Gap Eyes Latin American Expansion

It plans to enter Brazil as it embarks on an “exciting” expansion spree across the region.

MEXICO CITY — Gap hopes to roll out around 30 stores in Latin America by 2014, when it also plans to enter Brazil as it embarks on an “exciting” expansion spree across the region, the chain’s vice president of strategic alliances Stefan Laban revealed to WWD.

He added Latin America’s growth potential is second to Asia for the U.S. retailer, which has been scrambling to boost its presence around the world amid sluggish sales.

Laban’s comments came as Gap opened its first, 10,000-square-foot stand-alone store in Mexico City, which will house its Gap, GapKids and babyGap collections.

The shop, located in Mexico City’s fledgling Interlomas Mall, is the first of a dozen stores the company could open in Mexico by 2014, Laban said.

In late September, Gap will open another shop in Mexico City’s Atizapan Mall. That will be followed by a store in the city’s wealthy Satelite quarter in October, when another shop will also open in Guadalajara, Mexico’s third-largest city. If all goes well, Gap could open six to eight more stores in Mexico — making its expansion plans there the most aggressive for the region so far.

Laban said the time is auspicious for bringing Gap stores to Mexico, which it is doing in partnership with Liverpool. The brand has been selling through Liverpool department store corners since 2005. After Mexico lifted a 10-year punitive duty against Chinese imports last year, Gap can now bring its full merchandise assortment to Latin America’s second-biggest retail market.

“We could not bring baby products and our full range because of the duties,” Laban explained. “Now Mexican consumers will be able to get the same products available in London, Paris and New York, except for a few items that will be localized.”

Selling Mexican-tailored products (such as kids’ T-shirts emblazoned with Mexican heritage-landscape logos) will be one way Gap hopes to set itself apart from competitors like H&M, which hopes to open its first Mexican outlet this fall, and Inditex’s Zara and Paul & Bear, which have taken the market by storm.

Mexicans’ strong awareness of the Gap brand should help drive sales, Laban added.

“Since 2005, brand awareness for Gap and Banana Republic has been stellar,” he said. A third way Gap will beat rivals will be through its kids and baby collections.

Priced between 395 and 695 pesos, or $35 and $53 at current exchange, Gap’s baby and kids ranges will offer the strongest “quality, style and price” for the market, Laban added.

Gap is still in an exploratory stage in Brazil. Laban said the firm is looking for a strategic partner with hopes to make a debut in two years.

“Brazil is the big rock in Latin America, but it’s also a challenging market,” Laban said, backing other retailers’ views that high textile and clothing import duties, coupled with high retail prices and strong competition, add extra complexity to the market.

Still, Brazil’s booming middle class and economic growth potential make the market a “must” destination for any retailer, including Gap.

Gap also hopes to enter Colombia and Uruguay, as well as expand its presence in Chile.

With retail partner Superior International, the company will open an 8,000-square-foot freestanding Gap store in Bogota, Colombia’s capital city, in October. Later that month, it will inaugurate 8,000- and 6,000-square-foot Gap and Banana Republic units, respectively, in Medellin, Laban revealed. Then, in mid-November, Gap will arrive in Montevideo, Uruguay, through partner Neutral Duty, he added.

Meanwhile, Gap will install two stores in Panama City, Panama, in late November, taking its store count to five in the Central American country. This year’s Latin American expansion will culminate with a store opening in Viña del Mar, Chile, in November, Laban said.

In 2013, Gap hopes to open one to five stores in Colombia, one to two shops in Uruguay and three to four more stores in Chile, where it already operates five shops.

Laban would not provide a profit forecast for the region this year, but said same-store sales are so far doing very well with full-priced merchandise selling very strongly.

He noted that while operating profits do not yet exceed those in other markets, they could in a few years.

Gap brand awareness is higher in Latin America than other markets, Laban said, adding that consumers’ frequent travel to Miami, a Latin shopping hot spot, has helped build Gap and Banana Republic’s image in the region.