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Gap to Expand to Australia

The first Gap store in Australia is slated to open in Melbourne this fall.

Gap Inc. is preparing for its debut Down Under.

This story first appeared in the March 24, 2010 issue of WWD.  Subscribe Today.

The San Francisco-based retailer will reveal today that it has signed a franchise agreement with Brand Republic Pty. Ltd., a subsidiary of Busby Holdings Australia Pty. Ltd., for exclusive rights to operate Gap brand stores in Australia. The first store is slated to open in the Chadstone Mall in Melbourne this fall.

This brings the number of franchise agreements that Gap operates to 24 on four continents. All told, the company operates more than 130 franchise stores in 20 countries, spanning Asia, Europe, Latin America and the Middle East. Twenty-eight of those are Banana Republic stores.

The international rollout is being overseen by Stefan Laban, vice president of Strategic Alliances for Gap Inc. Before joining Gap in January, Laban, who is based in London, had been retail director with Nike Inc. for eight years and established that brand’s international franchise network. Before that, he was global retail director for Escada.

“With Australia, we’re extending our international presence to a whole new continent,” Laban said. “It’s a great retail market that really appreciates the casual style that Gap represents.”

He said the store in Melbourne will be 8,000 square feet on two levels and include all the Gap co-brands including babyGap, GapBody, GapKids and denim. With more than 530 stores, the Chadstone Mall is the largest in the Southern Hemisphere, he said, and Gap will join other well-known names including Tiffany, Gucci, A|X Armani Exchange, Calvin Klein, Hugo Boss and Lacoste.

He said the store will rival the other “great Gap stores in New York, London and Paris,” and will provide a true “Gap experience” for the Australian consumer.

Beyond that, Laban said the company will open another store in Sydney in spring 2011 before rolling out 10 to 15 additional units in major metropolitan areas around the country over the next three to four years. “There are 20 million people in Australia and 10 million of them live in cities,” he said. “It’s a really casual market and the brand awareness for Gap is really high there.”

Under the terms of the agreement, Brand Republic will purchase merchandise from Gap and must adhere to the company’s quality standards. Brand Republic operates more than 50 stores in Australia and also has the franchise for Guess in that country. “That’s why we teamed up with them,” Laban said, noting Brand Republic is well-versed in servicing the Australian consumer. For example, he said, the Melbourne store will launch with summer product because fall is the summer in that part of the world.

Looking beyond Australia, Laban said there are “some great pockets around the world” where Gap expects to add stores including Turkey, the Middle East and Asia. The company’s most recent franchises were for Israel and Thailand.

Laban said India and Brazil are next on the company’s agenda. “We’re in the exploring phase in Brazil. But this is a very thorough process,” he said, noting the Australia deal took three years to come to fruition. “We want to make sure we do it right.”

At a Bank of America analysts’ meeting earlier this month, Gap Inc. chief executive officer Glenn Murphy said a big focus for the company this year is a “much more comprehensive international and online program.” Those channels account for 20 percent of Gap Inc.’s $14.2 billion in volume, but will receive 30 percent of the retailer’s $575 million capital budget this year.

Calling it a “big opportunity for the brands,” Murphy said franchised Gap stores will be operating in 24 countries in the next 12 months; however, “we are only penetrated within those countries to 31 percent. So in those countries, we still have a lot of work to do.”