Gap, Inc. (“Gap” or “the Company”) released an announcement detailing its plans to build upon the current momentum of its international growth strategy. Gap reaffirmed its goal of growing total sales outside of North America and online to about 30% by the end of its fiscal 2013. Moreover, the Company plans to bring the first store of its Old Navy brand outside of North America to Japan within the next 1-2 years, and plans to “nearly triple” the number of Gap stores in China from 15 to about 45 by the end of 2012.
So, what is Gap’s marketing strategy when entering new markets such as Japan and China? According to the press release, Gap typically enters the new market with brand-building “flagship” stores, followed by outlets and other smaller stores in outlying areas. Once these stores pick up, the Company may decide to apply a franchise model to increase expansion in the regions. Personally, I think this model is solid because it mitigates risk. By opening just a few flagship stores early on, you sort of test the waters of the market without having a huge investment. If the flagship stores fail, the Company can reassess its decision to fully commit to entering that particular international market.
What are your thoughts on this strategy? Is Gap being too cautious by slowly entering these markets at first or are they pacing themselves appropriately given the risk?