Famous U.S. clothing chain and brand the Gap to open first stores in South Africa.
Gap Inc. is opening its doors to Africa. On Tuesday, the U.S. clothing chain unveils its first store in South Africa, in a swanky mall here. Another store will open in Cape Town this month, followed by Pretoria, the country’s political capital, later in the year.
Executives see the openings as a steppingstone onto a continent where the average economic growth is faster than 5% and the average age is 19—a nice fit for a chain catering to the young and hip at subluxury prices.
At a launch party Monday night, guests sipped from champagne flutes next to a “Hello South Africa” banner. Models clad in Gap denim worked the crowd while a DJ played techno music. Personal shoppers were on hand to assist consumers.
“The next big market for us is Africa,” Stefan Laban, the head of Gap’s franchise business, said at a rack of pink kids’ leggings at the Sandton-district store. “There is an emerging middle class and more and more tourism here.”
Gap’s expansion in Africa comes as the company is opening outlets in other emerging markets and closing stores in North America. The San Francisco company has struggled in the U.S. and Canada, where the company’s sales fell a combined 5% for the year ended in January. Elsewhere, sales rose 11%. The company opened its first store in Panama in February and plans to expand in Colombia, Uruguay and Peru over the next two years. A Lebanon shop is slated for this year.
Gap is entering South Africa following research that began around when the country hosted the World Cup in 2010. The company opened its first stores in Morocco and Egypt last year. Gap’s shares rose 69 cents, or 2.7%, to $26.08 at 4 p.m. Monday on the New York Stock Exchange, just off their 52-week high.
Gap in South Africa has a partnership with Stuttafords department stores, which have been selling Gap items since 2007. Stuttafords will be Gap’s franchise operator in South Africa.
Mr. Laban said Gap has received inquiries from other prospective operators in Africa but that it will be at least a couple of years before the clothier ventures beyond South Africa, the continent’s largest economy. Nigeria, for example, has a large pool of consumers and a faster-growing economy but lacks South Africa’s mall culture.
Gap isn’t the only clothing retailer moving into South Africa. Spain’s Zara, owned byInditex SA, opened its first South Africa store at the end of last year in the same mall where Gap is making its debut. Luxury retailers Gucci and Cartier also have boutiques in the mall.
Other consumer-goods companies also are seeking to tap a growing middle class, the highest-profile deal being Wal-Mart Stores Inc.’s acquisition last year of a majority stake in South African retailer Massmart Holdings Ltd.
For Monday evening’s party, Gap invited about 200 South Africa trendsetters. Guests sorting through pink skinny jeans and Gap-emblazoned T-shirts were served trays of sushi and, in a country where whiskey is popular among the aspiring middle class, Johnny Walker Black Label.
Gap research indicates that Joburgers favor a relaxed look, company executives said. “Our brand of casual American lifestyle is a good match,” Mr. Laban said.
The trick was finding the right blend of apparel in a reverse climate to that of the Northern Hemisphere. In the Sandton store, shoppers can buy the same spring line that’s on the racks in London or New York but also find pieces from last’s fall’s selection. That pattern will continue, Mr. Laban said.
Gap owns and operates its own stores in several markets, including North America and China. For other regions, including South Africa, it runs a franchises with local partners.
One of South Africa’s disadvantages is high import duties, Mr. Laban said. Since all clothing must be imported, a pair of jeans can be less expensive in the U.S. than in South Africa.
“We will do Gap here first and then think about the next phase,” he said, alluding to the possibility of bringing the company’s other brands, such as Banana Republic.
The investment comes after the Virgin Brand owned by British billionaire Richard Branson intends to open new clubs throughout South Africa. With a growing middle class throughout the continent, the retail sector will gradually expand to meet the growing demand by African consumers. The return on investment is too high to pass up for any company looking to expand, and increase revenue. Looking to Africa simply makes business sense.