Rebuild GAP

Can AI • Can the Baozun model become a new blueprint for international brands to operate in China?

Reporter | Xing Mengni

Editor | Chen Rui

As multiple multinational consumer goods companies reshaped their China operations through equity transactions in 2025, the U.S. apparel group Gap Inc. (hereinafter referred to as “Gap Group”) made a decision at the end of 2022 to authorize its Greater China business to a local Chinese company, which has already begun to exhibit a certain kind of illustrative value in advance.

The deal was ultimately completed in escrow in February 2023. Baozun, an e-commerce operations company, took over all assets of Gap Greater China (including mainland China, Hong Kong, and Macau) at a transaction price of $40 million, encompassing offline store networks, the right to operate e-commerce platforms, inventory, and related businesses. The relevant commercial agreements have a term of 20 years: the first term is 10 years, with two renewal options of 5 years each. The Gap brand also became the starting point for Baozun’s new business line—“Brand Management” (BBM). Baozun CEO Qiu Wenbin once described this business line as: “Gap Greater China’s brand assets and scale lay a very high starting point for Baozun’s brand management, opening a new chapter in business that fully integrates online and offline.”

At the time, Baozun had two cards. The first was Baozun’s full control over Gap China’s supply chain—which is also unique within Gap’s global authorization framework. This meant Baozun could call the shots on all aspects in the Greater China market, including production, stores, design, digitalization buildout, and more, enabling faster and more flexible replenishment. In the areas of products and branding, Baozun then proposed a localization strategy called “China-for-China”—a common approach multinational companies have used in China in recent years.

2026, new stores—within Gap, defined as 2.5th-generation stores.

The second card was Baozun’s channel capabilities and technology. Baozun was listed on the U.S. stock market in 2015 and on the Hong Kong stock market in 2020. Baozun and Gap China’s collaboration began in 2018, when it became the outsourced operator for Gap China’s e-commerce business, gaining detailed operational understanding of the latter’s supply chain, logistics, and consumer profiles. After switching to full-scale operations, Baozun’s digital operational capabilities helped it transition to brand management more quickly.

At an early-2023 earnings call and results briefing, Sandrine Zerbib, then president of Baozun BBM, said that during the investment due diligence phase, Baozun confirmed that Gap had “quick wins” in the short term. During the initial 50-day acquisition period, Baozun also validated its first two judgments about Gap China—that the key to reviving the brand lay in product assortment and gross margin. “We benefited from the consumption momentum quickly rebounding in the China market after the pandemic. In the past 10 weeks, we achieved a 22% growth in offline retail customer traffic, and more than a 500-basis-point increase in retail gross margin,” Zerbib said.

Subsequently, Baozun proposed Gap China’s future financial targets: narrowing losses from 2023 to 2024, achieving break-even in 2025, and expecting to start generating profits in 2026.

01

Baoiun Goes Into Full Force

The goal was clear, but for a long stretch at first, Gap China’s task was to rebuild its supply chain and channels.

At the end of 2022, Baozun reached out to Huang Yiming and invited him to join the new Gap China team. Huang Yiming had worked in Inditex China, the ZARA parent company, for more than 10 years.

Throughout 2023, Gap China was dealing with historical legacy issues. Huang Yiming told YiMagazine of First Financial that when Baozun took over, Gap China had only about 120 stores remaining. Baozun’s management had previously disclosed to the outside world that Gap China originally used more than 40 sets of systems; Baozun spent 10 months integrating them, shortening the decision chain for ordering and follow-up orders. Discounted items sold in Gap stores also gradually decreased; a series of measures helped the brand’s retail gross margin recover from about 45% before the transaction to around 55%.

Full control over Gap China’s supply chain also began to pay off. The original development cycles that used to take months were reduced, and Gap China’s design team could quickly follow market trend colors (such as “dopamine” and “Mauve/Merlot-inspired style”) and tailoring trends.

Independent of the large-assortment goods planning, Gap China began to adopt some more flexible approaches, such as launching capsule collections for quick market testing. In the 2023 fall and winter season, Gap China launched capsule collections in collaboration with China’s emerging designers, priced at four times the average product unit price. According to data provided by Gap China, in the first day after launch, top-priced items sold out within one hour; about half of the inventory was sold in the following two weeks at no discount (0 discount). Gap’s brand ranking on Tmall improved from outside the top 30 to No. 8.

In 2025, Gap China launched its fall and winter capsule collection, produced by the local team.

“Currently, 70% of Gap China’s supply chain is designed and produced locally in China,” Huang Yiming emphasized. This percentage is not a hard requirement; each season the proportion of localization may fluctuate by around 10% up or down. The China design team established by Baozun had previously led the launch of products that respond to the local market, such as sun-protective shirts and quick-dry pants. It introduced products with stronger premium capabilities, such as the “Everyday Daily Wardrobe” series and IP co-branded styles, and the proportion of e-commerce-exclusive styles has also been increasing year by year. In the spring and autumn seasons when products undergo major iteration, the Gap China team also visits fashion trade show venues in New York to inspect goods in order to ensure that some of the brand’s products are aligned with Gap globally. Gap Group also has an FSAL office in Shanghai to review and guide design for the China market. FSAL, i.e., Franchise Strategic Alliance & Licensing (franchise strategic alliance and licensing), is a joint supervisory team that Gap’s global headquarters dispatches to Shanghai, sharing the office with Baozun’s management team.

