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2012-09-11

Gap Inc. Eyes India Entry
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Gap's interest in the Indian market comes as the Indian government late last year opened the way for so-called

U.S. apparel retailer Gap Inc. is conducting market research in India as part of a plan to open retail operations in the future, an official from the company’s local liaison office said Tuesday. The official noted that the plans are at a preliminary stage but that management in the company’s San Francisco headquarters is “deliberating on this.” He added that specifics on how many stores the apparel retailer plans to open and how much it may invest are likely to be decided early next year.

“As our CEO has said, India is one of the markets that we could consider in the future, but any exploration of this opportunity is in the very early stages,” said Edie Kissko, a spokesperson for Gap Inc.

Gap’s interest in the Indian market comes as the Indian government late last year opened the way for so-called “single-brand retailers” that sell their own products to open in India through wholly-owned units. Previously, they could only own 51% of joint ventures with an Indian partner. A more controversial proposal to allow “multi-brand retail,” which would include supermarkets such as Wal-Mart Stores Inc. was withdrawn amid political opposition. But the single-brand expansion could itself prove enough to attract significant investment in India’s retail industry, which currently is dominated by mom-and-pop shops. Swedish housewares giant IKEA Group said in June it planned to invest up to 1.50 billion Euros in India.

Gap currently operates in India through a liaison office, The Gap International Sourcing India Pvt. Ltd., which sources woven fabrics both locally and from other countries in the Asia-Pacific region. The retailer has been expanding abroad but plans to shut more than one fifth of its Gap stores in North America over the next two years.

India’s retail market is estimated to generate sales of about $500 billion annually, making it an attractive destination for foreign firms. But those looking to set up shop here face significant challenges, including meeting the government’s mandate that at least 30% of the value of products sold by them in India must be manufactured with content purchased locally from small and medium industries. Commerce minister Anand Sharma said in New Delhi Tuesday that he was unaware of Gap’s interest in entering India but “if they want to come, they are most welcome within the government’s policy parameters.”

getchee Take

Gap has taken big steps in trying to stay a leader in the retail apparel industry with its educated gambles in India. The domination of mom-and-pop shops just shows that there’s plenty of room for growth and change. Gap seems to have taken the ‘it’s not as hard as you think’ approach to entering an emerging market. This is something that most of us are familiar with when it comes to China. However, the times have changed in China and opportunities have shifted. Expect to see a following trend from many other retailers in the coming years.

Source: Wall Street Journal