Filling the fashion retail Gap: Arvind to bring in US brand to India

US-based clothing giant Gap is all set to take on fashion retailer Zara as it looks to enter India next year through a joint venture with Arvind Brands, The Economic Times reported today.

The move comes days after Gap’s global rival Hennes & Mauritz AB ( H&M) got the approval from the Foreign Investment Promotion Board for a wholly owned subsidiary in the country that will run its H&M stores. Its other big rival Zara entered India three years ago while Marks & Spencer launched its first stores in India in 2000. Topshop too is finalising plans to enter the country in the next couple of months.

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Other global brands, like Mango and Tommy Hilfiger, are already present in the country via joint ventures with local partners or as franchisee. They have been quite successful in India. Significantly, these brands have reportedly grown 20-50 percent on year in the last financial year, that too despite a slowing economy. Clearly, shoppers are not cutting down spends on foreign brands.

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Recently, Marc Bolland, CEO of the UK’s largest clothing retailer Marks & Spencer, said the company plans to make India its biggest international market, outside its home market. India tops its list of priority markets, even ahead of China.

The competition in the fast-fashion space is getting intense with even GAP getting ready to open stores in India sometime next year.

According to AT Kearney’s Global Retail Development Index 2012, India is the fifth-most favourable destination for international retailers.

The sheer number of brands that are now present in India and the new ones that are entering every year is a clear sign of strengthening confidence among international brands that India is now one of the most important markets that they cannot ignore for long.

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Last year Gap Inc had reportedly initiated market research in India to consider setting up retail operations here. According to the ET report, Gap and Arvind already have a longstanding relationship as the US retailer has been buying denim from Arvind for several years.

Arvind Brands markets various foreign labels such as Tommy Hilfiger, Calvin Klein and Lee in the country.

Gap currently operates in India through a liaison office, The Gap International Sourcing, which sources woven fabrics both locally and from other countries in the Asia-Pacific region. The retailer has been expanding abroad but plans to shut more than one-fifth of its stores in North America over the next two years.

India allowed up to 100 percent foreign direct investment in single brand retail in 2012.

Gap, which owns global brands such as Gap, Old Navy, Banana Republic, Piperlime and Athleta, had put in place a team headed by its US veteran Rajiv Malik to give shape to its entry strategy for India.