The rise and fall of Yeezy Gap

Today I'm in front of the Gap, and in 2020, one tweet added over $1 billion in value to this corporation in just one day. And that tweet that said that one man, a guy who used to fold khakis at a Gap in Chicago and today was one of the most famous rappers in the world, was going to be part of their brand. That man was Kanye West, and he promised to be the Steve Jobs of Gap. But just 2 years later, the whole partnership that they put together was a disaster, and Gap lost $53 million.

I'm an innovator. And I'm not here to sit up and apologize about my ideas.

This is the rise and fall of the Yeezy Gap partnership. Oh, and by the way, thanks to Monarch Money for sponsoring this video.

More on them later.

To understand the story, you got to start with where The Gap was back at this time. See, back in the 1990s, under legendary CEO Mickey Drexler, The Gap was just a one-of-a-kind brand, seemingly unassailable. Basically won over America with khakis and t-shirts and staples, and man, they had us all wearing them. By the year 2000, the chain had hit $13.7 $1.2 billion in annual sales. And that square blue Gap logo, it was everywhere. But starting in the early 2000s, the next 20 years would be brutal. At one point, they would go through 3 CEOs in 6 years. Sales had gotten to $6.4 billion in 2014. By 2019, those were $4.7 billion, a 24% decrease in just 5 years. Gaps were usually in the mall. Brands also there were things like Zara and H&M. Those guys came in and they ate Gap's lunch. These fast fashion guys could bring a product to market as quick as 2 or 3 weeks. It would take Gap 6 to 9 months to do the same. Behind all that, the staple of where Gap was located, the American Mall, it was starting to die even faster than before. In 2013, Gap closed 189 stores. And behind it all, the design of Gap, while it had once been cool, having advertisements that got all of us to think you wore Gap and it was neat, now it was just corporate bland BS. And honestly, I don't know who shops at Gap. I don't know why I would buy Gap, and I really don't know what it stands for. I mean, if I need a t-shirt, I'll just get one, well, someplace else. It's probably going to be cheaper. So with this problem at hand, well, Gap was going to have to figure it out. It turns out there was somebody who was famous and had a connection to Gap that went way back. And Kanye, growing up in Chicago, had worked at a Gap store. He didn't even get enough hours as a part-time employee to qualify for the employee discount, but he was an employee and he knew how to fold khakis. In fact, in his 2004 album called College Dropout, he immortalized his time working The Gap in a song called Spaceship. It's a good album. And by 2015, Kanye was, well, considered a billionaire by Forbes, and he'd just come off his partnership with fitness brand Adidas. He was ready to step in and do something for The Gap brand.

In an interview, Kanye West said, I always saw The Gap as like being the Apple of apparel. I always had this comparison with Steve Jobs. I always felt like I was the Steve Jobs of The Gap.

He went on to say he was obsessed with the idea of making high-quality fashionable clothes accessible to everybody. Not just people that could buy $300 sneakers. And he was somebody that proved he could rejuvenate brands. By 2020, his Adidas partnership had generated $1.7 billion in additional revenue for Adidas. And so it seemed like perfect timing. Remember, right in the middle of 2020, something had happened. The internet had started to dominate people's lives even more because in March 2020, we all got locked down because of the COVID pandemic. So on June 26th, 2020, Kanye started to tease the news that he was going to work with Gap. With the hashtag #WestDayEver, he showed some images of some potential clothes that were going to say "Brought to you by Yeezy," his nickname for himself, and The Gap. Wall Street went crazy. Suddenly somebody was going to come in and give some direction and opinion and style to Gap. So they added $1 billion in value to Gap stock price that day. It went up over 42%. And even though the stock was down 20% for the year, still felt like a lifeline for the company. The deal was a massive 10-year partnership between Kanye and Gap. He would bring lines of clothing for men men, women, and children and elevate the brand, bringing fashion to the marketplace at prices that would be affordable for everyday consumers. What was in it for Kanye? Well, he could earn royalties on sales of all the things that he created for The Gap, plus he could earn himself 8.5 million shares if specific sales targets were met. And one thing you'll see really smart people do, especially when they have good representation like Kanye does, is understand the value of their worth. And he knew that Gap was a big business with big problems, and he was going to create a lot of value for them. So he demanded a lot of value in return. The deal was single-handedly valued at over $1 billion in revenue for the company, and analysts predicted that his work could comprise up to 10% of annual sales for Gap in the coming years. And seemingly at this moment, we had the ultimate comeback story. But there was a big question: would it work? The first sign of things was that Mickey Drexler, you know, the famous CEO who had since moved on from the Gap but led it during his heyday, he reached out to Kanye West personally. And Mickey's a smart dude. In a moment of weakness, he shared publicly that he had told Kanye he probably shouldn't do this deal because it doesn't make any sense between the Gap and him. The problem that Mickey saw was that Kanye is somebody who's not a corporate person. And Gap, well, Gap is the epitome of American corporate kind of clothing companies. It's just going to be a huge mismatch, he thought. Mickey told people inside of the Gap as well, hey, I don't think this is going to work out. Nobody listened to the old guy. Inside of the Gap, well, they seem to have deal fever. This is something that happens inside of companies when they're so anxious to get the deal done that they kind of forget that it may not be a good idea after all. And Gap was so anxious that they reportedly scrapped a deal with a Black-owned brand called Telfar in order to do the deal with Kanye. They had deal fever for sure.

