Old Navy will soon be making room at its stores to sell beauty products.
San Francisco-based Gap, Old Navy's parent, said it will test this year selling makeup and personal care products at the apparel chain. That phased launch will include 150 Old Navy stores featuring a curated assortment of beauty merchandise, "with select stores offering dedicated shop-in-shops and beauty associates," according to Gap. Next year, the company said it plans to "scale its Old Navy beauty business."
Gap sees a "clear and meaningful opportunity" for growth in the beauty and personal care sector, which it described as one of the fastest-growing and most-resilient retail categories in the United States. Sales are projected to surpass $100 billion in 2025, according to Euromonitor.
Gap CEO Richard Dickson talked about the beauty-expansion plans, as well as Gap doubling down on accessories, on Thursday at a Goldman Sachs retail conference.
"There's two categories that we believe already that resonate with our consumers through tests and dialog that we've had," Dickson said. "And ultimately, within our portfolio today, they're somewhat sleeper categories, and those are beauty and accessories. And with intention, we believe that those are two very big opportunities for us to go after, attracting new generation as well as high-margin businesses that will complement our apparel business."
Old-school beauty counters
Traditional department stores Macy's and Nordstrom have long had beauty departments, with different counters dedicated to specific brands, such as Estee Lauder and Chanel. The two biggest specialty beauty retailers, Ulta Beauty and Sephora, not only have their own stores but also have shop-in-shops at Target and Kohl's locations. Ulta and Target recently announced their partnership will end next year.
The most-common definition of the shop-in-shop or store-in-store concept differentiates them from a mere department within a store. As is the case with Sephora and Kohl's partnership, with shop-in-shop a retailer will set up a branded space — with distinct signage and sometimes its own dedicated salespeople — inside a larger chain's store.
"The difference between a department and a shop‑in‑shop is identity," BJ Feller, a managing director with the commercial real estate services firm Northmarq, told CoStar News in a message on LinkedIn. "If Old Navy beauty feels like an extension of the brand, it’s just another aisle. But if it emerges as a distinct mini‑brand, that’s when it truly approaches shop‑in‑shop territory.”
Equating Old Navy's plans to Sephora‑in‑Kohl’s "would be a stretch — that’s two powerhouse brands coexisting," according to Feller.
"But Old Navy absolutely has an opportunity to create a complementary, branded beauty concept that can boost traffic and dwell time — if handled with precision,” she said.
Gap declined to comment beyond its announcement, which was reported earlier by The Wall Street Journal. Gap plans to initially have 45 beauty shop-in-shops in the 150 stores that will expand into that sector, according to the Journal.
Gap's namesake chain plans to expand its accessories array, similar to Old Navy's move into beauty.
"With a respectable accessories business already in place, the company sees strong customer reception to this category as a key element of wardrobing and a natural extension of apparel, complementing customers’ lifestyles and shopping behaviors," Gap said.