A corporate strategy article by Thunderbird students Emma Brown, Caroline Caverly, Julie Goodman, Kelly Post and Angela Wong
Last year, when an apparel giant opened four stores in China and failed to gain a significant portion of the retail sales, multinational retail stores took note. The Gap, an apparel line successful in more than 3,000 locations worldwide, had everything going for them. So, what went wrong?
The Gap’s biggest mistake was the cookie cutter approach it took to establishing its presence in the world’s largest youth market. The Gap sought to target the increasing middle-income consumers in the rapidly growing Chinese market, but failed to capture the attention of their most important customers, the Chinese youth.
In China, the Gap is perceived as middle class apparel selling for a luxury price. Status and luxury are important goals for China’s consumers, especially for the youth. However, a premium price for a middle class product is a cost youths are not willing to bear. Moreover, The Gap chose to open stand-alone stores rather than locating in mall areas, forcing customers to go out of their way to make a special trip just to visit the store. The majority of Chinese consumers purchase apparel at a mall because they can use it as a single destination for shopping, eating, and entertainment. The Gap failed to realize that China’s middle class youth consumer is very different from an American consumer.