From clearing out positions to breaking the circle, who bridged the Gap?

Ask AI · How can Gap achieve a comeback against the odds through localization strategies?

The roller-coaster experience of this U.S. apparel giant in China has become a case study of Chinese-style brand reconstruction. It is also a question that every multinational brand hoping to continue operating profitably in the Chinese market cannot avoid.

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By / Daily Capital Talk

Just four years ago, the U.S. fashion apparel brand Gap was frequently clearing inventory and closing stores in the Chinese market, and outsiders once took it as another example of an international brand failing in China. But now, it is about to make a big move.

Recently, foreign media reported that after years of market struggles and strategic adjustments, Gap’s China business achieved single-quarter breakeven for the first time in the last quarter. This milestone performance injects fresh momentum into a U.S. brand that had been mired in the quicksand of store closures and clearance sales. The following store-expansion plan is even more ambitious—Baozun E-commerce, as Gap’s exclusive operator in Greater China, announced that this year it will add 50 new stores on the Chinese mainland, covering tier-one to tier-three cities. At the same time, it also plans to reopen stores in Hong Kong later in the year, ushering in a brand-new chapter for Gap’s development in China.

To be frank, amid the trade war and a complicated international environment, this news is still somewhat surprising. In recent years, some multinational brands in China have suffered their own “waterloo” moment. For example, the French retail giant Carrefour has been gradually exiting the Chinese market, and the U.S. denim brand GUESS also announced not long ago that it would close all its stores in China. Previously popular fast-fashion brands such as Forever 21 and New Look have also pulled out one after another, and even IKEA, which has long been deeply rooted in China, announced it would close seven malls…

At one point, some unfriendly public opinion voices claimed that the “Chinese market has lost its appeal,” questioning the inclusiveness and growth potential of China’s consumer market. But Gap’s rebound against the odds does exactly what it takes to shatter this prejudice—there is no such thing as a bad market; only companies that know how to operate better.

To understand Gap’s “resuscitation” in China, you must trace back the brand’s history and its posture when it first entered the Chinese market. Gap was founded in 1969 in San Francisco, USA, by Don and Doris Fisher. At that time, U.S. society was going through profound generational rifts, and “generation gap” became a keyword in social and cultural discourse. The Fisher couple keenly sensed this zeitgeist and named the brand Gap, intending to bridge aesthetic gaps between different eras through simple, casual, and affordable clothing. Jeans, logo hoodies, and basic T-shirts—items with no excessive decoration—became Gap’s brand symbols. It is neither a trailblazer chasing trends nor a traditional, conservative stereotype, but rather enters the wardrobes of ordinary American households in the form of “American basics.” Hollywood actress Sharon Stone wearing a Gap turtleneck on the Oscars stage further gave the brand influence that spans social classes.

Before entering the Chinese market, Gap had already completed an initial layout across Asia. In 1995, it opened its first Asian flagship store in Japan at Hankyu. But when Gap officially landed in China in 2010, it had missed the best timing. The first wave of fast fashion in China’s apparel market had already been stirring since the early 21st century—that was the golden age when malls were booming. From 2002 to 2007, Uniqlo, Zara, and H&M opened stores in China one after another and quickly fought for prime spots in core commercial districts.

In an interview in 2011, a former Gap executive admitted that the brand had always been waiting for the maturity of China’s middle class, believing that after 2010 would be the best time to enter. Strategically, this judgment may have seemed cautious, but in terms of the competitive landscape, it meant missing out on first-mover advantages. Therefore, when Gap finally arrived, prime locations had already been largely taken, and consumers’ awareness of the brand had already been ranked with prior bias; it was also pulled behind by competitors.

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More critically, Gap’s self-proclaimed “American basics” did not form enough differentiation in the Chinese market. Uniqlo also focuses on basics, but it outperforms Gap in fabric R&D and supply-chain efficiency; Zara and H&M capture young people’s fashion sensitivity through extremely rapid new-product launches. By comparison, Gap’s product design lacks novelty, its supply-chain response is slow, the cycle from design to shelf is far longer than that of competitors, and goods in its stores often look outdated.

