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As Online Sales Grow, So Does Gap Inc.’s Network of Distribution Centers

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David Moin
·6 min read
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Gap Inc., which sees online sales representing 50 percent of its volume in three years, is beefing up its network of distribution centers to meet the growing demand.

The company has been modernizing its six distribution centers and will build a seventh “state-of-the-art,” 850,000-square-foot distribution center in Longview, Texas, to service customers with greater speed and efficiency.

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The San Francisco-based specialty retailer has budgeted $140 million to build the Texas center. Construction is set to start next April and should be fully operational by August 2022.

“As we look to deliver on our three-year strategy and double our online business, we needed to expand our fulfillment network to provide a great experience for our customers today and ensure we have the ability to grow in the future,” said Shawn Curran, chief operating officer of Gap Inc., which generated $16.4 billion in sales in 2019.

At the Gap Inc. investor day in October, the company disclosed that in 2019, 25 percent of its sales were generated by e-commerce, and the goal was to double that to 50 percent by 2023.

At certain of Gap Inc.’s network of seven distribution centers, “We’ve implemented some of the world’s most advanced fulfillment technology and robotics to transform our traditional distribution centers into highly automated, cross-channel fulfillment centers,” said Curran, during an interview Wednesday. “We view our centers as supporting a seamless shopping experience for our customer so we have moved to calling them ‘customer experience centers’ to reflect this shift.” Some of the centers have been retrofitted, others to a degree or not at all yet, though the plan is for the entire network to get all the retrofittings.

Curran said modernizing distribution centers into customer experience centers and expanding Gap Inc. online capabilities has been “a journey over the past four or five years.”

The six other centers in North America, located in Fresno, Calif; Phoenix, Ariz.; Groveport, Ohio; Gallatin, Tenn.; Fishkill, N.Y., and Brampton, Ontario, provide good coverage for the Northeast, Midwest and West Coast, but it’s been lacking in the Southwest.

“Our Longview campus will house cutting-edge automation, similar to our Ohio campus, which is the most state-of-the-art in our network, but we are building the site specifically with automation in mind, rather than retrofitting an existing space. This is a first for us and something we’re excited about,” said Curran. “The increased capacity provided by an additional campus and the location will allow us to deliver inventory faster and more efficiently to customers across the country.”

The Longview center, which is about a two-hour drive east of Dallas, will service e-commerce, at least initially. It will also service only Old Navy, at least to begin with. Gap Inc. also operates the Gap, Athleta, Banana Republic and Intermix brands.

“The Longview campus will be for our online business because that is the capacity needed to service the customer,” said Curran. He said the company chose Longview as a site for a distribution center because Gap needed to get closer to its customers in the Southwest. “This will give us the proximity we need,” said Curran. “It’s all about speed and having the capacity to meet the increased demand.”

Curran said Longview will service the South and Southwest regions. To some degree it will supplement the company’s other distribution center, most specifically, the Tennessee campus, which continues to serve the Midwest as well as the Southwest.

Most Gap Inc. distribution centers are rigged with such technology advancements as:

• Sort orbs with robotic arms that can quickly and accurately sort batches of units destined for multiple online orders.

• Automated storage and retrieval systems with automated cranes that quickly race up and down aisles of storage space to stash away or retrieve thousands of cases.

• Two unit sorters for high-speed sortation of small lightweight items.

• Robotic auto baggers to quickly and efficiently wrap e-commerce orders.

“We are really pleased with our regional distribution network capability,” Curran added. “We believe that our strong seven-campus network, along with our strong store fleet, is well equipped to service the customer.”

The technologies being implemented in Longview have been “tested and optimized” at other campuses in the Gap Inc. network, the company indicated. Upon completion, the facility will be able to process up to one million units per day. The Columbus facility can also handle one million units daily, though Curran noted, “We are reengineering all of our centers to handle one million units daily eventually.”

Over the past several seasons, some of Gap’s fulfillment centers have been retrofitted to be cross-channel, meaning they distribute products to stores and customers ordering online. The New York, Tennessee and Fresno centers service both online orders and retail stores and have multiple buildings resting on a lot of land, giving Gap Inc. the ability to move large volumes of merchandise. The Ohio center was recently reengineered to be online only, and the Phoenix center is online only.

“Our fulfillment operations are really our biggest stores,” said Curran. “They are the connections to the majority of our customers.”

Gap Inc.’s Gap brand has been struggling to turn itself around, regain the relevance it had in the 1990s, and resonate more with existing customers and the next generation of customers. The situation is further complicated with the rising logistics costs associated with accelerating online shopping, which cut into the profitability of retailers. Among the steps retailers have taken to reduce those costs has been to encourage consumers to pick up their online orders at the stores, rather than have them delivered to their homes.

In 2018, Gap Inc. launched BOPIS, or buy online, pick up in store, across the Old Navy store fleet. In 2019, the BOPIS strategy was extended across the Banana Republic and Athleta store fleets. And in 2020, the BOPIS rollout concluded across the Gap brand store fleet. In May 2020, Gap Inc. started testing ship from store and curbside pickup in a small number of stores. BOPIS, ship from store, are in all stores, and curbside pickup are in stores where there are no physical constraints. Over the holidays, Old Navy and Athleta rolled in-store service hubs across all U.S. stores — the “Convenience spot” at Old Navy and At Your Service at Athleta. They’re situated in the front of the stores.

It’s anticipated the Longview campus will create more than 500 full-time jobs by the end of 2023 and will grow to more than 1,000 full-time jobs in the city over the next five years. Additionally, the company expects to create more than 1,000 part-time and seasonal jobs by 2026.

“This significant investment by Gap Inc. will provide a large number of jobs for East Texans and is a continued diversification of our economy,” said the mayor of Longview, Dr. Andy Mack.