Falling Into The Gap by Donald Fisher

The Big Idea: Falling Into The Gap is the inspirational story of how a man with no retail training built the world’s most successful international apparel company by being willing to take risks based on his natural instincts.

Lessons for Founders

It’s better to be lucky than smart.

Being a (tenacious) novice can be a competitive advantage.

Be clear about what success looks like. Often, founders (not Don Fisher) overlook the importance of family until it’s too late.

Keep equity at all costs.

It’s nice being a private company. You don’t have to answer to anyone.

Invest in operational excellence and information technology. It can be a strong competitive advantage.

Don’t be afraid to experiment. An enduring company will require at least a few reinventions to last decades.

In business, offense is product innovation and defense is operational excellence.

Success in business is especially rewarding because it lets you give back.

How was The Gap founded?

Inspiration for The Gap came from Don’s difficulty purchasing Levi’s from various department stores.

The Gap was originally a Levi’s-only store.

Doris and husband Don Fisher started the business after struggling to find jeans that fit him. They raised $63,000 to open their first store, which sold jeans and music, in San Francisco. The Fishers agreed on the name, which is short for “generation gap,” after Doris nixed her husband’s original idea, “Pants and Discs.”

Because a real estate deal fell through, Don was able to focus on launching The Gap. Luck plays a big role.

Don didn’t raise money from friends because he didn’t want to risk losing his friends’ money. Instead, he used his family’s savings of $63,000 to start The Gap.

Because Don didn’t have any retail training, he laid out the store as it made sense to him, a real estate investor, not as a traditional retailer would have done. Being a (tenacious) novice can be a competitive advantage.

Don just wanted to take the nightmare out of buying Levi’s.

Early Gap advertising was mostly radio, because that was the medium of choice for young people.

Early Gap slogan was “Over four tons of Levi’s.” And also, “for any shape, sex, or size.”

Early Gap employees were peole Don already knew and trusted.

The first Gap store opened with a big party, attended by social glitterati, and covered by local newspapers.

Don’s childhood was warm and stable. His upbringing gave him the self-confidence to launch The Gap, despite no retail experience.

Don was incredibly competitive, a champion swimmer, and hated losing in sports and beyond.

Don maintained many childhood friendship into old age.

Don attended UC Berkeley, majoring first in engineering, then in business administration.

Advice from Don’s mother: never say no when you can say yes, be big about little things, a secret is something you give somebody else to keep for you.

Don was a fearless body surfer, but came close to death a few times, eventually retiring from bodysurfing in his 70’s.

The three Fisher sons all attended Princeton and Stanford Graduate School of Business. Eventually, Bill and Bob became leaders at Gap. John started a family office and began investing.

Don’s first venture was converting his father’s furniture factory into an office building. That led to a brief career in real estate development in San Francisco.

After a challenging real estate venture, Don vowed never to partner with family members again.

Don was 41 years old when he opened the first Gap store.

Overtime, Don’s confidence grew and he relied less on Levi’s advice and more on his own instincts.

Don innovated a restocking system that was able to handle all the volume for that successful first store.

Don would never have started The Gap if the plan was just for one store. He envisioned as many as 10 stores.

When starting The Gap, Don also had an escape plan, just in case the first store was a failure.

Don invested early in computer systems to manage inventory and financials.

How did The Gap grow from one store to an empire?

First expansions outside of the Bay were: Southern California in 1971, Houston, Chicago.

Don overcame male breast cancer in 1971.

To save money, early commercials were made in Mexico City.

There were copycats like Miller Outpost and County Seat that started also selling only Levi’s.

Because of supply chain issues and competition among Levi’s retailers, The Gap started private labels in 1974.

Early Gap fashions were knockoffs manufactured in Hong Kong by Li & Fung.

In 1976, The Gap went public.

Don’s advice to entrepreneurs: keep equity at all costs.

It’s nice being private. You don’t have to answer to anyone.

In 1976, The Gap experimented briefly with discount retailing. They weren’t structured for off-price, so the experiment ended after a few years.

