Gap Is Making Sure the Shoe Fits in China
Gap Inc. (NYSE:GPS) is expanding in China, and as the company’s executives grow their business in the country, they are making sure they tailor their brand to Chinese consumers. Gap Inc. operates the Gap, Old Navy, Banana Republic, and Athleta brands, and according to The Wall Street Journal, the San Francisco-based firm plans to open 25 Gap stores and up to 10 Gap outlet stores in China in 2014.
Gap currently has 80 stores in the country, and it is now interested in continuing to open more as its domestic business in the U.S. struggles; China represents a good opportunity for the company thanks to its expanding middle class. The Journal reported on the Boston Consulting Group’s estimate that apparel sales in China in urban areas are expected to reach $156 billion by 2017, reflecting a 58 percent increase from 2013.
China has been on the radar of many U.S. retailers as of late because its middle class is growing, its retail sector is expanding, and brick-and-mortar retail in the U.S. is facing headwinds. The country is retail gold to many companies, but that is also causing an overcrowding of the market space as more companies move in — that’s where the demand for differentiation comes in.
If Gap wants to set itself apart from competitors, it needs to gain some sort of edge on the competition. Jeff Kirwan, president of Gap’s China division, has been tasked with that endeavor and Gap’s expansion. He recently launched Old Navy, the company’s lower-cost, family-targeted brand, in Shanghai, and sat down with The Wall Street Journal to talk about Gap’s strategy and its game plan moving forward with both physical stores and online.
According to the publication, Gap is planning to cater its business to Chinese consumers by researching how they shop, with whom they shop, and what they shop for. While many Americans shop alone or online, Kirwan said to The Wall Street Journal that Chinese consumers often shop in groups. That’s important for Gap to recognize, because the company has to make sure its locations support the social aspect of Chinese shopping.
Kirwan said to the newspaper: “What’s distorted in a positive way is that people shop in packs, so it’s a very social situation and in many parts of the country, because of the climate, malls and shopping centers become a social environment. In places like [the northern city of] Harbin, where we are looking to expand, the social environment is the mall. They also shop more frequently and continually shop at our stores and our competition. And that puts a lot of pressure on us to be good and current and new and to showcase our product.”
And like with American customers, Gap has also recognized that Chinese consumers are shopping more on the Internet — that’s where the need to boost its e-commerce efforts arises. Kirwan believes that Gap has an advantage over its competition when it comes to e-commerce thanks to the company’s expertise in that area, but there is always room to improve, and being the best of the best in online retail in China is especially important.
Gap needs to continue bolstering its online offering, make sure its locations support a social shopping experience, and also tailor its sizes to fit China’s population. The competition in the country is tight, but Kirwan said to the Journal that Gap has the advantage because its brands “serve every stage of the customer’s life — from infant through to adult,” and “have a unique brand voice that is very different from any local competitor or international player specifically in China.”