Posts Tagged ‘The Gap’

A little yuletide conversation

December 23, 2011

I’ve broken my blogging silence by voicing my opinion on the woes of Xmas retail over at the fancy Conversation website.

It kicks off like this:

The lead up to Christmas inevitably draws our attention to the actions and performance of retailers. This December there have been very few tales of cheer.

It gets better! Read on here.

A Gap in local knowledge?

November 4, 2010

A buddy brought this international business blunder to my attention via his blog – the “welcome” on The Gap’s local website  announcing their launch into Australia:

You’ve (hopefully) noted the erroneous placement of the signage – Melbourne’s ‘landmarks’ (such as they are) have been confused with Sydney’s.

This is a somewhat amusing example of a liability of foreignness, in that presumably the firm has utilised some offshore graphic artist (whether they be within the firm or outsourced) to compose the otherwise quite funky greeting. But a little local proofreading can’t be that hard.

The clock is ticking to see how long before they pick up on their error (it was first spotted on Oct 27, and I’m posting on November 4, 2010).

h/t: Andy Healy

Follow me to Oz

July 13, 2010

So, despite my repeated naysaying it seems not only is US ragtrader The Gap definitely coming to Australia (their first store will open in Melbourne next month), but they may well be leading a serious onslaught of entrants into the Aussie market.

According to this hype-heavy piece, the list of fashion retailers eying off Aussie wallets now includes Banana Republic (a Gap brand), Forever 21 (from US), Topshop (UK), and Uniqlo (Japan). While I am still taking this talk with a big grain of salt, there is certainly a long tradition of follow the leader amongst multinationals.

This behaviour may reflect several underlying motivations. Rivals may be concerned about early movers locking up resources and this limiting the scope for late moves.

In the retail domain there are grounds for concern that early movers may secure prime store locations, although this is much more of an issue in groceries and fast food than in fashion.  Indeed in fashion, it is more likely any early advantage comes from building stronger relations with landlords and property brokers as anchor tenants.

Unlike fastfood, the franchising model used is only likely to be rolled out at a country-level (i.e. companies are awarded the right to run all stores in a state or country, rather than companies that then sub-franchise to individuals store-by-store), so there is a less of a race to secure franchisees and/or build reputations.

Interestingly two of the most successful internationalisers H&M and Inditex (i.e. Zara) remain very tightlipped about any Aussie plans.  Both firms are much less inclined to franchise (mainly because they control their value chains much more tightly than the others on this list). They’ll need a lot more convincing that Australia represents sufficient bang for their buck/Euro/krona.  I suspect they still see Australia as small fry.

But I’m reluctant to say never anymore. The  performance of their international rivals down under may well play out as the demonstration effect (that this is a market worth seeking) that is a further key aspect of following.

I’m clicking to Westfield

June 17, 2010

Aussie shopping centre powerhouse Westfield (the world’s biggest shopping centre operator) announced a curious brand extension last week. The firm is reportedly planning to use its website as a virtual shopping mall, hosting e-commerce interfaces for a variety of retailers (with fashion being the rumoured kick-off).

So, is this a good move for Westfield?

As I’ve argued elsewhere, Westfield has five particularly powerful competencies: (i) property selection; (ii) redevelopment; (iii) financing; (iv) retailer relations; and (v) branding and marketing . The first three have no relevance to this venture, so the firm is only left with retailer relations and branding/marketing.

Source: Daniel Austin (d)Not

The retailer relations is partially about Westfield’s capacity to offer a more extensive suite of locations relative to rivals and the resultant bargaining power they wield as a landlord. It is also about Westfield’s extensive monitoring of tenant sales and sophisticated contracting processes.

Westfield already carries some information about tenants on their website, and because of their prominent landlord status can certainly attract the attention of these firms. I would be stunned if any of the retailers would grant Westfield exclusive rights to host/direct traffic to their e-commerce portal. Indeed, e-commerce is a substitute to the physical interface, and a mechanism these retailers can use to more effectively negotiate with Westfield as a landlord. Westfield will need to tread much more carefully in these e-relationships.

The counterbalancing angle may spring from the final competency – branding/marketing. Westfield was a global pioneer of using a common brand for their malls (indeed, my post title reflects the reported source of this brainwave – a founder heard a shopper saying they were “heading to Westfields”, and saw the scope for differentiation).

It may well be the case that online shoppers welcome the ‘browsing’ capacity of a virtual Westfield mall. New/small retailers with limited capital to expand their bricks and mortar footprint across Westfield’s 119 malls, may relish being next door to Zara, The Gap and Gucci on the Westfield website. It may also be a mechanism for virtual internationalisation. This could be a chance for Aussie retailers to test the waters in the US, UK and NZ without crossing an ocean. Presumably solely e-commerce retailers could also tap into this spillover effect. Getting this right could also extend consumer awareness of Westfield beyond their current whitebread Anglo markets.

The big challenge is making the site sticky enough. Westfield will need to fill the competency gap in build a user interface that is engaging, exciting and innovative. If they don’t get it right quickly someone could easily build a rival (Google perhaps?).

The uspide for Westfield is that there isn’t much downside here. I wouldn’t think there is an enormous investment required here. It is just a mechanism to augment an already profitable business (and perhaps distract some investors from the firm’s exposure to property price and finance risk).

Verdict? Interesting experiment that could conceivably secure some first mover/network effect advantage.

A Swedish flip-flop

May 18, 2010

Fourteen months is a long time in international business.  In March 2009, I quoted a senior figure at Swedish fast-fashion retailer H&M who said:

“We’ve never really opened in a country where they are in a different season.  We are not in South America and although we have one shop in Egypt we are concentrated in Europe and North America, with some shops in Asia.  The next destination is Russia… To go somewhere like Australia, it’s far away from our production offices”.

This week, her boss announced a reversal of this stance:

Hennes & Mauritz AB, Europe’s second- largest clothing retailer, is looking at opening its first store in the southern hemisphere to tap emerging-market growth and catch up with larger rival Inditex SA.

“Brazil and Argentina are very interesting,” Chief Executive Officer Karl-Johan Persson, 35, said in an interview at his Stockholm office, adding that he’s also looked at Australia. The company wants to enter the region at some point after making “sure we can handle it.”

Tellingly, it would seem that there has been some demonstration effect from the firm’s big rivals – Inditex and the Gap – expanding their operations into the lower hemisphere.  H&M are concerned about missing the growth opportunities in this markets.  International Business scholars need to pay close attention to such clustering of expansion behaviour within an industry, as a firm’s location choices (especially when market-seeking) are not independent of their competitors’.

Do I think we’ll be seeing H&M in Aussie shopping strips real soon?  No, I can’t see that we are a major priority for these guys, or Inditex, and I remain unconvinced about the likely scale of Gap’s entry.

Australia will remain an under-internationalised retail sector for years to come.