with consistent moments of glory,” Mr. Peck told investors at Gap’s corporate headquarters in San Francisco. “None of us are happy with our performance now.”
Once the master of casual, supplying Americans with staple khakis, denims and button-down shirts, the company is finding that its once-stable American customer base has splintered. Luxury is booming; at the other end of the market, discount retailers like T. J. Maxx and Burlington Stores are seeing robust gains. Gap, Abercrombie and their peers are stuck in the middle.
But they have also faltered at a game they once dominated: being the go-to destination for the legions of teenagers and young adults with money in their pockets and time on their hands. That role has fallen to juggernauts like H&M, based in Sweden, and Zara, owned by the Spanish company Inditex, which turn out cheaper versions of runway trends in weeks. H&M’s 368 stores in the United States, set to grow by 65 this year, get a fresh shipment of styles daily. Uniqlo, owned by the Japanese giant Fast Retailing, is most like Gap in that it sells basics. But Uniqlo markets basics at cheaper price points, in dozens of colors in high-tech fabrics, and offers midprice collections by designers and celebrities, including Jil Sander and Pharrell Williams. The company’s footprint here has grown to 42 stores in four years, and more are planned.
In September, yet another foreign fast-fashion brand is set to land on American shores. Primark, based in Dublin, plans to open 20 locations and will sell items for even less than H&M: Its latest catalog features $8 halter neck dresses and $10 bikinis. American retailers still outnumber the upstarts, but they are locked into outdated formulas.
“Back in the ’80s and ’90s, there wasn’t real access to higher-level fashion,” said Kate Davidson Hudson, co-founder and chief executive of Editorialist, an online fashion magazine. “It was the heyday of business casual, and stores did well selling core staples.”
“But now, everybody sees what’s on the runways on social media and on blogs, and everybody’s a critic, and shoppers want it as soon as they see it,” she said. “Brands like Gap just feel very dated.”
Sales at Gap stores open for at least a year, a closely watched figure in the retail industry, have fallen for 13 straight months. The company’s upmarket brand, Banana Republic, has also stumbled, though Gap’s cheaper Old Navy label has done well.
At Abercrombie & Fitch, comparable sales have fallen for three straight years and the brand is in the midst of an overhaul, which includes covering up the hunky shirtless male models who functioned as something of a corporate logo. Last week, the brand confirmed that Katia Kuethe, formerly of Lucky magazine, would be its new creative director. Even J. Crew, long a retail darling with a fiercely loyal following, has suffered from an increasingly stale formula of print, sequins and basics. J. Crew announced early this month that it would eliminate 175 jobs and replace the head of women’s design at its namesake brand.
The two-block stretch of 34th Street between Fifth and Seventh Avenues is a time capsule of retail, anchored on one end by the massive century-old Macy’s Herald Square store and increasingly populated by the foreign chains of the moment — Zara, Uniqlo and three H&M stores, including the airy 63,000-square-foot flagship, which opened last month and is, according to a corporate spokeswoman, the largest H&M in the world.
Sprinkled among them along the crowded sidewalks are older, familiar American mall staples like American Eagle, Banana Republic, Old Navy and others, along with Gap.
At a vibrant, three-story Uniqlo, Dhushyanthy Tharan of Hoboken, N.J., shopping on her 26th birthday for a long-sleeve button-down shirt, said she found the selection to be of higher quality and more stylish than at the Gap. “I love their materials, the cotton and linen, and their style,” she said. “It’s very young.”
“I have checked at American Eagle and the Gap,” she added, “but I never really find anything there.”
One of the people waiting for the H&M doors to open was Tianna Robinson, 30, of Brooklyn, who, unsatisfied with her wardrobe choices that morning, planned to pop in to buy a shirt for a business meeting later in the day.
“I know that no matter what,” she said, “I’ll be able to find a shirt that’s presentable and price-worthy. And it’s cute!”
H&M is her “go-to” store, Ms. Robinson said, but she also likes Zara. “Gap,” she added, “I don’t go to as much, to be honest.”
