WWD.com/globe-news/denim/gap-expands-to-south-america-3692098/
government-trade
government-trade

Gap Sets Plans for South American Expansion

Komax will open the U.S. retailer's first store, an 8,600-square-foot South American flagship, in Chile’s capital Santiago in early November.

Gap Inc. hopes to open at least 26 stores in South America by 2016 as it continues to grow its global franchise, according to Carlos Alberto Cartoni, co-owner of Gap’s Chilean franchise partner Komax.

After reportedly courting the U.S. brand for 20 years, Komax will open Gap’s first store, an 8,600-square-foot South American flagship, in Chile’s capital Santiago in early November.

As part of the franchise agreement, Komax will install six Gaps and three Banana Republics in a first expansion phase by 2013. Depending on its success, the retailer, which also manages the Polo Ralph Lauren and The North Face trademarks in Chile, will roll out another six Gaps and five Banana Republics by 2016, Cartoni revealed. Under the expansion, Gap will also arrive in other main Chilean cities Antofagasta and Viña del Mar, he added.

Santiago de Chile-based Komax will buy Gap’s clothing at wholesale prices that will include the U.S. retailer’s markup and won’t pay royalties. Apparel will be sourced directly from Gap’s global factories and will be tailored to Chilean consumer tastes.

“In Chile there is definitely room for 10 to 12 Gaps and eight Banana Republics,” Cartoni noted, adding that consumers’ strong appreciation for U.S. brands and fashion, coupled with soaring incomes in a booming economy, encouraged Gap to choose Chile as its South American launching pad.

According to Cartoni, Chileans’ per capita income is expected to rise to $25,000 a year in the next five years, up from $15,000 today.

Consumers in Chile’s northern neighbor Peru are also enjoying greater purchasing power amid a burgeoning economy, with per capita incomes forecast to reach $12,000 by 2016, though Peru has twice Chile’s population.

“Peru is a good market close to us, and we know it very well,” Cartoni said. He added that Peruvians share Chilean’s zeal for trendy U.S. and global fashion brands, making them ideal customers for Gap.

In Peru, Komax hopes to install as many as six Gaps from mid-2012 to 2015, most likely in the capital, Lima, where it also operates The North Face flagships.

Stores aside, Komax hopes to open Gap and Banana Republic corners in Chilean department stores and other multichannel retailers in the medium term, followed by a similar strategy in Peru after it opens its first shops there.

Cartoni said Komax’s Peruvian venture will have its challenges. “Finding good xlocations in Peru is not as easy as Chile, but we are confident we can find them,” Cartoni said.

Once it consolidates Gap in Chile and Peru, Komax will begin scouting other South American locations for Gap.

An obvious choice would be Brazil, the region’s largest economy with the fastest-growing fashion consumer base, but Cartoni said it’s too early to predict which markets Komax will explore.