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)?

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3 Responses to “Will The Gap head down under?”

  1. Brendan Lewis Says:

    Interesting. Did Sakshi define international though? My suspicion is that “global players” tend to come early and for a much longer tenure. “exporters” are much more opportunistic. therefore lumping everyone’s activities under the label international could be misleading when trying to discern trends.

    We had a look at the concept here http://bit.ly/c0GwZ at the Churchill Club, but didn’t generate any research on it.

    I like your work.

    Brendan

    • Andre Sammartino Says:

      By only looking at retailers and their FDI/franchising the research sidestops that important distinction. You’re right – exporters can be much more fleet of foot than those making investments in new countries. Thanks for the link. They raise some interesting views and distinctions.

  2. Steve Sammartino Says:

    All very good answers.
    Steve.

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