Mr. Peck and his team seemed to suggest to investors last week that Gap and its sister brands would start to emulate their fast-fashion rivals. Gap’s brands will focus on improving the product, they said, and on speeding up the time it takes to get new styles into stores.
“We are looking at what is starting to trend externally, and feeding that into our process very quickly to testing,” said Jeff Kirwan, Gap’s global brand president. “Then if it tests well, and we feel confident in the early results, we’re going to invest more and move on forward.”
But in reality, it will be difficult for Gap and other American brands to catch up to the likes of Zara, for example, which owns garment factories around the world, giving it a measure of control that permits a quick response to emerging trends. That “vertically integrated” setup lets fast-fashion brands constantly deliver new styles to stores, often in small batches. Fast-fashion retailers have come under increased scrutiny, however, for their heavy reliance on low-wage factory workers, many of whom work in dangerous, grueling conditions, as well as for the environmental toll of throwaway fashion.
Nevertheless, it takes far longer for Gap, which does not own any factories, to source new designs and get fresh styles on its racks. The company hired new design chiefs this year, but in a telling sign of just how much it lags in speed and flexibility, Mr. Peck said that their new products would not show up until next spring, because the brand had already bought the bulk of its stock for the rest of this year.
“Vertically integrating your supply chain can take years to accomplish, and tens of hundreds of millions of dollars to implement the right way,” said Andrew Billings, senior manager of the retail and consumer practice at the New York consulting firm North Highland. “That’s not something that’s going to happen overnight.”
That doesn’t mean the process couldn’t be faster. Even without its own factories, a company like Gap could “work with your design team and reduce the number of sample rounds to make quicker decisions,” Mr. Billings said. “They might be able to turn something over in 15 weeks, which would be drastically faster than your typical fashion calendar, which is more around 45 weeks.”
American brands are also saddled with the remnants of a shopping mall culture that is fast vanishing. Many of Gap’s coming store closures are expected to be at malls that have suffered from declining foot traffic and slumping sales. The national retailers that once anchored those malls, like J. C. Penney and Sears, also are floundering, at the same time as e-commerce is picking up steam.
By contrast, the foreign labels setting up shop in the United States are getting their pick of the best real estate, said William Susman, managing director at Threadstone Partners, a New York consumer and retail advisory firm. And overseas retailers, from the start, are used to operating all of their locations as high-traffic, high-grossing flagship stores, he said.
“The mall doesn’t really exist abroad as it does here. You have High Street locations in Europe whose economics really resemble flagship stores,” Mr. Susman said. “They have a very different real estate strategy.”
But most pressing for declining brands, retail specialists say, is bringing a dose of inspiration to an outdated assortment of clothing. At J. Crew, that means fewer fashion faux pas, like its universally panned “Tilly” cropped sweater that wound up on the sale pile. For Abercrombie, that means less reliance on logos to appeal to a generation now tired of blatant brand marketing. For Gap, that means sprucing up what has become a lineup of bland basics with no discernible point of view.
That hasn’t happened yet. The brand appears to be sticking to its basics strategy, albeit in a dizzying array of choices. Gap offers at least 11 categories of women’s jeans: true skinny, slim straight, girlfriend, authentic boyfriend, sexy boyfriend, always skinny, curvy skinny, real straight, perfect boot, long & lean and legging.
“There’s no creative direction, there’s no creative identity, and the shopper can perceive that,” said Ms. Davidson Hudson, of the Editorialist. “Gap needs to say: Here are the two silhouettes that we think are important this season. These are the two we’re standing behind. Here’s your perfect pair.”
Daniel Kulle, president of H&M in the United States, had similar advice for his American rivals. He said that H&M still saw “a huge opportunity to grow, for the next couple of years,” in the United States.
“If you don’t keep constantly updating your fleet, if you don’t have the right trends and collections season after season, your customers are just going to go somewhere else,” Mr. Kulle said in an interview.
“You have to keep your customers curious,” he said. “Then they have to keep coming into your stores to see what’s new today.”