Kai Ryssdal: My oh my how far Gap has fallen. The once hip, but still somehow ubiquitous retail brand is going to close a bunch of U.S. stores by the end of 2013. It was too ubiquitous, it turns out. It’s also going to triple its business in China — becoming the latest big American company to look overseas for growth.
Torsten Stocker is on the phone with us from Hong Kong. He’s with the Monitor Group over there. Good to have you with us.
Torsten Stocker: Great to be on the program.
Ryssdal: So I was in Shanghai a number of months ago on a big reporting trip and we actually went to a Gap store at a big mall in Shanghai and two things hit me. One is that the place was completely empty, there was not a soul in sight. And the other one was they had basically taken an American Gap store and plopped it down in the middle of China. How does that work?
Stocker: That’s a very valid question, but I think the way they’ve entered China is obviously based on what they know best. And I think that’s really maintaining the core values of their brand and being an American casual brand and having all those elements of Americana as part of their brand. Of course, the big challenge is to get Chinese consumers hooked on that.
Ryssdal: Yeah. One thing that caught me when I was there: So they’ve taken their premiere line of jeans — the 1969 jeans — and they’re selling them in China and branding them as 1969 jeans. 1969 in China was not a great year, right? You had the Red Guards and it was bad in the middle of the cultural revolution. Do Chinese consumers get that?
Stocker: Some may, but I think the consumers that they’re targeting now are mostly younger consumers born in the ’80s and the ’90s or maybe the ’70s. I don’t think that they would actually make that connection to 1969 as that particular year. Now of course having said this, they might not make the connection to the ’60s counterculture in the West either. So in that sense, it’s probably more of a neutral right, rather than a negative or a positive.
Ryssdal: What about this idea that they’re going to expand by building big flagship stores, the very same kind of stores they’re closing here. Is that a winning strategy?
Stocker: To be honest, I have mixed feelings about that. Now, of course, I mean it’s great for the brand and you make a big impact when you open a store like that in a new city, but it’s a very long and tedious way to build a brand and to expand in China — in particular when some of your competitors have been in this market for many, many years and are expanding much faster.
Ryssdal: Well, so that’s a very good question: Is the Gap late to the party in China? Obviously there’s room for growth, but have they missed the big boom?
Stocker: Well, I wouldn’t say that. There have been examples of some brands that in fact came a little bit too early and probably failed because consumers weren’t yet ready for a slightly more premium, mid-market apparel brand. But China now, you could almost say that it’s a global battleground where American brands and Japanese brands and Korean brands are fighting it out with a lot of the local Chinese brands, who are also very good because they’ve sharpened their teeth being suppliers to the very brands that they’re competing with in China.
Ryssdal: Torsten Stocker with the Monitor Group. He’s based in Hong Kong, also out of Shanghai. We got him in Hong Kong. Torsten, thank you so much.
Stocker: You’re welcome.
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