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Clothing retailer Gap’s expansion in India
Gap was founded in 1969 in San Francisco. The company’s products are sold under the Gap, Banana Republic, Old Navy, Piperlime, Athlete and Intermix brands. Gap has long been seen as the go- to- for young adults seeking affordable fashion.
As explored in the MarketLine Case Study ‘The Gap, Inc. Strategies for a turnaround’ (Advantage subscribers click here to view the report or here for non-subscribers) the company has outlined a number of turnaround strategies including expansion in Asia, following volatile market growth in its domestic market for most of the past decade.
High GDP growth rates, rising consumer spending, a burgeoning middle class and rising population have contributed to the attractiveness of the Asian market.
Gap partnered with Arvind Lifestyle Brand (an Indian retailer which is part of the Arvind Group) to open franchise-operated Gap brand stores in 2015. This marks the company’s entry to the Indian market. The brand plans to open about 40 franchise-operated Gap stores in India.
India is the world’s second most populous market and its economy has grown rapidly in recent years. The country has a dozen cities with a growing population; this combined with high GDP growth rates, and an increasing middle class means that there is great growth opportunity for Gap.
According to MarketLine the Indian apparel retail industry is projected to grow at a strong rate for the five year period 2014 – 2019. Unlike the US, India is not over saturated and therefore, provides many opportunities for retailers such as Gap.
Although there is huge growth potential within the Indian retail industry; at present the un-organized retail sectors, which consist of unauthorized small shops- conventional Kirana shops, general stores and corner shops, continue to dominate the Indian retail market. It is estimated that over 95% of retail in India is done through the unorganized channel.
This can therefore act as a barrier for companies such as Gap and the company may also find it difficult to understand trends in this industry as un-organized retail sales go undetected. If Gap is able to overcome this structural obstacle, India could well play a key role in any potential turnaround.