Old Navy Tried to Make Sizes for All. It Backfired. - The Journal. - WSJ Podcasts - The Wall Street Journal

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Ryan Knutson: Over the last few decades, Americans have been getting heavier.

Suzanne Kapner: The waist size of women have been going up year after year. The average dress size is now a size 18, up from a 14 five years ago. But I mean, if you look back 50 years ago, it was closer to a size eight.

Ryan Knutson: Our colleague Suzanne Kapner covers the retail industry. And she says that for a long time, the industry hasn't been serving plus-sized customers very well.

Suzanne Kapner: Most retailers, if they offered plus sizes, it was in a separate section. It wasn't the full line. They very often charged more for the larger clothes because fairly or not they do require more fabric. They require different fits. There's more work and cost that does go into producing a larger size.

Ryan Knutson: But retailers have been trying to be more inclusive.

Suzanne Kapner: Brands have been sort of inching towards offering more plus size and more positive body imagery. You know, there's Victoria's Secret. There's Target. There's a lot of brands have been adding more plus sizes to their offerings and in their ads showing women with various body shapes. So there has been a movement inside the industry to kind of embrace not everybody has to look like that perfect model. There's been much more acceptance that we are all come in different shapes and sizes and we should embrace that.

Ryan Knutson: Last year, Old Navy embraced this idea in a big way. It got rid of plus-size sections and started offering all its women's clothes in a wide range of sizes, from size zero to 30.

Suzanne Kapner: Old Navy set out to sort of rectify some of these issues. But just the execution, they just blundered it so badly.

Ryan Knutson: Welcome to The Journal, our show about money, business and power. I'm Ryan Knutson. It's Friday, May 27th. Coming up on the show, why Old Navy's attempt to break the mold for women's sizes didn't work. Old Navy was created by its parent company Gap, Inc. in 1994 when the company's CEO wanted to create a new line of stores.

Suzanne Kapner: He came up with this idea to sort of launch a lower-priced line chain of clothes that catered to the whole family, kids, moms, siblings, dads.

Speaker 3: These pants are fit to be tied.

Speaker 4: Old Navy drawstring pants for the family.

Speaker 5: (singing)

Ryan Knutson: Middle school Ryan shopped at Old Navy all the time.

Suzanne Kapner: And now?

Ryan Knutson: And now, I was looking through my closet and I don't think I have anything from Old Navy anymore. Even though I stopped shopping at Old Navy, a lot of people still go there.

Suzanne Kapner: And in fact, it's become so successful that it's outpaced The Gap brand. You know, it now has more stores and more sales and more profits than The Gap brand. It accounted in the last fiscal year for something like 54% of company-wide sales and almost 80% of profits.

Ryan Knutson: And Old Navy, the powerhouse of its parent company, wanted to change how it handled women's clothing, especially given customers changing body shapes.

Suzanne Kapner: They did offer plus sizes, but it was in limited runs in certain styles. It wasn't every style. It was often if you went into their stores, they'd have a small plus-size section maybe in the back of the store. You felt, as a plus-size woman you felt like a second- class shopper. You couldn't just walk in and walk through the store and find your size in a lot of styles.

Ryan Knutson: Last year, Old Navy decided to shake up the system and completely overhaul how it designed and sold women's clothes. The goal was to be more inclusive to shoppers of all sizes. So instead of segregating clothes into plus-size sections, they wanted to put them all together. And rather than offering sizes zero to 14 like most retailers, Old Navy decided to offer sizes zero to 30.

Suzanne Kapner: Every style they sold would be in this wide range of sizes from very, very small to very, very large. And each size of a particular style would cost the same, which was somewhat revolutionary.

Ryan Knutson: And what was the business case for doing this?

Suzanne Kapner: The business case is that they would attract more customers because there is this growing segment of larger women who are underserved. And if they could be known as the place to come to find these clothes at equitable prices, the idea is they could attract a lot more customers.

Ryan Knutson: This plan required an overhaul of everything.

Suzanne Kapner: They have something like 1,200 stores, and they had to kind of redo the floor plans in all these stores so that these sizes would all be shown together. So you'd go in and you'd look at a particular style of women's dress and you'd have the size runs all grouped together.

Ryan Knutson: The company got new mannequins in various shapes and sizes and it redesigned its clothes.

Suzanne Kapner: I think what is not always obvious is that as you go up or down in sizing, the scale of the clothing changes. So you can't just make something larger proportionally because you might be taller than you are wider and the clothes start to become out of proportion. Most brands, they will design on, whatever it is, a size eight, they call it a fit model. And then as you scale up or down, there's some distortion in the sizing,

Ryan Knutson: The pockets start to look really massive or something?

Suzanne Kapner: The pockets aren't in the right place and the way the waistband curves is off. And they had to really fine- tune all of this. So a lot of work went into developing these extended sizes.

Ryan Knutson: In August of 2021, Old Navy launched its new strategy.

Suzanne Kapner: They made it very clear that this was the biggest launch in the company's history and that they really felt like they were trying to democratize women's clothes shopping.

Ryan Knutson: The company rolled out a big ad campaign. One featured comedian Aidy Bryant from Saturday Night Live dancing with a diverse group of women.

Aidy Bryant: Oh, we're dancing. Okay, (inaudible). I'm a dancer now.

Suzanne Kapner: BodyQuality was sort of the name they had for this, kind of a play on body equality. Was a lot of fanfare, a lot of press at the time of this launch, which was last August.

Ryan Knutson: It sounds like this wasn't just sort of some small tweak that they were making to their stores. This was a major, major strategy, both for the company and also in how Old Navy was portraying itself to its customers.

Suzanne Kapner: Absolutely. And they made no secret this was a very big deal for the company.

