Gap is struggling with revenue in Europe

Gap, the American clothing retailer, is active in Europe for quite some time. But while it has seen some steady growth in the United States these last couple of years, its presence in Europe is slightly less positive. Revenues here have come down from €516 million in 2010 to €507 million in 2012, despite continued expansion.

Another thing that clearly emphasizes the difference between Gap in the US and Gap in Europe is the fact its revenue per store in Europe has decreased at an average annual rate of more than 3% in the last four years. On the other hand, in the US its revenue per store has improved by almost 4% every year! So, Gap and Europe, it doesn’t seem like a clear match made in heaven. But is it all Gaps fault? Absolutely not.

According to Nasdaq.com, Gaps weak performance in Europe can be attributed to the current economic situation in its key markets France and the United Kingdom, two of the biggest apparel markets in Europe. Ecommerce in these countries wasn’t doing very well the last couple of years and this had a negative effect on the results from Gap in Europe. But it’s not a dead-end street for the multinational clothing retailer, that has almost 200 stores spread across European countries like the United Kingdom, France, Italy and Ireland. The British apparel market is huge and may have some positive growth in front of them, while ecommerce in France still grows and offers Gap some opportunities with a change in shopping trends

Gap in France
The French have known some economically unsatisfying times with high unemployment and low wages. This has had its effect on the apparel market, which has remained stagnant for the past years. In other words: consumers weren’t buying that many clothes and shoes anymore. The money they had, they used it for more essential stuff, like food or healthcare products. Nonetheless, the men’s apparel category showed some positive signs in 2012. It may have had something to do with a trend, that French men are more particular about what to wear. They now tend to spend more money on apparel products compared to women and they also buy their clothing more often on themselves instead of letting their partners get it for them. According to Nasdaq.com Gap can leverage this trend by facilitating the sales of its men’s products in this country. Another thing Gap should consider, is remaining responsive to changing (consumer-spending) trends. Retailers like H&M, Vivarte or KIABI are popular in France, because they offer products at competitive prices.

Gap in the United Kingdom
The apparel market in the United Kingdom showed only marginal growth in 2012, due to low income and changing shopping trends. Consumers started buying clothes and shoes that can be used for multiple occasions, which led to fewer purchases. The apparel market in the UK still totals about 43 billion euros and it has actually seen some positive growth, despite the economic turndown. Expectations are this market will grow at a compound annual growth rate of 3% through to 2017, so there are also some opportunities for Gap in this European country. More and more brands are focusing on a multichannel strategy, by updating their website and targeting ecommerce as a channel. Gap should consider following this trends, so they can keep up and maybe even grow again in the United Kingdom and France, just like it does now in the United States.