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Gap's finds it tough to boost sales in India

American fashion giant Gap has been finding it difficult to enhance consumer base in India even after being close to two years into the country. The company has failed to leverage its global positioning and is lagging behind fast fashion brands like Zara, Forever 21 and H&M. It has not been able to build connect with local styles and trends and the fact that the brand is struggling globally has made the situation worse.

Gap has a franchise agreement with textile and apparel major Arvind Lifestyle Brands in India. Suresh J, MD of the company says Gap’s and other fast fashion brands performance should not be compared, as Gap is a classic brand and equally spread between men, women and kids. As a mall developer in national capital region (NCR) points out, the brand does almost half of what H&M does in terms of sales. H&M clocks in about Rs 40 lakh worth of turnover in the mall per day. Mall executives from across the country say, Gap was doing reasonably brisk business till H&M opened doors in October 2015. Gap has taken up some of the most expensive spaces in malls across the country; it is present at Select City Walk in Delhi, Mall of India in Noida, DLF Promenade among others. It runs a total of 11 stores. A big problem is that the costs are high, but the returns are way below what the brand hoped to mint. To add to its troubles, a mall owner says, Gap has not priced its products right. He says that it is not priced right for the kind of fashion it offers.

Is pricing an issue?

A mall head in Maharashtra says, Gap seems to be having issues with pricing. While they are priced similar to Forever 21 and H&M, others offer higher fashion. The rival brands have caught the pulse of fashion conscious Indian customers. They are quick to change their styles, maintaining a fair degree of freshness in their stocks on shelves. Brands like Zara launch new collections more frequently. Zara launches new designs twice a week and Forever 21 turns its inventory 14 times a year. At Gap, prices start at Rs 800 while the entry point at H&M is Rs 1,500 a piece. Forever 21 start as low as Rs329 for its online fare. But when one compares the average stock pricing of all the brands, Gap is priced 50 per cent higher than H&M and Zara, according to reports.

Analysing the trade dynamics, Baqar Naqvi, Business Director, Wazir Advisors points out most overseas players who have come to India with same pricing as their home markets have not done well. In 2009, M&S cut prices by 20 per cent to make its products more affordable. But that is not the only issue. Gap has done very little advertising and promotion, whereas other international entrants are doing so aggressively. It also has limited penetration, whereas players like Zara have now penetrated tier II towns too and are doing pretty well even in those markets. Zara has already cut prices by 10 to 15 per cent and others are looking at it, say experts. Zara is also facing slowdown in sales growth. Inditex Trent, the JV between Tata owned Trent and Zara’s parent, posted a 17 per cent growth in sales in FY 2016, its slowest growth since opening stores here.

On this note, Suresh J agrees that a 10 to 15 per cent cut in prices may help the brand move its merchandise faster and said they were working on it. He also added that Arvind was working with the Gap sourcing team to increase production from India to avoid hefty import duties. Gap has also started selling online, which he believes will give it an edge over Zara and H&M who do not sell online so far in the country.