updated 10/17/2006 11:03:04 AM ET 2006-10-17T15:03:04

Gap Inc., the leader in online sales among apparel specialty chains, plans to move beyond its brands to make its mark on one of the fastest-growing segments in e-commerce: shoes.

The San Francisco-based chain, on Tuesday is slated to begin testing Piperlime.com, a Web site with 100 shoe brands, from $24 flip-flops from surf-clothing brand Roxy to $900 boots from orthopedist/designer Taryn Rose. Gap, which will officially launch the site Nov. 1, believes a stylish selection hand-picked by its staff can set it apart from online-only shoe merchants such as zappos.com and shoes.com, which offer a massive selection.

“Online footwear is growing rapidly. And it is so complementary with apparel,” said Toby Lenk, president of Gap Direct, the company’s online division. “It’s like peas and carrots. Apparel sells footwear, and footwear sells apparel.”

Gap’s venture to sell outside its own brands is reminiscent of how the company got its start in the 1970s by selling Levi’s jeans and corduroys to teens.

This time around, Gap, which operates stores under its namesake brand, Old Navy, Banana Republic and Forth & Towne, is counting on its marketing power and its data base of customers to make a big footprint in shoes and help spur overall lagging sales. But while the online venture doesn’t require the same investment as building a new store concept, analysts are wondering whether Gap should first fix its merchandising problems before venturing into yet another new business.

Gap is counting on a merchandising makeover and increased marketing to climb out of a two-year slump. In August, it reported a 53 percent drop in profits in the second quarter. Sales were unchanged at $3.72 billion.

Gap’s sales at stores open at least a year, known as same-store sales, have declined for eight consecutive quarters, though analysts say improved merchandise is winning back customers. The company averaged a 7.1 percent decline in same-store sales in February through September; Gap reported a 3 percent dip last month, smaller than analysts had expected.

Gap’s shares are now trading at the high end of a 52-week range of $15.90 to $19.98 as investors seem to believe the worst is over.

Still, some analysts question the latest move.

“My first thought is, doesn’t it make a lot more sense to make sure the foundation is stable before you add things on top of it?” asked Patricia Edwards, portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle. “Management is flailing, trying to figure out some way to grow the business and show success.”

Only a year ago, Gap launched Forth & Towne, its first new store chain in 10 years, to cater to boomers.

The Web site is “a real cheap way to get some revenue and customers into the door,” Edwards said, but it’s not the right time for the company to take its eye off the business. She pointed to once high-flying Chico’s Fas Inc., whose sales at its namesake stores have stalled recently because of what she believes is overexpansion in other store concepts.

Gap, which rebuilt its e-commerce platform last year, generated online sales of about $600 million last year, making it the biggest specialty apparel chain online, according to Internet Retailer magazine. For the first half of fiscal 2006, Gap’s online sales, including both shoes and clothing, has averaged a 21 percent increase.

Lenk said Piperlime.com will accept all Gap Inc. credit cards, allowing customers to earn and redeem rewards. And Lenk envisions that Gap’s Web sites, which will have a link to Piperlime, will eventually sell shoe brands featured on Piperlime.

Gap joins other recent players like Amazon.com, trying to grab a big piece of the online shoe market.

“It’s the category du jour,” said Heather Dougherty, senior analyst at Nielsen/NetRatings Inc., an Internet research company.

Online shoe sales are expected to reach $2.9 billion this year, and are expected to almost double to $5.7 billion by 2011, according to Forrester Research Inc. Online shoe sales are expected to account for 10 percent of the projected overall $30 billion shoe market in 2006 and Forrester forecasts they will account for 17 percent of total online sales in 2011.

In comparison, online apparel sales should account for only about 5 percent of the projected $176 billion apparel market this year; by 2011, online apparel should make up 11 percent of total online sales.

Catherine Beaudoin, senior vice president and general manager of Piperlime and a 10-year Gap veteran, said there is enormous potential for Gap as the online shoe market is very fragmented.

Beaudoin noted that a survey of its online customers showed that while they’re interested in buying shoes online, they consider it a “stark utilitarian experience.”

“We realized there was a real absence of passion. This is an ultimate shoe lovers’ experience. It’s not just transactional,” said Beaudoin.

Piperlime, which will offer 150 brands when it is officially launched, will feature free advice from experts, starting with celebrity stylist Rachel Zoe. Each page features what’s hot in shoe styles and highlights the brand of the moment; customers can search by style or brand.

Competitors say they’re unfazed by the new entry. Established rival shoemall.com has redesigned its Web site to make it more user friendly, and online shoe leader Zappos.com, which expects to generate sales of $600 million this year, has expanded into other accessories such as handbags and most recently eyewear.

“Customers shop online to have a larger choice,” said Fred Mossler, senior vice president of merchandising at zappos.com. It now offers more than 700 brands in 40 categories, from running shoes to special occasion. “We want to be a destination in each of the categories.”

Mossler also believes zappos.com can compete better on service.

Like Zappos.com and some other competitors, Piperlime will offer free shipping and free returns on every order and provides a 24-hour customer service number. But Zappos allows shoppers up to 365 days to return items; Piperlime sets a 60-day deadline.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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