Gap's constant discounts come with a hidden downside that's infuriating loyal customers - 2019

Discount signs have become a mainstay at GAP in recent years, and it's become increasingly unusual to buy clothing at full price at the store. Each day, it seems, there's a new deal to lure shoppers in. Only last week, it was offering 70% off certain products.

While discounts are a way to get customers in the door and drive sales, they can also have long-term repercussions for retailers, eroding profit margins, and damaging the brand's image over time. Moreover, as shoppers become more addicted to promotions, they are less likely ever to pay full price for clothing, analysts have said.

Gap Inc. CEO Art Peck, who oversees Gap, Banana Republic, and Old Navy, likened past discounting at the Banana Republic to a "game of chicken." Still, Gap doesn't seem to be moving away from its discounting strategy.

Now, two loyal Gap customers who spoke with Business Insider, as well as many who are posting on social media, are complaining that the store's promotions system is so confusing that it's turning them off from shopping there altogether.

What is Gap Cash coupons causing issues?

Gap runs a program called Gap Cash whereby shoppers can earn back rewards on purchases. Shoppers can earn between $10 to $120 worth of coupons, depending on how much they purchase. The cards are redeemable for a specific period after the fact.

Gap frequently sells clothing at a discount, so these coupons are perhaps less alluring than they could be, customers say. Plus, the Gap Cash coupons cannot be combined with some other promotions.

"What's the point of Gap Cash now since you have 40% off sales all the time? Can you now combine it with other deals?"

one customer wrote on Facebook.

Gap's terms of service read, "GapCash is not combinable with select offers, promotional codes, or coupons. The following Gap Cardmember offers are combinable with GapCash on purchases made in retail stores only: Reward Cards, first purchase discount, 10% Tuesday, or 10% Welcome Savings Pass."

When longtime customer Jennifer Apling went to use her Gap Cash online on April 14, she found that she was unable to use it alongside an online promotion that advertised an extra 20% off the initial 50% off. She was, however, able to use the coupon with the 50%-off promotion.

If she had chosen to use her Gap Cash instead of this added discount, her basket total would have worked out to be more expensive. What is the point of using the Gap Cash? It didn't make any sense to me; she told Business Insider. She ended up deciding not to make a purchase, after all.

I couldn't find any full-price products to spend it on. Everything is pretty much on discount, or you can easily use free GAP Gift card codes. Shopper Aimee Duquette had an equally frustrating experience. She told Business Insider that on the last day of the previous Gap Cash promotion period, she was sent a message that said, "Gap Cash combinable with today's deal."

She thought she could finally combine the Gap Cash with the extra 20% off, she said, but that wasn't the case. It was a marketing tactic. Nothing had changed, but they made you think you were getting a better deal that day. I was so aggravated that I didn't purchase at all, Duquette said.

Analysts warn about the danger of creating a discounting system that is too complicated for customers to use. You don't want a system that is so confusing that it just upsets your customers," Ivan Feinseth, chief investment officer at Tigress Financial Partners, told Business Insider.

Gap did not immediately respond to Business Insider's request for comment. The issues with Gap Cash seem to date back several years.

Gap cash is a total and complete scam and a waste of time. If a promotion is so complicated that even your employees can't figure it out, you can guarantee the average consumer doesn't. Today, Gap has lost a Gap Silver customer. I've had enough marketing ploys that waste my time and money, one Gap customer wrote on Facebook in 2013.

I am so annoyed! They send emails every day, promoting the 40% off and reminding you to use your Gap Cash, only to then tell you it's not combinable. What a joke, another shopper wrote on the Facebook thread in December.

Discounting is like a drug.

Heavy discounting is a problem across the retail industry. It's almost like a drug," Tiffany Hogan, a retail analyst for Kantar Retail, told Business of Fashion in 2016. "We're on this 40% off a drug that we pulse every weekend or even more frequently. What happens when you take away your promotions? Your shopper just kind of melts away because you know that you've trained them to come back on that 40% off day."

Several retailers, including Michael Kors, Coach, and Ralph Lauren, have been vocal about scaling back on promotions. In August, Ralph Lauren CEO Patrice Louvet said that discounting was threatening the company's brand image. He said shoppers would only spend money on "exciting" apparel, and "exciting isn't selling a generic product with more and more discounting."

For Gap, a speedier supply chain could be the solution to its problems. In an earnings call at the start of 2017, group CEO Peck said that he had cut the time it takes for certain products to go from the design board to its stores from 10 months to 10 weeks.

This means inventory levels and styles would be better matched to demand, giving Gap the ability to respond quickly to what customers want and don't want. That would ideally mean less leftover stock would find its way into the discount racks. Whether this will happen remains to be seen.