After sinking sales in America facing competition from Zara and Uniqlo in particular, GAP is heading to India. The retailer plans to open 40 stores in Mumbai and New Delhi, starting next year in a move that is aimed to help solve its falling market share to rapidly growing and trendy fast-fashion giants.
Last year, Gap opened its first stores in Brazil, as well as in Hungary, Paraguay, Peru and Costa Rica. In July, it also unveiled plans to enter Austria and Slovenia giving it a presence in 44 markets.
On its strategy to open stores in India Steve Sunnucks, Global President of Gap said "India is an emerging, vibrant market and an important next step in our global expansion strategy,".
GAP is hoping to benefit from India's demographic of a huge growing middle class population under the age of 25. "More than half of India's population is under 25 and they are actively embracing fashion in today's retail environment,"
said Ismail Seyis, Vice President of Gap Global Franchise.
In recent times India has been an attractive market for Mass brands: Zara has been in India since 2010, and H&M opened its first store there this year. Chief executive officer of Gap, Glenn Murphy, told Businessweek in an interview that Gap has “strong brand awareness”
However high tariffs—and the resulting high prices—have made it tough going for overseas companies. Thats where Arvind Lifestyle Brand Ltd, (a unit of textile manufacturer Arvind Ltd) comes in as a licensed partner. As one of Asia’s largest denim producers—and a longtime Gap supplier and with handsdown experience of operating more than a thousand retail outlets for Nautica (VFC) and Tommy Hilfiger (PVH), both American brands GAP seems to have worked its strategy out as Arvind will help the U.S. retailer to reduce the cost and time needed to set up in the South Asian nation and give it access to a ready-made distribution network.
"The apparel market is likely to witness a major wave of growth and we are well poised to benefit from it,"
Sanjay Lalbhai, chairman and managing director of Arvind said in a news conference. "We'll see that the best locations at the best malls will be made available to us."
GAP currently has 231 Gap stores in Asia, and also aims to open 110 Gap stores in mainland China, Hong Kong and Taiwan this year. Gap raised its full-year profit forecast to $2.95-$3.00 per share for the year ending February 2015. It had previously forecast $2.90-$2.95 per share.
The burning question however is can the once-celebrated brand be a sucess in India?
Over the years Gap has turned into a disappointment to Americans after facing stiff competition from all sides since 2011. With the Arrival of H&M, and Zara in the U.S. Abercrombie & Fitch (ANF), American Apparel (APP), and Forever 21 also began luring younger shoppers leading to the company losing its relevance.
In a country with a population of more than 1.2 billion, Price, and not Fashion is what drives Indian consumers to buy. Global fashion brands when entering Asia's third-largest economy have started accepting this phenomenon and working as per market demands. In the past year, global brands such as (H&M) and Forever 21, have announced their aggressive expansion plans India. Inherently, Indian consumers are price conscious, and the value for money segment is what still generates biggest business, when it comes to fashion seasonal sales and promotions is what drives business.
Meanwhile the success of Spanish fashion label Zara, known for its fast fashion approach is unbeatable. Since its launch in India in 2009, Zara has become one of the fastest growing fashion brands.
GAP could score over the already difficult competition in India in the realm of Online shopping which has been growing rapidly, however the company has said it has “no concrete plans” to make its apparel available over the internet. In an economy such as India's If Gap has to survive, it must be able to offer something unique and constantly keep up with the latest trends in order to attract customers into its stores. Otherwise it wont be long before the Apparel giant ends up getting for more than it bargained for.