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The first EasyGap collaborative product dropped on June 8th, 2021. Mid-pandemic, and it was right in the middle of Kanye West's 44th birthday. It was called the Round Jacket. It was a bright blue puffer jacket. It had no zippers, looked weird, and it was decidedly a Kanye West invention. Mickey would later tell folks that the jacket did $7 million in pre-orders overnight. Then in September 2021 came a $90 product, the Perfect Hoodie, that came in multiple different colors. Black, purple, brown, and all that kind of stuff. The item was a huge hit. Supposedly it did the most sales of any item in the chain's 52-year history. Kanye would later claim that they sold $14 million worth of hoodies from one TV commercial alone. And even better, it was doing exactly what The Gap wanted. 70% of customers for this new hoodie were brand new to The Gap brand. Kanye did his part. He basically used the music video for one of his new songs off of his album Donda to promote the hoodie. It's basically a commercial for the item. In January 2022, they took the partnership even further. They brought in luxury fashion house Balenciaga with the idea of producing Yeezy Gap Engineered by Balenciaga. Balenciaga. It's hard to pronounce these brands. Maybe that's why I'm not cool. Balenciaga was a cutting-edge brand, ultra-high-end luxury stuff, led by a designer called Demna Gvasalia. Pardon for mispronouncing that if I did. Anyway, I tried 3 times. I can't get it right. The idea was that, you know, they would bring cutting-edge stuff to Gap. Something that was just the opposite of what the brand had been so far. And with these types of sales and the progress, man, it looked like everything was going right for The Gap and the Yeezy partnership. But behind the scenes, the tension was building. One of the first things to happen was the recognition that Mickey Drexler had been right. Kanye, he was not a corporate person, and he kept retraining the deal and trying to change it. I mean, in fact, just 3 months into it, he had demanded a seat on The Gap board, and he had looked at the board, had 3 months in, and maybe had talked to somebody at a party. I have no idea. And decided that only 2 Black members on the board out of 12 total people wasn't enough, and he wanted to have more representation on it. And Kanye took it so far that he threatened to walk away from the deal unless they gave in. People heard about this and the stock dropped on the news. People were starting to get a sense of what was going wrong with the Yeezy Gap deal. Then there was the part where Gap didn't really do their part. They had promised a partial rollout of the collection in 2020 and a full rollout by 2021, but by early 2022, they weren't being productive. Only 2 products out of the planned suite had been actually released. The problem was Kanye's kind of desires here. He had conflicting, basically, ideas of what he wanted to have happen. He wanted to hit a sub-$100 price point, but he wanted top-tier quality. In other words, he had champagne tastes and a beer budget. On top of that, Kanye wanted everything made in Los Angeles near where he lived. Gap? Well, Gap was totally optimized for buying stuff from overseas and having it shipped over. And when Balenciaga stepped in, there was no way they were going to hit the sub-$100 price point. These are the types of folks that sell $250 to $400 hoodies or $1,000 hoodies. And in this case, Yeezy Gap was going to be the $250 to $400 level. Definitely not the quote unquote "unaffordable stuff" they'd been looking for at the beginning. Then things got even weirder in July 2022 when the collab between Balenciaga and Gap hit the New York Times kind of flagship for the Yeezy Gap collaboration. Kanye did some weird stuff. Instead of placing them on hangers where people could see them like a normal retailer, Kanye insisted on putting them in giant construction bags. In the middle of the floor. They looked like they were in garbage bags. So here you have these people coming in for luxury and coolness, and instead they're on their knees digging through trash bags like they're at a thrift store. One tweet went viral at the time reporting that Kanye got mad when he showed up and saw the clothes on hangers and demanded everything come off of them and be put on the floor. In addition, he supposedly instructed the retail staff not to help people find their size. In other words, hey, you're gonna be paid a premium price. Yeah, good luck, you're on your own. It's kind of like Ross Dress for Less. Yeah, exactly. When asked about how he got the inspiration for the collection, Kanye West went on Instagram and said homeless people were his inspiration for the fashion. Like, who says that? Like, come on. And when people started to call out that this might be insensitive to people who are homeless, Kanye reportedly said, I'm an innovator and I'm not here to sit up and apologize about my ideas. By August 2022, just one month later, the whole thing had gone at internet light speed to a total mess. Kanye was openly airing his grievances on Instagram. He was complaining that Gap was stealing his designs, that they weren't doing their part, and that it was a whole mess. And I can only imagine being in the corporate offices of Gap at this time. You know, you're some corporate person who went to the Fashion Institute of Design or whatever, and there you are trying to produce some clothing and you're doing it with this guy who is at best capricious and at worst crazyville. And you're having to operate under that, man, in the end of it, like, you could see corporate culture and outsider culture, they clashed. Daniel decided at this point he needed to own his own castle, and that's the way he said it. He went on CNBC and said, "A king can't live in someone else's castle. A king has to make his own castle." And his desire going forward was to open his own retail stores. And I'll give it to The Gap, they basically came back and they were pretty professional about the whole thing. They went out and said, "Hey, yeah, We agree this isn't working. We're going to wind down this partnership. And Gap planned to minimize their losses by selling off the remaining Yeezy inventory through the end of the year. But then came October 2022. Something would happen that would make that impossible. And at that moment, Kanye went to Paris Fashion Week and he wore a t-shirt that said, quote, "White Lives Matter," which you got to remember how things were. This is 3 years ago as I'm recording this. It was a different world, right? This was peak cancel culture time. We were still coming off the end of the pandemic. We'd come off Black Lives Matter. Understandably, The world went kind of crazy when he did. He further went on Twitter, started to write anti-Semitic tweets, writing that he was going to go DEFCON 3 on Jewish people. And rather than kind of listen to the feedback from people, he doubled down.

