New York/New Delhi: Gap is moving in to India’s fast growing market for Western-style apparel with plans to open 40 stores by 2015 - in the latest example of its aggressive expansion into emerging markets.
The San Francisco-based fashion chain said it had entered into an agreement with a franchise partner, Arvind Lifestyle Brand Limited, to roll out the stores next spring, starting in India’s two largest cities: Mumbai and New Delhi.
Gap’s comparable sales in the latest quarter released on Thursday were flat, weighed down by a 5 per cent slide in sales to $1.47bn for the Gap Global clothing brand. In the US, Gap Global net sales fell 5 per cent to $850m, compared to $894m in the same three month period to August 3 a year earlier.
Gap - best known for its casual denim and khaki pants - has been expanding into emerging markets to offset falling sales at home, in the face of fierce competition from cheaper, fast fashion rivals such as Uniqlo and Zara.
Last year, it opened its first stores in Brazil, as well as in Hungary, Paraguay, Peru and Costa Rica. In July, the US group also unveiled plans to enter Austria and Slovenia - giving it a presence in 44 markets.
“For us, India is the last major market without an international shopping experience and an important next step in our global expansion strategy,” said Stefan Laban, senior vice-president of Gap International. “We’ve been looking to expand there for a number of years but only now do we really feel that the timing is right.”
Although India remains a bastion of traditional forms of dress - including saris and salwar kameez - many affluent young Indians are adopting Western-style clothing as part of their regular wardrobe. Mr Laban also noted that Indian consumers’ awareness of Gap had been boosted by endorsements from Bollywood stars and a boom in affluent Indian tourists travelling abroad.
“We believe the Gap aesthetic has the potential to really resonate with shoppers, especially the half of India’s population that is under 25,” he said.
Arvind Mills is one of Asia’s largest denim producers, and a long-time Gap supplier. It also operates more than 1,000 retail outlets in India for leading American fashion brands including Nautica and Tommy Hilfiger.
But while India is one of Gap’s top ten supplier countries, Mr Laban said that much of the apparel available in its Indian stores will be imported, despite high tariffs.
Other western retailers to have launched in India - including the UK’s Marks and Spencer- struggled until they stocked primarily with Indian-made products to bring down prices. Nevertheless, Mr Laban expressed confidence that the Gap collections had potential for long-term growth.
“We are aware of the higher duty taxes of course, but have spent a considerable amount of time working with our partners to benchmark the pricing of product both against local and international competitors,” he said. “Gap can and will be a contender in the field.”
Mr Laban added that new higher-quality mall developments would provide a further boost.
Zara owner Inditex, which entered the Indian market several years ago in a venture with the retail arm of the influential Tata group, is already expanding after finding favour with some consumers.
Gap’s initial focus will be India’s biggest cities, though over time the company will look at smaller second and third tier cities where consumers have shown strong appetite for Western brands.
“Clearly, our broader expansion will be regulated by the success of our first stores in Mumbai and Delhi, where the launch of the brand matters most and where we can be at our most visible,” Mr Laban said. “Equally, we also need to be flexible and secure good property as and when it becomes available, as competition among foreign players is becoming ever more fierce.
Online shopping is also growing rapidly in India, but Gap said it has “no concrete plans” to make its apparel available over the internet.
“It’s taken us several years to get to grips with India’s bricks and mortar lay of the land and how we want to be positioned within it,” Mr Laban said. “When we enter a market, you only get one shot to establish a brand and we want to make sure we get it right. That offline mentality also applies to online frontiers, and in particular e-commerce.”
— Financial Times
