Business Standard: April 29, 2015
New Delhi: Gap, a US multinational clothing and accessories retailer, is set to open its first store on Saturday at a South Delhi mall. It has partnered Arvind for the India entry, where the latter is looking at an investment of Rs 400 crore over five years.
Ismail Seyis, vice-president, Gap Global Franchise, and J Suresh, managing director at Arvind Lifestyle Brands, spoke to Digbijay Mishra. Excerpts:
This is the 45th market for Gap. What took you so long to open in India?
IS: We have been looking at India for quite some time. It’s really a question of timing and finding the right pipeline of location. Also, what we didn’t want to do is open in two or three locations and end up waiting for another three years for opening the next one. We wanted to have a steady pipeline. The other key thing was working with Arvind; having a partner like them makes it the perfect timing.
What is the way forward?
IS: Over the next five years, the opportunity is 40 stores in the next five years. We are looking at the top three cities — Delhi, Mumbai and Bengaluru — for the first year. Our average store size is about 7,000 sq ft. This is a flagship store for maximum impact but over a period of time, the next stores will be in the range of 7-8,000 sq ft.
How many stores in the first year?
JS: Most malls are filled, so we have to keep looking for good space. But if everything goes well, we will have 10 stores by mid-next year. Rentals are not a major problem. Gap is such a strong brand but getting the space takes time.
What is the cost you are looking at per store?
JS: As capital expenditure and working capital, we are around Rs 8-10 crore a store over the next five years.
How is the retail sector sentiment? Do you feel the heat from online retailers?
IS: I think we are all a little swayed by the dip in retail sentiment over the past year but as we go forward, we believe in the India story and so does the entire world. It's also a very young population. So, once GDP growth gets back to 8-10 per cent, the entire growth will come to the market in six months.
Sentiments are good now and while it is still not converting into consumption, it’s a matter of time.
Is the pricing India-specific?
IS & JS: Yes, we are making it very India-specific. It’s not expensive, it's premium; certainly not mainstream mass but it's accessible. The reason we said 30-40 stores is also because pricing in our business model makes it so attractive. We have spent a lot of time working on the model to make the price positioning right. It is an aspirational brand but accessible.
Where do you see India emerging over the next few years among all your markets?
IS: When I look at my franchise world and I see the overall 45 markets -- Russia, Brazil, Mexico and India would be up there with all those markets. The potential over the next 10 years is the sky is the limit. Today, on a five-year term, when I look in the top 10 markets, it's not China, of course, but I would put it in the league of Brazil Russia, Mexico.
E-tailers have shown there is good demand for premium brands in non-metros as well. How do you plan to tap that?
JS: We will reach out to every customer. We are working on that and, of course, e-commerce is an integral part of our plan.
What is the biggest challenge in a market like India?
IS: Accessibility to real estate is the biggest challenge. Which is why it was a no-brainer for me as to why it has to be a franchise way in India.
How big is the opportunity for the brand in India?
JS: It’s a sizable opportunity and not a niche one. To give an idea of the scale of the brand potential, we are looking at a Rs 1,000-crore opportunity but there is no timeline for that as yet.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.