Gap in Japan: Market Expansion

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Gap in Japan: Market Expansion Gap Inc. currently has 198 stores in Japan, with 147 Gap stores, 10 Old Navy stores and 41Banana Republic stores. As the largest market outside of the United States, Gap Inc. Japan and Asia in general have been growing rapidly with 14.7 percent increase in net revenue while the sale of other international markets has stagnated. However, the three brands of Gap Inc. currently face strong competition from local brands such as Neighborhood and Music Earth & Ecology and international brands such as Uniqlo and Zara. In order to retain the current customers and expand on market share, Gap, Old Navy, and Banana Republic must each develop more distinct and specific market position. According to Deloitte’s report on Global Power of Retail, the apparel and footwear industry scored 3.05 on the Q ratio. Q ratio measures publicly traded company’s market capitalization to the value of its tangible assets; the higher the ratio, the more financial market participants believe that part of the company’s value comes from its non-tangible assets, such as market dominance, customer loyalty, and differentiation. However, Gap Inc. scored a 2.17 Q ratio, which is below the 3.05 of the industry, while competitor H&M scored a 5.5. When consumers think of affordable fashion brands, they would immediately relate to H&M. And when consumers are asked where they would get basic clothes, they would without a doubt answer Uniqlo (Q ratio 3.41). As of now, the brands of Gap Inc. lack clear selling point and consumer loyalty. Stated in Japanese fashion market report, “Because of doubts about the future of the economy, Japanese consumers have become increasingly cost and quality conscious.” Moreover, the flourish of fashion magazines and blogs annexes to the intense fashion market of Japan. In order to diverse the audience and attract both price and…...

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