The Gap opens flagship store in Shanghai- will this be a vacation spot or second home?

The Gap opens flagship store in Shanghai- will this be a vacation spot or second home?

By Marc Niola

November 12, 2010

Shenzhen- As growing uncertainty in the U.S. economy continues, retailers hope to gain ground in the Middle Kingdom. One of the latest U.S. retailers to join the growing number of multinationals to enter China’s sizzling consumer market is The Gap.The Gap has marked Shanghai, arguably the fashion capital of China, as the site of its flagship store in China. Located in the trendy shopping center- Hong Kong Plaza in the Puxi section of Shanghai – the store is well positioned in the busiest shopping districts in the city. The grand opening on November 11, which just happened to coincide with the celebration of “Singles Day” in China (11/11- China’s one day) was a clever marketing strategy to promote the brand’s “wearing passion” image. A symbolic gesture well appreciated by many Chinese because passion was definitely in the air
during Single’s Day in Shanghai.

The Gap Shanghai will carry most of the product lines available in its U.S. stores, in addition to its special offerings with Chinese characteristics for the domestic Asian consumer. By offering specially designed jeans for the Chinese market The Gap hopes to gain traction with the growing, but increasing demanding Chinese consumer. With the China Limited Edition Jeans, only 3,000 units will be made, The Gap hopes it can develop a collector niche market, and plenty of footfall,by tailoring its original design jeans with the same fabric and weave
method it introduced in its 1969 edition.

The Gap’s entry into the Chinese market will require substantial attention, as competition between foreign rivals and domestic challengers increasing vie for market share. Along with coming to China late, The Gap will not only have to compete for market share with many well established multinationals, it will also have to contend with
increasing wages, unfavorable tax rules and the often U.S. vilified currency appreciation issue— doing business in China isn’t always as easy or cheap as it used to be.

As the challenges and obstacles to doing business in China constantly evolve The Gap, and any other enterprise thinking about doing business in China, needs to take its China market just as serious as it does its home market. Because of the relentless competition and the unpredictable Chinese consumer to succeed in China companies need to bring their global best-practices and adapt them to China.One of the most essential areas where companies consistently flounder on is in their understanding of the Chinese market. Companies
looking to understand the Chinese customer need to have their top and middle level executives spend the required time in China to develop their expertise of the dynamic Chinese market. Sounds simple- but you
would be surprised how many top-executives from multinationals in China actually lack basic Chinese market fundamentals.

Few success companies have recently found out that winning in China usually means winning globally. Companies (both foreign and Chinese) that win in China have stream-lined and cost-saving sourcing operations, innovative lean-manufacturing, highly developed and dependable distribution channels and targeted marketing strategies. Increasingly, companies that win locally in China gain world-wide advantage by leveraging what works in China— globally.

If The Gap strives to make China its second home it will need to effectively adapt its product line to the Chinese market buttressed with its global best-practices in supply-chain, marketing and enterprise resource management. How well it eventually executes on these areas in the rapidly changing conditions in China will be the harbinger of success. It is inevitably too early to tell whether The Gap’s advance into China is just a short stay or a sustained presence, but it does plan to open three more stores in two of China’s first-tier cities, Shanghai and Beijing. With Shenzhen and Guangzhou hopefully next The Gap seems to be well-prepared the bridge the cultural and economic divides into China market.