He went on a podcast and said, I could say anti-Semitic things and Adidas can't drop me. Now what?

But it turns out he was wrong. On October 25th, 2022, Adidas had had enough as well. They gave up nearly a quarter billion dollars in future profits. And terminated their Adidas partnership with Kanye. This basically left Gap in an impossible position. They couldn't keep selling this merchandise. It was toxic by this point. This guy had been cut off by Adidas. He was going after all these different folks. And so Gap had no choice but to take a hit at that point and cut their losses. And because of this stuff, basically Kanye got himself canceled. Gap gave up on him. Adidas gave up on him. JPMorgan gave up on his accounts. Balenciaga, they basically cut ties with him. And according to Forbes, he went from a billionaire to whatever a not billionaire is pretty much overnight. In November 2022, Gap reported publicly that they were taking a $53 million impairment charge due specifically to the Yeezy Gap inventory write-off. And the lady who was the CEO of Gap at the time, Sonia Singhal, she basically set a new record. She was fired and she had the shortest tenure of any Gap CEO to date. And suddenly Gap was back to the drawing board. In 2023, it had to lay off over 1,800 workers. And had to try to figure out what its identity was going to be. One branding expert looked at it at the time and recognized exactly what had happened here. Kanye West had gotten famous by being a provocateur, and that was something Gap wasn't able to stomach. When they signed up with him, well, they knew what they were going to get, and they got it. And Gap ended up in a worse place than where it was before Kanye. Its stock was down 65% from 2022. The whole idea of a Kanye West lifeline, well, had become a big rock in their shorts. The Kanye story is a great example of the most important decision you can make in life or in business is who you choose to do business with or who you spend time with. You know, we all talk about that with marriage. Who you choose to get married with is the most important decision you'll make in your whole life. In the case of hiring employees, like a Kanye West, well, you can see what happens if you hire the wrong one. On the other end of the spectrum, if you hire the right one and the perfect one, magic can happen. And that's why the great CEOs and leaders in the world spend a ton of their time on team building above all else. And you get to a certain point where your company is so big that you may spend almost all of your time team building and making sure the right people are in the right seats. If you like this video, you may like this one about Subway that will explain to you exactly what can happen if you choose the wrong spokesperson for your business. All right, if you enjoyed this video, let me know in the comments below. That encourages me to make more. I'll talk to you later.