Gap details China expansion

San Francisco Gap plans to open two namesake stores in Beijing and two in Shanghai and start selling its merchandise online in China later this year, the company said Wednesday.

Gap will own and operate its four new stores, including a shop on the premier Nanjing West Road in Shanghai; a store on Mid Huaihai Road, another top shopping street in Shanghai; a two-story store on Beijing's Wanfujing Street and a store in a Beijing regional mall called Chaobei Joy City.

John Ermatinger, president of Gap's Asia Pacific Region, said Gap will tweak its sizes and product mix, including smaller sizes and using brighter colors to appeal to locals.

Ermatinger told The Associated Press that the retailer views its expansion into China as a "major cornerstone" for its international growth.

The move was unrelated to China's announcement this week that it would let its currency, the yuan, appreciate against the U.S. dollar, Ermatinger said. That change will make prices of U.S. goods more competitive in China.

Ermatinger declined to say how many stores Gap will eventually operate in China or to project its revenue in China.

"Our growth will depend on how well Chinese customers will embrace the brand," he said.

Gap's entry comes after extensive analysis of Chinese consumers' buying habits. Ermatinger said Gap team members interviewed consumers and went through their closets.

Gap is counting on China's massive online community to fuel Web sales. According to Forrester Research, China had 209.1 million Internet users in 2008, or 16% of the population. Forrester expects that number to increase to 377.1 million, or 27% of the population, by 2013.

A distribution center outside Shanghai will serve all four stores and the China Internet business, which Gap will manage with Shanghai Yi Shang Network Information Co. Ltd., an e-commerce company.

To lead its expansion efforts, the company has appointed Redmond Yeung as president, China for Gap, and Lorenzo Moretti, as managing director, China for Gap. Yeung will lead business development and real estate strategy, and Moretti will focus on all store operations, product-to-market activities and infrastructure development. Based in Shanghai, where Gap will also open its corporate China headquarters, they will report to Ermatinger.

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