Gap Faces Stiff Competition at New China E-commerce Site
U.S. clothing retailer, Gap, has launched a new online store in China, following in the footsteps of other foreign companies trying to tap into the country's growing e-commerce market.
The online store was launched on Wednesday, and coincides with the eventual opening of four Gap stores in the country as part of the company's global expansion plans.
The new online store comes as China's emerging e-commerce market is projected to reach US$61 billion at the end of the year, according to consulting group iResearch. And the growth is only expected to continue, with the market increasing by 44 percent next year, and then 34 percent the year after.
Gap could not be reached for immediate comment. But in statements made earlier this year, the company said it was "confident" Gap could integrate its brand into the China retail market.
"Now, after spending a lot of time listening to Chinese consumers and learning more about their shopping preferences, we're excited at the prospect of meeting their fashion needs," said company CEO Glenn Murphy in a statement.
But in terms of e-commerce, Gap will be entering a competitive market already filled with seasoned players.
Currently, China's largest online retailer is Taobao.com. The company controls about 75 percent of the online retail market and was able to beat out eBay's efforts in China. In the third quarter of 2010, Taobao's sales reached $15.2 billion, according to Beijing-based research firm Analysys International.
Foreign companies like eBay and Amazon, on the other hand, have struggled to become popular in the market. EBay's online platform in China, Eachnet.com, controls a 0.8 percent market share, while Amazon's China online store online only holds 0.6 percent.
Still, other companies are trying to grab a share of the market as it continues to grow. China's largest search engine Baidu and Japanese e-commerce company Rakuten jointly launched their own shopping mall website in the country last month. America's popular Wal-Mart company has also said it is preparing to sell online in China from its Sam's Club warehouse stores.
In the case of Gap, the clothing retailer has partnered with Chinese e-commerce company Shanghai Yi Shang Network Information to deliver its online store.
Such partnerships are important for foreign companies to succeed in the e-commerce market, said Chen Shousong, an analyst with Analysys. Gap also benefits from a strong brand name known globally, he said.
But because the e-commerce market is already so competitive, "there will be a lot of difficulties," Chen added. Gap could perhaps benefit more if the company sold its products through Taobao, rather than promote its own website, he said.
"In China, the Gap brand is not as strong," Chen said. "It will take some time to nurture that kind of brand recognition."