Will The Gap head down under?

Rumours abound that US clothing retailers, The Gap and Abercombie & Fitch, might be set to open stores down under. This sent me off to chat with an Honours student in our department who has spent the past six months exploring the international expansion patterns of various major retailers, including The Gap.

Here’s a little email interview I did with our newest retail expert Sakshi Banerjee:

André: How international is The Gap?

Sakshi: The Gap is actually not that international in comparison to its counterparts such as Zara (Inditex) and H&M. The focus of The Gap has always been its home market, the US. Though it has begun to internationalise, the majority of its sales (around 82%) are still generated within its home market. In comparison, H&M derives less than 10% of its sales from its home market and Inditex around 50%.

André: How many countries does The Gap operate in currently?

Sakshi: The firm has stores in six countries – The USA, Canada, The UK, Ireland, France & Japan. Here’s a link to their store (and brand) counts. They have recently started expanding by franchise, mainly in the Middle East where such an entry mode seems to be compulsory.

André: Why has it taken so long for them to get down here?

Sakshi: The reason for the lateness of their entrance in the Australian market can be attributed to a number of factors. There are organizational factors. The Gap’s high dependence on its home market and home region (NAFTA) have meant that they have been slow to expand outside their natural comfort zone. Country characteristics of Australia such as its geographic distance, being in the southern hemisphere (switched seasons) as well as its small consumer market have meant that Australia is not seen as high priority market to enter/expand to.

André: How likely do you think it is that they will indeed open down here?

Sakshi: The likeliness of them opening an actual store is very slim. The costs, the risk, and the pressure on their supply chain as well as the pressure on designers to produce alternative seasons’ clothes mean that the likelihood of them opening is very slim. And as for Abercombie and Fitch, their clothes are already being carried in certain stores in Australia, so there might not be that much to gain.

André: Do you think this would attract the other big fashion retailers to Australia too?

Sakshi: I do not believe that this will attract other major fashion retailers. Inditex has explicitly stated that it will not be coming to Australia and currently H&M is more focused on expanding their presence in the Asian markets.

André: Thanks Sakshi.

Anyone else got questions for Sakshi (or me)?

Is Starbucks a cannibal?

This story regarding Starbucks’ launch of an instant coffee brand (Via) is rather concerning. In particular, this quote regarding a ‘taste challenge’:

“The initial commercials will promote a “taste challenge” that will take place at Starbucks stores from this Friday to Monday. Customers who participate will be able to try a cup of brewed coffee and a cup of Via, to see if they can tell them apart.

“We’re convinced a majority of people won’t be able to tell the difference,” said Mr. Schultz, who explained that he has secretly been serving Via to people at his office and home for months and that they haven’t realized they were drinking instant coffee.” 

Surely, if customers cannot readily taste any difference between the instant coffee and the considerably more expensive version brewed in-store, then Starbucks has broken their own business model. 

Will the purported ambience of their stores (i.e. the ‘café experience’) and the wider range of coffee flavour choices be sufficient to overcome any losses from customer flight to instant? 

Also, doesn’t pushing this product out into the retail space allow other competitors (i.e. diners etc) scope to advertise “Starbucks coffee in house”. 

Unless Starbucks is looking to abandon its retail cafe network down the track and take on Nestlé etc in the grocery domain, this looks a very dangerous move.

Why doesn’t iTunes have a long tail?

One of the supposed strategic advantages of online retailers like Amazon and iTunes is their much larger stock of products.

As Chris Anderson has described, if we look at the distribution of popularity of many products (such as books, movies, songs, search phrases) there is a very lengthy tail of titles and choices which the mightily heterogenous world of consumers might be interested in purchasing. Certain firms are very well positioned to take advantage of this long tail phenomenon by either catering solely to some portion of the tail (some micro-niche), by making search for such products practical, and/or by holding massively diverse portfolios.

Amazon has been lauded as a success story based on the last two elements, especially through its aggregation of the used books market. It would seem to do a reasonable job on the music side of things.

Elsewhere in the music market, CD Baby has sold more than 5 million CDs by independent artists (from a current stable of around 278,000 titles) thus tapping into the micro-niche end of the spectrum.

The other big player is Apple’s iTunes, which reportedly has more than 8 million songs on offer. But this is where it seems to fall down.

I have been recently revisiting some CDs from my pretty large collection, in particular a minor Aussie hit album from the mid-1990s by a band called the Clouds. This release charted way back when, along with efforts from other local outfits like Ratcat, The Falling Joys, and The Hummingbirds.

The strange thing is that these albums, once popular enough to justify record deals, have disappeared from the retail environment. They are NOT available from iTunes, nor are they still in print as physical releases.

The bands, their publishers and their original record labels have dropped the ball here. Surely there is little to no cost or risk in getting this material listed on iTunes. Likewise, Apple is being far lazier than I expected in building up the inventory of their store.

Is there perhaps a niche role here for some entrepreneur in identifying back catalogue for iTunes? This could extend to some shopfront for fans of this sort of music (and presumably the same for many other niche genres). A physical counterpart to this is Collingwood’s Aztec Music which rereleases long-lost 70s and 80s albums on vinyl.

At the moment, folks are forced to illegally share access to a considerable portion of history’s record music. When, exactly, will this long tail shift out of the black market?