Gap Inc. (GPS: 20.10 0.00 0.00%) plans to open 4 stores in China and launch an online e-commerce operation in order to enhance its overseas operations. It expects to execute its plans by late 2010.Gap, a specialty retailer offering clothing, accessories and personal care products, expects to open 2 stores in Beijing and 2 more in Shanghai, all of which will be owned and operated by the company.
One of the Beijing stores will be located on Wangfujing Street and will cover a surface area of 1,165 square meters; the other will be a 1,800 square meter store in Chaobei Joy City, which is a regional shopping center. In Shanghai, one store located on Nanjing West Road will occupy a 1,796-square meter area followed by another 1,140 square meter store situated on the Mid Huaihai Road.
The Gap stores will feature a full range of Gap adult, GapKids and babyGap products, including 1969 Premium Jeans.
We believe this initiative of Gap is backed by the idea of establishing a network of multi- channel consumer markets in China for its various brands involving the launch of a considerable number of stores in the coming years.
Gap entered into a partnership with Shanghai Yi Shang Network Information Co., Ltd., an e-commerce company providing online retail services in China. GAP has also expanded its Board by including Katherine Tsang, Chairperson at Standard Chartered Plc, China, a leading international bank.
We believe capturing the Chinese market is a strategically ambitious move made by the company, given its plans to introduce its other upmarket brand stores of Banana Republic in the coming year. Moreover, this expansion is expected to be the most significant overseas venture of Gap in more than a decade.
Gap’s Chinese footprint follows competitor Iconix Brand Group Inc. (ICON: 14.870.00 0.00%), which made an announcement on June 22, 2010 to open 50 freestanding Candie’s stores in Greater China in 2010. Iconix is engaged in licensing, marketing, and providing trend direction for a portfolio of owned consumer brands.
In China, Gap will be competing with a range of already established international rivals, including Japan’s Uniqlo Co. Ltd., which has 47 stores in China and markets its brand “Uniqlo”. It will also face strong price competition from fast-fashion players like Swedish chain Hennes & Mauritz AB or H&M.Gap’s foray into the Chinese market is backed by an extensive analysis of Chinese consumers’ buying habits, but we believe the growth will depend on the acceptability of the brand by Chinese consumers. The company is believed to be the first international retailer to launch an e-commerce operation in China at the same time as opening stores.
Since its first store in San Francisco in 1969, Gap has come a long way. The company currently has 3,100 stores across the globe, offering products under the Gap, Banana Republic, Old Navy, Piperlime and Athleta brand names.
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