By  on December 19, 2006

SINGAPORE — The Gap is growing in Southeast Asia.

The San Francisco-based retailer opened its Singapore flagship here this month, a 9,000-square-foot store in the Wisma Atria mall on the city's shopping hub of Orchard Road. It completes a recent string of Gap launches in the region, including two other Singapore shops and one in Kuala Lumpur, Malaysia, as the company looks to ramp up its retail presence worldwide.

The stores were developed through a franchise agreement with Singapore-based retailer and distributor FJ Benjamin Holdings Ltd. Their partnership marks the first Gap franchises worldwide, in addition to the company-owned units in North America, Europe and Japan.

"Gap Inc. has always operated company-owned stores," said Ron Young, senior vice president and managing director of international strategic alliances. "But we really believed that, in order to reach the world markets in the density that we want, we had to develop a new channel."

Gap Inc. also signed a contract this year with Dubai-based franchise partner Al Tayer Group to launch Gap and Banana Republic in the Middle East in the first quarter of next year.

The expansions come as Gap Inc. continues to face struggling sales. The company last month reported a 10.8 percent decline in its third-quarter earnings. For the first nine months of the year, earnings were down 27.9 percent to $559 million.

Young declined to comment on how the expansion might contribute to the company's turnaround, but said that franchise deals were one part of the retailer's new growth initiatives.

"A few years ago, we had the belief that we had to own and control our stores," Young said. "Today, we recognize that there are operators out there that are extremely good retailers and merchants, and, with the right type of partnership, we can create very strong networks."

The main benefit of franchise partners is that they provide the local knowledge and experience to allow Gap Inc. to quickly reach new markets, Young said. He pointed out that the deal with FJ Benjamin was signed in January, only 10 months before the first Singapore Gap store opened in the city's VivoCity Mall in mid-October. The Kuala Lumpur store followed in mid-November, as well as the stores in Singapore's Centrepoint and Wisma Atria malls this month. Gap Inc. chief executive officer Paul Pressler traveled to Singapore this month to see the retail locations.The recent openings are the first step to developing both Gap and sister brand Banana Republic across Southeast Asia. Gap Inc. and FJ Benjamin have expanded their agreement to include Indonesia, as well, and two Gap and two Banana Republic stores are slated to open in the capital of Jakarta in April.

Banana Republic then will launch in Malaysia in June and in Singapore's high-end Paragon mall in July. Current plans call for 50 Gap and Banana Republic stores in the three countries by 2011.

Gap Inc. also is actively looking at other markets in Asia, Young said. He declined to name the brand's next step, saying the biggest hurdle in the region was finding partners who could deliver the brands to the same standard as the company-owned stores.

"The most important element of the franchise network is being able to find a partner who can present your brands with the essence and the quality that has made the brands the success that they are," Young said.

To meet such requirements, Gap Inc. sent a team to Singapore in the weeks leading up to the openings to educate local staff on everything from visual merchandising to the signature Gap folding technique. The stores are outfitted with the newest Gap store design, which also is being rolled out across North America.

The merchandise in the new stores is a franchise-specific mix of products from the North American and European collections as well as items not available in other markets. Starting with the upcoming spring collection, however, the franchise store merchandise will be more closely aligned with the North American selection.

Prices are about 10 to 15 percent more in the new stores, mainly because of import costs and high rent, Young said. But, judging by the crowds that flocked into the flagship here just hours after it opened on Dec. 8, the higher prices weren't a major concern to Singaporean shoppers.

An advertising blitz on everything from buses to billboards across the city seems to have created strong anticipation around the store openings, a method FJ Benjamin ceo Nash Benjamin said is essential to attracting customers in the increasingly competitive retail scene.

"To have a successful business in this market, you have to create that ‘wow' effect in everything from store fit-out to location to advertising," Benjamin said. "We are creating in a very competitive environment, and we have to be absolutely right with everything we do."

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