TOKYO — Gap Inc. is continuing its international expansion drive, eyeing potential acquisitions, launching a Japanese e-commerce site and bringing the Old Navy chain here, according to John Ermatinger, Gap’s Asia Pacific president.
This story first appeared in the March 2, 2011 issue of WWD. Subscribe Today.
Although the executive said the company’s main priority is developing its existing portfolio of brands, Gap is “always looking” at possible acquisitions. He said the company has already examined some companies in Asia, but the potential targets have either overlapped with Gap’s existing brands or turned out to not be for sale.
“It would have to be someone that adds a certain opportunity or ability to reach a very unique consumer that perhaps we don’t reach today,” he said during an interview at Gap’s new four-level Ginza flagship, without elaborating.
As for Old Navy, he said the company is studying the best way to bring the chain to Japan and sees plenty of potential here, an historic market for the company. Ermatinger said the company is looking at real estate options for its “number-one weapon” brand and it will happen soon — although not this year.
“We see this market as having a terrific value component to it. It’s probably the largest component of all apparel spending in Japan so we think [Old Navy is] just a natural,” Ermatinger said.
The executive said the company is also working to establish a Japanese e-commerce site. Currently, customers in Japan can order Gap goods from the global site, but Ermatinger, who is also president of Gap’s Japan business, said the retailer wants to “be more Japan-friendly and establish our own online community and we’re looking at that now.” He declined to give a specific timeline, but said the Japanese site should go live over the next two years.
The Ginza flagship will open Thursday with much fanfare as pop star Avril Lavigne will hand out jeans, designed in collaboration with her fashion label Abbey Dawn, to the first 200 customers through the door.
The 15,446-square-foot unit is the brand’s largest in Japan and replaces the Gap’s first flagship in the country, which was located just a half block away and opened in 1995. Escalators trimmed in blue glass take shoppers to the various levels carrying the full range of Gap merchandise, including a special collection of denim, T-shirts and other goods developed with 10 Corso Como.
The new Gap store’s space was originally designated for a massive Louis Vuitton flagship, but Vuitton’s corporate parent, LVMH Moët Hennessy Louis Vuitton, scrapped plans for the store in late 2008 against a backdrop of declining luxury goods sales in Japan. So Gap’s occupation of the spot along the same strip as massive Gucci, Dior, Hermès and Giorgio Armani flagships exemplifies just how much this once luxury-obsessed country has become more budget-conscious in its shopping habits. Similarly, Hennes & Mauritz, Zara and Abercrombie & Fitch have all opened stores in the neighborhood, a key destination for Asian tourists.
Espousing an optimism rare among retail executives when discussing business prospects in Japan, Ermatinger said Gap is “bullish” on the market. Although he declined to disclose financials in any form, he said, “sales and profits are very good” for Gap Japan, which has about 130 Gap stores and 29 Banana Republic stores in the country.
He attributed that success to Gap’s positioning in the fashion spectrum as a midway point between cheap fast-fashion brands and high-end luxury, although Gap’s prices in Japan are definitely higher than they are in the U.S. For example, a pair of women’s “ultraskinny” stretch jeans sells for 12,800 yen, or $156 at current exchange rates. But Ermatinger said that price premium in Japan is justified as consumers here are willing to pay more for a high level of service and merchandise that was designed expressly for the Japanese market.
“Despite what you would say maybe could be as long as a 15-year recession in Japan, our business continues to move forward,” he said, describing it as “healthy as it’s ever been.”
Meanwhile, Ermatinger said Gap’s first stores in China, which began opening in the fall, are performing “extremely” well. It has two stores in Beijing and two in Shanghai, along with an e-commerce site.