Since buyers bought nearly a year in advance, there was no opportunity to test products. They had to rely on instincts.

The Gap experimented briefly with Ralph Lauren, but it wasn’t a good fit.

Don never drank coffee or smoked.

Don hated long hair on boys.

Throughout the journey of building The Gap, family was always a priority.

Don’s father died in 1981 due to a stroke.

Mickey Drexler was vital to the evolution of The Gap to a vertically-integrated, private-label retailer.

In 1984, Maggie Gross began investing in magazine and television advertising.

In 1983, The Gap bought Banana Republic Safari and Travel Clothing from the Zeiglers for $325,000, plus bonuses based on profits. The Zeiglers left in 1987 after some conflict with management.

By 1986, there were 65 total stores.

In 1984, The Gap bought Pottery Barn, which was soon sold to Williams-Sonoma after a bumpy ride.

In the mid 80s, The Gap invested in fashion design and rebranded itself as a fashionable clothing retailer, through the Corporate Individuals of Style campaign, emphasizing khakis.

GapKids (1986) and babyGap (1989) were the brainchildren of Mickey Drexler and both an instant hit.

In 1986, The Gap expanded globally. Don had difficulty convincing management on the idea, but persisted regardless.

Sales in Japan were slow partially because the customers were too polite to disturb the neatly organized merchandise.

There were several legal battles involving trademarks in Europe and, then, in Japan.

After stock price declines in 1992, Mickey Drexler decided to create a lower-priced brand called Gap Warehouse, which was eventually rebranded Old Navy, based on the name of a pub in France.

Old Navy was a fantastic hit and propelled The Gap performance for many years.

What happened next after stepping down from CEO?

In 1995, Mickey Drexler became CEO and Don stepped down to chairman of the board. McKinsey helped in the transition.

As a bigger, more important company, it was easier to get high quality people to join the board of directors.

Scaling so fast led to inefficiencies, so The Gap invested heavily in computer systems during the 90’s to help alleviate the issue.

The Gap expanded into fragrances and body care starting in 1994.

In business, offense is product innovation and defense is operational excellence.

The Gap always remained very entrepreneurial, which is rare in a Fortune 500 company.

The 90’s saw very successful Gap ad campaigns, including “Swing Dancers”. Old Navy ad campaigns were more family-oriented and nostalgic.

Stock options, restricted stock grants, and a discount stock purchase plan helped retain top talent.

Operational excellence allowed new store locations in smaller communities and town.

The Gap’s e-commerce strategy early on was first, observe. Then launch when the time is right. In 1999, when other e-commerce companies crumbled during holiday, The Gap performed very well.

From the time Don left college, he looked for business situations that would not only put food on the table, but would give him the exhilaration that only tough challenges provide.

Don went bodysurfing for the last time in 1994, at the age of sixty-six, but was able to continue swimming by building an indoor pool.

Doris and Don collected modern art as a hobby and were supporters of the SFMOMA.

Don also devoted time to politics, specifically with the goal of making SF (and the USA) more business-friendly.

Don was also active in creating the Presidio Trust.

Don’s burning passion was education. He joined the Columbia Park Boys Club board of directors, then later the Boys & Girls Club of America.

Other organizations served: UC Berkeley School of Business, Stanford GSB, Princeton University, UCSF, Bay Area Life Sciences Alliance.

Don also helped keep the San Francisco Giants in SF.

Don served on the boards of Ross Stores, Charles Schwab, Air Touch, and KQED.

The family investment office was originally established for buying the San Francisco Giants.

Investments in VC Rosewood paid off through good investments in Hooked On Phonics and Noah’s Bagels.

The Fishers are a very close family and look for opportunities that would benefit multiple generations. They can be patient and reap the rewards consistent with that patience.

The family invested heavily in timberland, much to the chagrin of environmental activists.

It’s better to give money to good causes while you’re still alive.

In their philanthropy, Don and Doris preferred to support specific projects and capital projects, over supporting operating expenses. Endowments are established for operating expenses.

Doris and Don invested in Edison School Project and supported KIPP.