As retailers turn their focus to reaching consumers in the most effective ways possible, big data is becoming a key tool for companies like The Gap, Inc., President and CEO Art Peck told CNBC.
“We’ve really been building back-end big data analytic capabilities now for a couple of years, and data is a huge asset for us,” Peck said on Wednesday in an interview with “Mad Money” host Jim Cramer. “It’s surprising to me that more people in our space aren’t talking about it.”
Gap, the parent company of Old Navy, Banana Republic and Athleta, among other brands, handily beat earnings estimates in March thanks in part to the strength of its brands, Peck said.
The retail giant, which sees two billion customer visits a year between its websites and its stores, also gets a boost from using the data it collects to market to consumers.
“We know a lot about our customers. We can see their lifetime value. We know who our most valuable customer is,” Peck told Cramer. “Structurally, because we have multiple brands and multi-channels, we’ve got something not a lot of other apparel companies have.”
Leveraging consumer data pays dividends in several ways, Peck said. It helps Gap direct its advertising dollars in the most effective way to get the best returns; it gives the company insights into what consumers want in a company; and it helps pinpoint where the value is.
“If you look at the difference between a customer who’s casually engaged and one who is really deeply engaged in our brands across channels, it’s at least 10 times the value of that [first] customer,” the CEO said, speaking from a J.P. Morgan retail conference.
Today, Gap’s marketing spending skews heavily toward advertising on social media rather than traditional media, Peck continued.
Advertising on platforms like Facebook and Instagram lets the retailer target customers more specifically and gives Peck an “excellent line of sight to returns,” he told Cramer.
“It’s super effective for us,” the CEO said. “If I’m getting a 6x or an 8x return on my advertising spend, I might say I want to spend down to a 3x return and I’m still getting an incremental return on that dollar. It’s hard to do that in a lot of the traditional media.”
The more traditional aspects of retail are not lost on Gap and its underlying businesses, however. Athleta, the company’s sportswear brand, has grown to 140 stores from only selling online.
“Most retail came from physical and went online. Athleta came from online and catalog and is going physical. And we’re very focused on making sure that we’re building the retailer of the future,” Peck said.
Athleta’s business is now half online and half brick-and-mortar, with plans to expand the physical store base “at a responsible rate,” Peck said. But for Gap and Athleta in particular, the focus remains on consumers and what they want to see from top brands.
Peck pointed out that Athleta recently became a B Corporation, a certification similar to “Fair Trade” that subscribes companies to a strict set of social and environmental standards.
“That’s a values issue that our customers are super responsive to. The engagement in that brand is amazing and that’s what consumers are looking for today,” Peck told Cramer. “I don’t care if it’s a millennial or a 70-year-old woman. She sees that as a brand that she can relate to from a values standpoint and it’s a really powerful equation.”