Even so, in the first few years after entering China, Gap still managed to secure a window for rapid growth thanks to its brand halo and its accurate targeting of the “post-80s” consumer group. But things didn’t last. As the post-90s and post-00s gradually became the main consumer forces, their pursuit of individuality, their recognition of domestic trend culture (guochao), and their reliance on social e-commerce made Gap’s traditional model look cumbersome. The brand tried to attract all consumers but failed to precisely anchor its target audience. Its brand image wavered between being a “national brand” and a “discount mall” retailer.

After 2016, Gap’s China business began to decline. The pace of store expansion slowed, and the number of store closures gradually increased. At that time, Gap still hadn’t realized how serious the problem was. It continued using the global standardized operating strategy and failed to adjust for localization based on Chinese consumers’ needs, planting hidden seeds of trouble for the crisis to come.

The real crisis began in 2020. That year, due to the global pandemic, the offline retail industry was hit hard. Gap’s stores in China were shut down on a large scale, and sales dropped significantly. To make matters worse, its brand Old Navy, after entering China for six years, closed all sales channels in March 2020 due to poor performance, fully exiting the Chinese market. This move not only caused Gap severe losses, but also shook consumers’ confidence in the brand.

By 2022, Gap’s slump in China was no longer something it could hide. Large-scale store closures and frequent price-cut promotions caused the brand to be labeled as having “worrisome prospects.” At this point, GAP made what now looks like the most correct decision— in November of that year, Baozun E-commerce Co., Ltd. and Gap Inc. signed an acquisition agreement. Using an all-cash transaction, Baozun acquired Gap’s business in Greater China, with the initial equity transaction benchmark consideration of $40 million.

Baozun E-commerce is not a stranger to capital markets. Founded in 2007, the company has long provided e-commerce managed services for international brands and has a deep understanding of how multinational brands operate in the Chinese market. More importantly, it had already cooperated with Gap before. And in this acquisition, Baozun wasn’t merely obtaining a brand authorization. Through its wholly owned subsidiary, White Horse Hongkong Holding Limited, it acquired two entities responsible for operating Gap’s Greater China business. The related agreements have a 20-year term, with the first 10 years renewable twice.

To be fair, taking over a struggling international brand is far more challenging than operating a local brand. What Baozun needed to do was not simply copy Gap’s global model into China, but fundamentally rebuild the brand’s operating logic in China. Traditional multinational brand operating models are often constrained by global product planning and ordering cycles; China teams lack sufficient autonomy and find it difficult to respond quickly to changes in the local market. What Baozun needed to break was exactly this standardized framework.

The transformation starts with the supply chain. Gap China no longer relies on globally standardized ordering conferences; instead, it builds close connections with local manufacturers and producers. Gap’s core categories are mainly cotton-based products. After scaling up localized procurement of the required raw materials, the procurement cycle is significantly shortened. The fastest timeline from product R&D to launch is reduced to within six weeks, and replenishment orders can arrive at the warehouse within two weeks. Establishing this flexible supply-chain system enables Gap China to respond to market changes more nimbly, no longer being dragged down by long global supply chains. By 2025, the localization ratio of product design and production exceeds 70%.

Product-structure adjustments follow suit. Gap China assembled a local design and R&D team, improved the fit and fused in local culture. One particularly representative detail: the China team spent half a year improving the hoodie pattern. By adding fabric weight and a more structured feel, it addressed domestic consumers’ needs for “a balance between relaxed comfort and refinement.” This is not a minor tweak to a global template, but a deep rebuild based on local consumer insights.

The channel strategy also underwent a fundamental shift. Gap China no longer obsessively focuses on the “big store” model centered on prime commercial districts in top-tier cities. Instead, it adopts a more flexible store approach: in tier-one and some new tier-one cities, it retains directly operated stores to upgrade the experience of benchmark stores. In other new tier-one cities and most tier-two and below cities, it leverages affiliated cooperation partners to rapidly expand the sales network in the form of “co-operated stores.”

This light-asset operating model both eases the pressure of intensive upfront investment on cash flow and profit, and shares risk with partners. By the end of 2025, the share of affiliated stores in Gap China’s store network is close to 40%. Meanwhile, the brand continues to ramp up digital retail, strengthening the synergistic effect of private-domain traffic operations, e-commerce platforms, and DTC owned channels, forming an omnichannel operating model with deep integration of online and offline.

