Layout loses market opportunities in China's domestic market GAP rebates online sales

When ZARA from Spain, H&M from Sweden, and Uniqlo from Japan have already taken the lead in setting up the Chinese market, the GAPs who entered China in late 2010 clearly have lost their opportunities.

After losing the opportunity, choosing the online sales model has also caused the industry to question, "Although online sales is a trend, but once you enter China to build their own online sales platform, such risks and costs are very large."

A few days ago, GAP had to sell through a third-party B2C channel instead of selling its own website.

Missed opportunity

The American clothing giant GAP once suffered a headache because of the decline in its performance. As its brains improve its performance, its competitors have already occupied these emerging markets in Asia.

At the end of 2010, when the Chinese market share of Zara, H&M, and Uniqlo grew rapidly, the first flagship stores of GAP were also opened in mainland China.

"Is it a bit late for GAP to enter China?" an industry source pointed out that although Yang Deming, president of GAP China, said that this node is the time to enter China, GAP is hard to ignore a problem that is later as the clothing market in mainland China. The GAP had to pay a higher amount of shop-opening costs than its competitors.

The above-mentioned insiders pointed out that compared with other competitors, GAP did lose its chance.

In the face of the same strong and more innovative opponents, GAP’s road to China’s development appears to be stagnant. In 2010, Zara Group's Inditex Group opened 75 new stores in China and pointed out in its financial report that it will add 120 stores in China in 2011.

H&M’s latest financial report also revealed that 250 new stores will be opened this year, including China, the United Kingdom, and the United States. As of August 2010, Uniqlo has had 76 stores in China and plans to increase the number of stores in China to 1,000 by 2020. Uniqlo has already started trying to sell online in China, and has performed well.

To keep up with the pace of these international rivals, GAP must expand rapidly. The reporter learned from GAP's financial report that after 2005, the number of GAP stores has been flattening, and for its newly acquired brand Athletea last year. Only one store was added in the year.

The annual report shows that GAP currently has a total of 3,068 stores. In the fourth quarter of 2010, it opened 27 stores and closed 41 stores. There were 135 shops in the Asian region GAP on January 29, 2011 and 120 companies on January 30, 2010. From last year to this year, GAP closed 41 stores in the United States.

The reporter learned from GAP China that the brand entering China is only GAP among the five brands under GAP, and the performance of GAP brand is not satisfactory. Although Gap's turnover in 2010 increased by 2% compared with 2009, its sales of 5.735 billion yuan this year are still down by about 4% compared with the sales of 5.958 billion in 2008.

Not only that, but since the beginning of 2006, GAP has experienced a decline in sales, and sales in 2010 have still not exceeded 2005. In 2005, GAP Group’s net sales were US$16.019 billion and in 2010 it was US$14.664 billion.

Self-constructed online sales platform sales performance doubts

In the critical moment of declining performance in 2008, GAP appealed to online sales and overseas expansion strategies. According to its annual report, this strategy has achieved initial results.

Glenn Murphy, chairman and chief executive of Gap, USA, pointed out in his 2010 financial report that now we have started online sales in 31 countries to consumers in at least 90 countries.

For overseas operations, Murphy is also worried. “We have problems with limited operations in most countries. We have to deal with major players that have a certain foundation in these countries where we are involved. Problems with local real estate prices, employees, transportation, etc. will lead us to be different from operations in regions with successful experiences."

After GAP entered China in 2010, unlike the other three competitors, GAP adopted the strategy of operating online and offline at the same time. In terms of network services, Gap chose to cooperate with Shanghai Yishang Network Information Co., Ltd.

"This strategy has no problem at all, but so far, we haven't seen companies that can truly operate online and offline." Fang Yingzhi, an e-commerce research center of the B2C analyst country, pointed out that, in addition to comparing with traditional competitors, GAP's online sales in China also face at least competitors like Vanke or McCaw.

Analysys B2C analyst Chen Shou pointed out that "I don't understand why GAP enters China and chooses to build its own online sales platform so that it has to expend huge financial resources, human resources, and material resources."

What is even more worrying is that GAP clearly has little experience with China's Internet environment. "To build such an online sales channel that requires long-term capital investment, if there is no localized experience, it is not an easy task," Chen Shou said.

This successful experience is Uniqlo. “Uniquku chose a local third-party online sales platform for sales in China. This may be a relatively low-risk way for traditional brands to enter the B2C market.” Chen Shou sent that “For the Chinese market In the absence of understanding of the environment, third-party platforms can obviously avoid risks and reduce costs."

“In addition, customers’ tastes and trends will also differ from the countries in which we lived before. Therefore, our sales may not be successful or different from our expected results,” the financial report revealed.

This is also a problem that will cause headaches for GAP. The industry insiders pointed out that “GAP clothing sold in China is more fashionable and cheaper. However, the rise of Chinese brands in China has a large-scale, low-price, and does not lose the international fashion of these brands. Clothes will also have a great impact on these international brands such as GAP."