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Gap's coming to India with 40 stores, but here's why it may not succeed
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  • Gap's coming to India with 40 stores, but here's why it may not succeed

Gap's coming to India with 40 stores, but here's why it may not succeed

FP Staff • August 23, 2014, 10:10:50 IST
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Until about 10 years ago, GAP was one of the world’s most successful garment retailers that wooed young adults in the 1990s with “classic khakis and swing-dancing ads”.

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Gap's coming to India with 40 stores, but here's why it may not succeed

American clothing giant Gap is planning to set up shop in India at a time when most retailers in the US are suffering with slowing consumer spending.

The clothing store is partnering with one of the country’s largest textile companies, Arvind Lifestyle Brand Ltd, a subsidiary of Arvind Ltd, to open 40 outlets in India, and is likely to launch its firs two stores by early next year.

For Gap, India is an important market among the emerging countries and the next step in its global expansion strategy. The intent behind the move is strategic given that Spanish fast fashion rival brand Zara, which opened shop in India in 2010, crossed the Rs 500 crore sales mark this year.

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In essence, markets like India and China, which provide better growth prospects and lower competition among western brands are better suited to gain market share and brand recognition.

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Gapcurrently has 231 Gap stores in Asia, and is also aiming to open 110 Gap stores in mainland China, Hong Kong and Taiwan this year. And even though India is one of Gap’s top 10supplier countries, much of the apparel available in its Indian stores will be imported, despite high tariffs.

But will Gap be a success story in India?

Until about 10years ago, Gap was one of the world’s most successful garment retailers that wooed young adults in the 1990s with “classic khakis andswing-dancing ads”. It not only understood its customer but was completely dedicated in catering to every customer’s needs.

But today, the situation is quite different and it has not been able toto replicate this success in the 2000s.Not only have the quality of the products deteriorated, but so have the designs and merchandising. This is evident from the fact that Gap has lost its market share to rapidly growing and trendy fast-fashion giants like H&M, Forever 21, Zara and Uniqlo.

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In fact, between 2008 and 2010, Gap closed more than 50of its 3,251 stores and in thesecond quarter of this year, net sales slid 5 percent, to $850 million, compared to the year before.

According to this report, Forever 21’s share of the US specialty apparel market grew from 1 percent in 2003 to 6 percent 2011, while H&M’s share increased from 1 percent to 3 percent. During the same time period, Old Navy’s share of the market dropped 600 basis points, to 11 percent; the Gap’s dropped 700 basis points, to 8 percent; and Banana Republic’s 100 basis points, to 5 percent.

In short, Gap’s bland designs led to other firms gaining share, and in order to re-brand itself the company needs to better gauge its customer base, align branding and design accordingly and get rid of loss making brands like Old Navy rather than just setting up shop in India, where half the population is under the age of 25 and eager to embrace fashion.

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In India, Zara and Forever21 are a success because of their pricing and inventory rotation according to latest fashion trends. If Gap has to survive in India, it must offer something unique and constantly keep up with the latest trends in order to attract customers into its stores.

Another area where Gap could score over its competitors is baby apparel. Gap’s management has reportedly stated thatthe market shares of GapKids and babyGap in their respective segments are significantly higher than Gap’s market share in adult apparel as there is a huge demand forbaby products in its own stores as well as franchisee stores.

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