Brand storytelling is also quietly changing. In the past, Gap told stories about “leisure life in small towns.” Now it begins offering inspiration for “everyday outfits for young people in China.” Through collaborations with domestic original trend brands such as Melting Sadness and local IP initiatives like “the Palace Museum has new items” (Shangxin le Gugong), it embeds cultural links to engage with Chinese consumers while preserving the brand’s international identity. When the brand moves beyond being a single label and starts co-creating with local culture, it stops being a cold Logo and instead tries to become part of consumers’ lifestyles.

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A series of adjustments has started to show results in financial data. Baozun E-commerce’s Q1 2024 financial report shows that its brand management business (including Gap China) recorded a year-over-year reduction of 20 days in inventory turnover days. In the apparel industry, improving inventory turnover efficiency directly means better utilization efficiency of capital and reduced risk of inventory backlog. In 2025, Gap China achieved more than 20% year-over-year revenue growth. In Q4 2025, the brand for the first time achieved single-quarter breakeven—although the profit is still thin. Specifically, the adjusted operating profit of the “brand management business” led mainly by Gap was 1.8 million yuan. But this is a milestone turning point since Baozun took over.

Especially the next round of expansion that follows means Gap has not only stemmed the decline—it has restarted the engine for growth.

Don’t miss this! Gap’s journey in China happens to be set against a larger narrative backdrop. In recent years, the contraction of some multinational brand companies in China has been simply attributed to the claim that “the Chinese market is losing attractiveness.” But “Daily Capital Talk” believes Carrefour’s troubles stem more from the overall decline of the traditional big-box retail format, and GUESS’s weakness is closely related to its insufficient product update speed and lack of reach to younger consumer groups. The common thread in these cases is this: when the market environment and consumer demographics change profoundly, companies that cling to old models will inevitably face challenges. And those brands that can adjust flexibly and localize deeply still have the opportunity to find their place.

Please note: competition in China’s apparel market has never weakened. In 2025, the global fashion industry landscape continues to be reshaped, while domestic sportswear brand Anta helps revive Europe’s century-old brand FILA, leading the Amer Sports Group—which owns Salomon and Arc’teryx—back into profitability. Yager (Yingguo/; Yageer) completes its transformation from a traditional manufacturing group to a fashion holding platform through a multi-brand matrix. These cases show that Chinese companies’ strategic-level restructuring of international brands is injecting new momentum into how international brands develop in China. Gap’s story is just another footnote to this trend.

There is no such thing as a bad market—only companies that know how to operate better. Gap China’s experience is not an isolated case. The message it sends to the outside world is: China’s consumer market in terms of size and depth is still considerable. But success no longer relies solely on a brand’s international halo; it depends on whether it can truly understand consumers in this market, and whether it can win recognition again through the speed of localization, localized products, and localized storytelling.

Baozun E-commerce’s transformation of Gap is, at its core, an experiment in “operating an international brand the Chinese way.” The answers this experiment has delivered so far at least prove that, with the right strategy and execution capability, an international brand stuck in difficulties can absolutely achieve second-stage growth in the Chinese market.

Of course, the road ahead for Gap China is still full of challenges. Whether Gap can maintain growth while gradually improving efficiency per store and achieving sustainable profitability remains the key test of the effectiveness of its transformation. But at the very least, from clearing inventory and closing stores to achieving its first breakeven, from rumors of withdrawal to reopening stores—the curve of Gap in China has already told a story about “mending.” The founders, Fisher and his wife, named the brand with “generation gap” with the original intention to connect different generations. Years later, thousands of miles away from San Francisco—in the Chinese market—this American brand, through a deep localization overhaul, is mending not only generational differences, but also the invisible chasm between international brands and Chinese consumers. And this may well be a question that every multinational brand hoping to continue operating in China long-term cannot avoid.

【The article is for communication only, not investment advice. Please note investment risks. Writing is not easy—if your phone still has battery, please help like and share. Wishing you all a happy 2026 with joy in your heart,迎接新年光景, and gathering blessings year after year, as you go into all four seasons with smoothness!】

Author’s statement: personal views only, for reference