All About Gap’s $40 Million China Deal – Sourcing Journal

Gap Inc. continues to streamline its international operating structure, signing a $40 million deal with Chinese e-commerce service provider Baozun Inc. to acquire its Greater China business.

Baozun’s interest in Gap’s business in China is to continue its development of Baozun Brand Management (BBM), a new line of business to leverage its brand-serving technologies to engage in deeper relationships. with these brands. Baozun said he believes its China-for-China strategy and technology and data-driven approach to product and consumer operations will “enable” Gap’s China business to deliver sustainable future growth.

“Technology is central to our strategy, and it is our competitive advantage,” said Vincent Qiu, Chairman and CEO of Baozun. “With Gap’s brand equity and significant scale in Greater China, BBM will start at a higher level to bridge the gap between digital commerce and brick-and-mortar at scale and do what few have done in the world. retail business.” Qiu said BBM plans to add retail talent, supply chain capabilities and IT systems to create an ecosystem that will also help serve its other brand partners.

“We care deeply about our customers in Greater China and know this is a market with enormous potential for our brand,” said Mark Breitbard, President and CEO of Gap Brand. “The growth we unlock through local partnerships with market experts like Baozun not only allows us to connect with new and existing customers, but also to provide them with personalized and service-oriented experiences.”

Breitbard shifted Gap’s international operations to an asset-light model in the wake of Covid. The operations review was part of a global restructuring process that began before the pandemic. The restructuring ultimately included the decision to close 175 North American malls so Gap could focus on non-mall locations instead.

Gap first sought to lighten its load of overseas assets in October 2020. Breitbard, at the time, said Gap was looking to “amplify” its “global reach”, but in a “light-weight” way. assets”. Eight months later, Gap said it would close 19 doors across the UK and the Republic of Ireland. More than 50 Gap-branded stores, e-commerce operations and outlets were unaffected by the closures in the UK. In September 2021, Gap unveiled Next Plc as its new franchise partner through a joint venture, the same month Gap was due to close its remaining 81 locations across the UK.

Breitbard then said the joint venture gave Gap the benefits of Next Plc’s “broad, omnidirectional platform and e-commerce expertise” as the UK’s leading online clothing retailer. The deal, which Breitbard said advanced Gap’s European asset light strategy, included the sale of Gap products on Next Plc’s website and in Gap-branded stores in Next Plc’s flagship locations, but not in standalone Gap stores on UK high streets.

A week later, Gap signed an agreement to divest its French operations to Hermione People & Brands, the retail arm of the FIB Group via a franchise agreement. And in November 2021, Gap agreed for Italian clothing retailer OVS to take over and operate 11 Gap stores across Italy.

As for China, Gap has closed stores in more than 15 Chinese cities since the start of 2022. The first Gap store in China opened in 2010.

The all-cash Gap-Baozun transaction has an initial consideration of $40 million which is subject to customary closing conditions and certain adjustments, with an outside transaction limit of $50 million. The transaction is expected to be finalized in the first half of 2023.

In addition, Baozun and Gap have entered into a series of commercial agreements which give the former the right to manufacture, market, distribute and sell Gap products in Greater China and to create exclusive products for the local market. The agreements have an initial term of 10 years and can be renewed twice. Each renewal mandate is for a period of five years.

About Marilyn Perkins

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