Struggling fashion group Gap is set to launch a new "fully European" apparel collection this autumn which it hopes will help it emerge from the doldrums. The iconic US retailer - which owns the Gap, Old Navy and Banana Republic clothing chains - is also testing a new store fitting concept for the market. But is it doing enough to reverse its fortunes? asks Ivan Castano.

San Francisco-based Gap has hired a team of European designers to dream up the crucial range, scheduled to hit its 170 European stores this autumn.

Gap UK president Stephen Sunnucks is heading the team, whose members don't feature any "star" designers, according to Gap UK spokeswoman Anita Borzyskowska.

Mary Amelie Sauve, a contributing fashion editor at French Vogue, is helping with the collection's styles.

The range is a basic casual collection - in line with Gap's fashion spirit - but features spruced up versions of the retailers' best-selling sweaters and trousers - which it hopes Europeans will snap up with gusto.

"We are localising our business," Borzyskowska concedes. "For the past 18 months we have been working to build a London-based team to design a 100% European
collection. We have found that team and the autumn collection will be the first full expression of its work."

Gap's spring and summer apparel already feature some of the team's work, Borzyskowska adds.

The new range marks a strategic leap for Gap which has traditionally sold its US-market ranges in international stores - something which analysts say has cost it dearly.

However, after reporting continual sales declines in Europe, the company seems to have
listened to experts' advise that it localise its clothes or fail.

"Our European customers have slightly different requirements and past experience has demonstrated the case," Borkyskowska says, adding that European shoppers have a penchant for finer and more trend-setting apparel.

New silhouettes
To fulfil that need, Gap has added new silhouettes to its strong-selling Marina wool tops. It has also incorporated a jodhpur-shaped khaki pant to its khaki basics to meet this year's fashion trends.

Despite changes, Borkyskowska insists the collection is an easy-to-wear casual portfolio. "This is still a casual wear collection that's all about ease of dressing. It's not a fast-fashion collection," she notes. "It will provide the firm foundations of every wardrobe but be relevant to the trends of each season."

Asked about the strategy behind the fledgling 7,000 square-metre concept store, located at London's Brent Cross Shopping Centre, Borkyskowska notes: "We know we need to innovate with our store environment to capture customers' attention and this is an effort to do that."

The store has an open façade bereft of doors. It has a huge Gap logo in mid foreground and the till and clothes layout is presented to create a greater sense of intimacy.

Borkyskowska says Gap will monitor the initiative's success before launching it across Europe.

Right step
Analysts say Gap's new European strategy is on the money.

"It's definitely a step in the right direction," says Luca Solca, a retail analyst with Stanford Bernstein in London. "They've had too basic a positioning in Europe for too long. Apparel and footwear have become more fashion-sensitive and moving in that direction is certainly positive for them."

Seymour Pierce senior retail analyst Richard Ratner adds the new range is "good news for Gap."

"If the collection is localised Brits will buy it and so will Europeans," he says.

The store concept also "looks very nice," Ratner says. "The layout is very attractive and innovative in terms of store fit and visual merchandising."

Declining sales
Gap executives are sure to watch the collection's performance with a keen eye. After all, its success could make a huge difference for the retailer which is scrambling to shore up its business after years of declining sales in the US and abroad.

In Europe, where Gap arrived in 1987, the company has suffered from failing to catch up with competitors such as Sweden's H&M and Spain's Zara, which cheap yet fashionable apparel have won consumers' hearts.

Gap had 1.4% of the UK specialised retail market in 2005 - down from 1.8% in 2001, according to Mintel analyst Katrin Magnussen, who adds Gap's European sales have weakened in recent years.

Gap won't provide a regional sales breakdown. However, its latest first-quarter financials show a 3% decline to $353m in international sales compared to the same year period when they fell 11%.

Also last month, Gap announced it will axe 90 workers in London as part of an effort to restructure its Gap Kids and Baby Gap banners. Gap employs 7,500 people in Europe. It operates 137 stores in the UK and 33 in France.

"Low value"
While welcoming its new strategy, Magnussen says Gap could do more to boost its fortunes in Europe.

She says its clothes are too expensive for the casual market, providing "low value for money." Moreover, the company could benefit from launching more exciting ranges targeting a wider customer base.

"I'm not sure they really understand this market," Magnussen says. "There are loads they could do to make themselves more interesting such as launching a cheaper range and aiming at a younger audience than their main 20-25 customer base."

Adds Magnussen: "They could introduce a premium range to appeal to an older audience, one that wouldn't just be basics but include dressier clothes such as suits or party dresses. And they could benefit from marking their clothes more fashionable, edgier."

Gap is working to lower its clothing prices, Borkywskowska says, adding that the new casual items such as T-shirts and jeans are cheaper than in the past. However, she admits that some luxurious items such as those made of cashmere, leather and shearling
are more expensive.

Borkywskwowska says it's too early to evaluate how the new strategy will impact Gap.

"This is a work in progress and we are not going to speculate about how successful it could be," she says. "We will see how consumers respond and over time, we will probably have to tweak and amend it as necessary."

For the sake of Gap's shareholders and management, let's hope the forthcoming collection will require few - if any - changes.