Gap Needs to Strike Balance Between Brand Image and Pricing Strategy

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Reliance Retail, the largest retailer in India, has partnered with Gap Inc. to bring the American fashion brand Gap to India. Reliance Retail's presence is anticipated to aid Gap in quickly scaling up its product distribution network in the country. However, the American speciality apparel company needs to adjust its brand image and pricing strategy to appeal to cost-conscious Indian consumers, said GlobalData, a leading data and analytics company.

"Gap opened its first store in India in May 2015, as part of a strategy to geographically diversify the business away from the stagnating US and Western Europe markets," commented Bobby Verghese, Consumer Research Analyst at GlobalData. "Despite being a mass-market American apparel brand and offering products at a lower price point than in the US, Gap gained little traction in India, with the country contributing less than 5 percent of overall value sales in Asia in 2020."

Gap flopped compared to other global fast-fashion brands such as H&M, Mango, Vero Moda, and Zara, which are recognised as aspirational premium brands with more on-trend ranges. By late 2020, Gap discontinued its franchise deal with Arvind Fashions and permanently closed all stores in India.

Reliance Retail plans to introduce Gap's apparel offerings in India via a multichannel strategy, comprising exclusive brand stores, multi-brand stores, and online sales, including through its direct-to-consumer website Ajio. Gap's namesake and Banana Republic brands will be the perfect addition to Reliance's multi-brand portfolio of its own labels—Netplay, Teamspirit, and Avaasa Mix N Match—and global brands such as Armani, Burberry, Diesel, GAS, Marks & Spencer, and Superdry.

The partnership will assist Gap in gaining a foothold in the Indian apparel market. GlobalData's Q2 2022 consumer survey revealed that 42 percent of Indian respondents typically purchased clothing and footwear from international brands. Between 2022 and 2025, this sector is forecasted to grow at a 6.8 percent compound annual growth rate (CAGR) from $76.8 billion to $93.7 billion due to the rising middle class, growing urbanisation, and youth affinity for Western clothing and accessories.

"Gap can leverage Reliance's manufacturing capabilities to produce goods for the Indian market instead of importing them, thereby lowering prices and reducing potential disruptions due to supply chain issues," added Verghese. "This should enable Gap to attract the value-driven Indian consumers, as 51 percent of Indian survey respondents said they purchased clothing & footwear from mass-market brands in 2021, according to GlobalData's Q1 2022 consumer survey."

Gap's re-entry into India comes with the company's plans to either continue or divest its Chinese business, which has been underperforming due to an ill-thought retail strategy and COVID-19 restrictions.

 "While the partnership with Reliance will help Gap optimise retail expansion, it needs an agile product development and marketing strategy to adapt to the volatile consumer preferences in the new normal. The apparel maker will need to strike a balance between its international brand image and value-for-money pricing strategy to appeal to the cost-conscious Indian consumers."