Ryan Knutson: Around the time of the launch, the CEO of Old Navy's parent company said it was the largest launch of the brand's history and that it would be "an important growth driver for the business for years to come." And how did the customers react in the very beginning?

Suzanne Kapner: Well, sales almost immediately started going down, so that was not a encouraging sign.

Ryan Knutson: Why sales went down, that's after the break. After Old Navy launched BodyQuality, sales started falling.

Suzanne Kapner: They went down 9% in the third quarter of last year, 6% in the fourth quarter. And so they were clearly heading in the wrong direction.

Ryan Knutson: At first, Old Navy said the slowdown was related to supply chains and the pandemic, not its new sizing strategy.

Suzanne Kapner: The company, at least last fall, was telling analysts that this extended size strategy was working and that they were getting new customers.

Ryan Knutson: But in April, as sales kept falling, the top executive at Old Navy stepped down. And Suzanne decided to start looking into what was happening.

Suzanne Kapner: In my reporting, talking to employees, both former and current employees they all pointed to the same thing. Without exception, they all pointed to the extended sizing as the problem.

Ryan Knutson: Suzanne went to Old Navy stores and saw the problem firsthand.

Suzanne Kapner: You would see racks of clothes, let's say women's dresses. And there would be a size two and size 18 through 28, but nothing in the middle. And they ended up with too much of the very small and the very large sizes, not enough of the middle sizes, which tend to be the most popular. So to clear out the excess, they had to put a large amount of clothes on sale, 50% off. And right now, retailers are not discounting very much because there's still these supply chain issues. There's still product shortages. So it really stood out as like, "Whoa, what's going on here? Why are all these clothes on sale at Old Navy?"

Ryan Knutson: In the retail industry, there's a word for this problem.

Suzanne Kapner: They call it size broken. So it means that the size run is broken, that they have too much of stuff that they can't sell and not enough of the stuff that they could sell.

Ryan Knutson: Suzanne says there are a lot of reasons why this might have happened. For starters, it's just hard to forecast demand, especially for a brand new strategy.

Suzanne Kapner: Not every store has the same size customer. A store in Queens, New York may sell more of a certain size versus a store in California. And that's all sort of part of the logistics of making sure you have the right sizes in the right stores. It's very complex.

Ryan Knutson: Why didn't Old Navy just order more of the stuff in the middle sizes?

Suzanne Kapner: You know, there are factory minimums where they have to order a certain amount of each size. And if you see that you're selling out of sizes six through 12, you can't just reorder those sizes. You have to sort of order them kind of on this curve. And so it's not a precise science, unfortunately.

Ryan Knutson: How bad is this situation now for Old Navy?

Suzanne Kapner: Well, they are stuck with a lot of clothes that they need to clear out. So that's never a good thing for a retailer. That's going to hit the Old Navy's profits, and so goes Old Navy, so goes The Gap because The Gap has two weak brands that Old Navy tends to support, The Gap brand and Banana Republic.

Ryan Knutson: Old Navy's parent company, The Gap, released an earnings report yesterday, and it wasn't good. The company said Old Navy's quarterly sales were down 19% from last year. CEO Sonia Syngal said the BodyQuality strategy was a factor in the declining sales and that supply chain issues caused by the pandemic made it harder to reorder the right sizes. Here she is on a call with investors yesterday.

Sonia Syngal: We launched too broadly and too quickly. We overplanned larger sizes with customer demand under- pacing supply, leading to excessive inventory across stores.

Ryan Knutson: The company said it was going to scale back the strategy. The extended sizes will still be available online, but not in all stores. Did anything good come out of this for Old Navy?

Suzanne Kapner: I think they generated a lot of good will and there certainly is room for them to... If they can tweak the way they order and the way they forecast and get the sizing right, there's room for this to ultimately be a success. And interestingly, I've got a lot of feedback from readers on this story and a lot of emails from larger women who said I didn't even know, I didn't know Old Navy offered larger size clothes. So even though they did a lot of marketing around the launch, the word just may not have gotten out.

Ryan Knutson: How are people in the industry reacting to what's been happening at Old Navy?

Suzanne Kapner: I talked to a consultant who has worked many years in the industry for Ralph Lauren and some other brands, and she really thought it was groundbreaking what they did. I think people are giving the company a lot of credit for undertaking this, but companies are going to be hesitant to dive into this unless Old Navy can show that it actually works and is profitable.

Ryan Knutson: What do you think this means for this movement in retail to provide more inclusive sizing?

Suzanne Kapner: Americans in general, we are getting bigger and retailers are going to need to provide clothes for people of all shapes and sizes. And I think in many ways, it could end up being worth it because you could expand your customer base tremendously. You know, we are moving away from the idea that you have to be stick thin to be a beautiful person. And that's not going away. So retailers are going to really have to figure out how to serve a wider range of customer.

Ryan Knutson: That's all for today, Friday, May 27th. The Journal is a co-production of Gimlet and The Wall Street Journal. Your hosts are Kate Linebaugh and me, Ryan Knutson. The show's produced by Annie Baxter, Katherine Brewer, Shyla Duff, Pia Gadkari, Rachel Humphreys, Brendan Klinkenberg, Matt Kwong, Annie Minoff, Laura Morris, Afeef Nessouli, Enrique Perez de la Rosa, Sarah Platt, Aaron Randall, Alan Rodriguez Espinoza, Pierce Singgih, Mark Sovel, Catherine Whelan, and Victoria Whitley-Berry. Our engineers are Griffin Tanner and Nathan Singapok, with help this week from Marcus Bagala. Our theme music is by So Wylie. Additional music this week from Blue Dot Sessions, Katherine Anderson, Marcus Bagala, Peter Leonard, Bobby Lord, and Emma Munger. Fact-checking by Nicole Pasulka. Thanks for listening. See you Monday.