US apparel retailer Gap has tied up with Arvind Lifestyle Brands, a subsidiary of Arvind Ltd, to set up 40 stores in India.

Arvind Ltd said the franchisee agreement with the San Francisco-based firm is a step towards adding premium brands to its portfolio.

“Apparel is a very large category with huge growth potential. We are looking at luxury, premium, speciality retail and e-commerce for our next phase of growth,” said Sanjay Lalbhai, Chairman, Arvind Ltd, adding e-commerce will be a category by itself.

Gap stores will be spread over 8,000 sq.ft. Each store will entail an investment of ₹10 crore. The first store is expected to be rolled out by the middle of next year starting with Delhi and Mumbai.

Gap, best known for its casual denim and khaki pants, sells brands such as Banana Republic, Old Navy and Piperlime. and operates both company-owned stores and franchise stores around the world. It has over 3,100 company-owned stores and 350 franchise stores.

Lalbhai said Arvind, a supplier to Gap, will work on a royalty model with the US retailer.

Asked if Arvind will import the merchandise, J Suresh, MD and CEO, Arvind Lifestyle, said initially, the company will rely on Gap’s global sourcing.

“Gap sources from India and Bangladesh. We will leverage it at a later stage,” he said.

On Thursday, Arvind Lifestyle Brands also announced a franchise agreement with The Children’s Place, the largest children’s speciality apparel retailer in North America.

In India, Gap will compete with others lifestyle apparel brands such as Zara.

Other global players Global brands like Uniqlo and H&M are also gearing up to start operations in India.

According to a Technopak report, the Indian apparel retail market is expected to grow at a compounded annual growth rate of of nine per cent to nearly 2.5 times in 2023 from $41 billion in 2013. The report said consumption of apparel, favourable demographics, increase in value and penetration will help in steady growth of the sector.

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