A Personal Finance Lesson From The Gap

PagAbout a week ago, I had a fairly interesting experience at The Gap. I stopped there on a spur of the moment as I was looking for gift ideas, and I was about to leave when I realized that there was only one noticeable employee in the store. That employee was running the only checkout, which had about twelve people in line, and she made no effort to ask for more help, she just kept charging ahead. For a store that previously marketed a rather boutique-like appearance, this lack of customer service was almost shocking.

This morning, I stumbled across a similar sentiment on (I added my own emphasis):

Today, I visited a Gap store for the first time in a while. We all know that they’ve been having trouble, and it was interesting to see how they’re responding.

They’re closing about 50 stores net this year, trying to make their business match the market. At the same time, it was pretty obvious from my visit that they’re working hard to save money on sales staff, store designers and other expenses. It took me twenty minutes to check out. In the old days, it would have been two minutes. My reading of the Dip is that nickel and diming is a dumb strategy.

They should close 200 or even 500 stores and keep the very best people from each store, redeploying them to their best stores. They should invest in those great stores, invest in design, in targeted marketing. In other words, instead of shrinking themselves back to greatness, they ought to avoid the nickel and diming and go back to what made them great in the first place.

When your current strategy isn’t working, doing the same thing, but just a little less of it, doesn’t make a lot of sense, imo.

I think there’s a lot of useful meat in this situation that one can apply to their own finances.

First of all, individual bits of frugality (i.e., nickel and diming) don’t really help; it only really works if you switch to that mindset. One of the regular criticisms I hear about articles on clipping coupons and such is that, in the end, you’re not saving that much for the effort involved. What is often not seen is that the coupons are just one small piece in a larger philosophy and set of behaviors: using a shopping list, buying items in bulk if the price per unit is cheaper, not being afraid to buy generics, studying the fliers and maximizing sales, and so on. Cutting coupons alone isn’t that cost-effective, but as a part of a more general strategy, it can really help.

Second, it’s often the 800 pound gorilla in our budget that makes things so tight. If you’re racking up huge credit card bills and you realize it’s not working, don’t just resolve to spend a little less with the plastic – rethink your situation and chuck ’em. If you spend $25 a month on premium cable channels that you never watch, don’t tell yourself “Well, I might watch them…” – get rid of the waste. If you have a third car that is rarely driven, look at the situation and ask if you really need it – you probably don’t. Maybe you’re barely making your house payments – maybe it’s time to move to another area. Don’t just take the big things for granted – look at everything when you’re in trouble.

Third, keeping up appearances is a dangerous game. The Gap has a certain appearance that they’re no longer able to maintain because they’ve expanded too much. The same thing happens when you buy too much stuff to keep up with the Joneses; the bills start coming in and you realize that you’re really in a fix. Instead of following that strategy…

Focusing on your core values is always a winning strategy. What’s really important to you? Perhaps you spend most of your time watching television, so it might make sense to buy a huge LCD television, but then does it make sense to spend a ton of money on other things that are far less important to you? Probably not – it just takes space and creates debt (or at least lost investments).

In the end, Seth sums it up well, so I’ll repeat it again: when your current strategy isn’t working, doing the same thing, but just a little less of it, doesn’t make a lot of sense.

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