US apparel chain GAP will manufacture and sell locally in India to counter mounting competition from its European rivals Zara and Hennes & Mauritz (H&M).
While this will allow the San Francisco-based brand to correct prices of its products, it has also chalked out a strategy to up the ante further. GAP will shrink size of its stores in India by almost half, from around 9,000 square feet to about 5,000 square feet and in a global first, partner with Amazon to push online sales here.
J Suresh, MD and CEO, Arvind Lifestyle Brands and Arvind Retail, said, "We had a very good start. But there was a new duty introduced by government in 2016 on imported products, which increased the cost model of GAP."
He said, "When H&M came, they came with low prices. Zara followed suit and cut prices too. Going forward, we will correct prices by 10-15% because we have got approvals to manufacture in India and therefore won’t be required to pay import duties."
Earlier, although India has been a strong sourcing hub for GAP for its global markets, it did not have the necessary approvals to sell the same products here.
With reference to GAP’s partnership with Amazon, Suresh said the move is likely to increase contribution from online sales (negligible now) to 10% immediately, and to 15-20% over a period of five years.
At present, GAP operates 11 stores across the country and it plans to open four more by the year-end.