New Delhi: US-based casual wear label Gap Inc. sent Stefan Laban, then head of international strategic alliances, to scout out India’s market potential five years ago, soon after Spanish clothing and accessories retailer Zara established a presence in Asia’s third biggest economy.

“The market was not ready for Gap then, and the market can’t be more ready for the brand now," said Laban, now senior vice-president at the company.

Laban is in the Indian capital to open the US brand’s first store at a south Delhi mall, having partnered with Bengaluru-based Arvind Lifestyle Brands Ltd, a unit of Arvind Ltd, to set foot in the country.

Gap, founded in 1969, has used the franchise route in 45 out of the 50 markets it is present in. Globally, it has more than 3,700 owned and franchise stores.

The San Francisco-based company expects India to be one of the top 10 markets for Gap in the next five years.

“Gap is a 1,000-crore opportunity in five years," said J. Suresh, managing director and chief executive officer, Arvind Lifestyle Brands, which has brought marquee brands including Tommy Hilfiger and Calvin Klein to India, besides Arrow, US Polo Association and Elle. It operates 1,000 stores in 190 cities across the country.

India’s apparel market is estimated at $45 billion, and is projected to touch $200 billion by 2025, according to a study by consulting firm Wazir Advisors.

Gap plans to set up 10 stores mainly in Delhi, Mumbai and Bengaluru by March 2016, and 40 over the next 4-5 years, spread across the top 10 cities in India. Arvind will spend between 8 crore and 10 crore to set up each store, and is aiming to reach the break-even point once it has 10 stores in India.

The brand will also be available online. “Online is essential. We are working on the strategy and will finalise soon," added Suresh.

Gap’s India stores will stock its global range, sourced from markets including India and Sri Lanka. Ismail Seyis, vice-president, international strategic alliances, claimed that the products will be competitively priced against the other international brands available in India.

“Charging a premium does not work any more. Pricing here has been worked out keeping profitability in mind for both the partners," said Seyis.

The company will sell T-shirts starting at 799 and jeans starting at 2,999. While product options at the entry-level pricing may be few, most products for men, women and kids are priced below 4,999, according to Suresh. In the denim segment, Gap will be competing with brands such as Levi’s and Lee Cooper.

“These are some very sharp price points," said a business head at a top casual wear label who did not wish to be named. “If this is a consistent and not just an entry strategy, it will be fabulous. They have an advantage (in terms of margins) since they also source from India," he said.

Gap has been sourcing from India for close to a decade, and that will reduce its reliance on imports. Foreign labels sold in India are often deemed expensive as many of them are imported.

“The sourcing quantity will not change, as we’ll have the same product lines here as well," said Seyis.

Brands such as Zara and Mango have, since their entry into India, adjusted prices to suit Indian pockets. Marks & Spencer tweaked its entry price points and lowered prices of its garments. Local sourcing helped the brand sell Polo T-shirts for as low as 500. Another competitor, Sweden’s Hennes & Mauritz (H&M), will open 50 stores in the top metros starting later this year.

“Gap has a bright future in India. Denim as a category is the fastest growing in the Indian apparel market..." said Arvind Singhal, chairman of retail consulting firm Technopak, noting that Gap is strong in the market for denims.

Finding quality retail space may prove to be a challenge for the company, Singha added.

Gap is entering India at a time when the company’s growth in its home market has slowed in the face of stiff competition from brands like H&M and Japan’s Uniqlo.

Gap, which is a $6.2 billion-a- year brand, has focused on markets such as Brazil, Costa Rica and Hungary among others. It is not looking at any new markets for now. “We’ll focus on the existing markets for growth, rather than expand into new markets. Markets in western Europe and India will be of immediate focus," said Seyis.

Depending on the success and growth rates of Gap in India, the American retailer will bring other brands such as Banana Republic. “It’s too early, and there’s no time frame in mind. All depends on how the market responds," added Seyis.

Gap also sells brands such as Old Navy and Piperlime.

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