Gap opens first Australian store, but wary of entering retail discount war

American clothing chain Gap is keeping an eye on the rampant discounting currently plaguing the Australian retail industry, saying while its products are competitively priced in comparison to local retailers, it will not engage in any type of price war.

With the chain opening its first Australian store in Melbourne’s Chadstone Shopping Centre today, the first of several over the next few years, Gap’s strategic alliances chief Stefan Laban says the company is concerned about prices.

“Our concern is that the market will become even more value driven,” he says.

“There is a lot of pressure on pricing, and with sales such an important part of our structure here it’s important. We aren’t worried, but we can see that happening.”

“There are two methods to follow in retail. One is to just compete on price and compete that way, and the other method is to just try and keep prices up. We’re going with that latter method, and trying to keep quality high.”

Laban says the company’s flagship denim jeans will sell for about $100, which he says is in line with similar comparable products in the fashion-saturated Melbourne market.

However, he says Gap will offer more of a stable product range, rather than following the latest fashion trends.

“We’re not trying to find a fashion niche here, we are confident in bringing our denim products here. Melbourne is very fashionable, but I also think they have a good sense of quality and they have a good sense of casual wear as well. We are confident we’ll do well.”

The company hopes to open up to 15 stores over the next three to four years in Australia, a slow rollout due to the difficulty in finding the appropriate available retail space. The Chadstone store is 1,200 square metres, with the Sydney store opening next month to cover 800 squares.

“When we enter international markets, we want to do it right. Brand recognition for Gap is high here, but we also have to make sure we find the right real estate. We are looking for big stores, and our attitude is that we should wait to find the right size store.”

“The Chadstone store is rather on the big size. The average retail store in the Australian market is about 300-400 square metres, but our stores will be a little bigger. We want to show the full assortment.”

The new Chadstone store is actually a combination of Gap’s flagship denim products and its baby/young child wear stores, with the latter taking up about 40% of the store. Laban says this approach provides the company with a key point of difference to other child wear retailers.

“We think there are some strong child brands out here, but we think our assortment is strong. We stand for colour, quality and good value for money, and we think we bring something that isn’t here just yet.”

Although Gap has continued to struggle in the US, with same-store sales down 6% in July, Laban says the international push has been developed over the past two years and isn’t a specific strategy designed to pull the company out of trouble.

“The Australian opening has nothing to do with the US. Gap is a global brand, we’re opening in China this year as well, and Australia is just part of that international expansion. We think we bring something new to the market here.”

“When you enter a new market you want to make sure you have the right partner. That has taken some time as well.”

Laban points to international retailers entering Australia, including Zara or the rumoured expansion of H&M, saying this will deliver more competition and attract other retailers here.

“Personally, I think this is great for the consumer here. With Zara coming and others I think in a year from now, consumers will have a better off and more value for money.”

Laban says Gap has no immediate plans to bring the company’s other popular brands, Old Navy and Banana Republic, to Australia, saying the Gap brand will be its main focus for now.

“We’re looking at 10-15 stores in the next three to four years, and eventually we could do as many as 25 stores. We want to present in the great malls here, and be part of the offering to the Australian consumer.”