Seventy percent of Gap China’s merchandise is designed by local teams, enabling faster response.

Gap entered China in 2010, and at its peak it had more than 200 stores. After Baozun took over, Gap stopped opening large stores and instead focused on improving sales per square meter. In 2023, Gap China tried store formats ranging from 800 square meters to 400 square meters. In 2024, the brand spent nearly one year testing and validating retail outcomes from different goods assortment combinations and different store sizes, ultimately setting 600 square meters as the core store format for the current development stage. It also further improved cargo capacity efficiency and launched the 2.5th-generation “Blue Note New Sound” image store. It has been expanding in different places using a “flagship store + mid-size store” model. As of the end of Q3 2025, Gap in China had a total of 163 stores. That means that from 2023 to now, Gap has opened around 40-plus new stores.

As for where to open stores, data takes the lead. Gap China will determine store cities based on historical store-opening data, competitor performance, and reference to e-commerce sales data. For example, Gap once opened 12 stores in Hong Kong, and the highest single-store annual sales exceeded 100 million yuan. As of March 30, Google Maps shows that all Gap stores in Hong Kong are currently closed. Huang Yiming said that based on market dynamics—observing that Hong Kong’s passenger flow may gradually move toward Shenzhen—Gap now believes Shenzhen has tremendous potential.

Before it was acquired by Baozun, Gap rarely entered lower-tier cities, or even county-level markets. “After the end of fiscal year 2023, we wanted to bring Gap back to growth,” Huang Yiming said. “Gap is not a pure e-commerce brand, so it can’t support such a large scale relying solely on e-commerce. If we don’t open new stores, the channel will shrink.” He took office as CEO of Gap China in July 2024.

Gap China began using a dealer joint venture model as early as 2019, in which partners join. After Baozun took over, following adjustments in 2023, the joint venture was restarted in 2024. Currently, Gap has direct operations in first-tier cities and about 60% of new first-tier cities, while 70% of second-tier and lower cities use the joint venture model. “If it’s in cities within a two-hour drive from the areas around Beijing, Shanghai, Guangzhou, and Shenzhen, the team tends to favor direct operations, so a management team can cover enough regions and stores locally,” Huang Yiming said. He also emphasized that the joint venture model Gap is currently rolling out is not simple wholesale; it is uniformly controlled by the brand in terms of merchandise, pricing, and store image.

Through the joint venture model, Gap has now opened stores in Urumqi and Kashgar in Xinjiang. Huang Yiming believes that even though Urumqi is a second-tier city, it has strong consumer purchasing power and recognition of, and affinity for, the Gap brand.

In September 2025, Gap China held its most recent nationwide partner conference. It planned to focus on boosting revenue scale and brand influence for Gap in markets such as North China, Southwest China, and South China, which also reveals Gap China’s channel development plan for 2026. In the long run, Huang Yiming and his team believe Gap can expand into more new first-tier or second-tier cities.

Cheng Weixiong, an expert in brand strategy consulting for the footwear and apparel industry, said that the essence of the joint venture model is “taking a shortcut.” “The joint venture’s gross margin is higher,” Cheng Weixiong told YiMagazine of First Financial. “In China’s county-level markets, in a strict sense, there is no brand. But Gap is an American brand with some cultural influence and with prices that are not high, so it will be welcomed by distributors.” Cheng Weixiong worked for Metersbonwe for 13 years, and later founded Shanghai Liangqi Brand Management Co., Ltd.

By the end of 2024, Gap China did indeed show some signs of brand revitalization. At that time, the Gap Group was also undergoing transformation globally. In 2023, Richard Dickson, former CEO of U.S. toy giant Mattel, announced he would join—Dickson is known for reviving the “Barbie” IP. In 2024, he defined it as “a year to reshape Gap’s brand influence,” hiring renowned fashion designer Zac Posen as the group’s executive vice president and creative director. This was Gap’s first appointment of a creative management layer in 13 years. Gap then launched a series of marketing offensives worldwide aimed at winning back younger consumers. It paid tribute to Gap’s first San Francisco store that historically only sold vinyl records and jeans, positioning “music + denim” as the brand’s core.

In response to Gap’s global brand strategy, Gap China also made some adjustments. Huang Yiming pointed out that, unlike fast fashion and functional brands, Gap emphasizes emotional connection and comfortable everyday dressing; its product design leans more classic and suits the mainstream. After that, Gap China, together with Kung Fu Panda, iShoping, and China IPs such as the Palace Museum, TVB, and Chinese Peking opera, launched co-branded capsule collections in an effort to capture more consumers.

By the end of fiscal year 2024, Baoiun’s brand management business recorded a 17% revenue growth year over year compared with the same period of fiscal year 2023. This was mainly driven by Gap’s “strong growth.” At the company management’s earnings call, they defined 2024 as “a year of structural upgrades and network optimization,” and set a goal of opening 50 new stores nationwide in 2025.

2025 was a year when Gap intensified its marketing efforts. In September of that year, actor Cheng Yi became Gap China’s brand ambassador. Gap China also opened a GAP music pop-up space on Anfu Road in Shanghai, launching the THE GAP CLUB capsule collection. To some extent, this can be understood as the operational focus of the Gap under Baozun shifting—from internal system reform to brand reinvention directed at the market.

Regarding the most important goal in the early stage after Baozun took over—improving gross margin—in 2023 through 2025, Gap China’s metric continued to be optimized. The latest Q3 2025 financial report shows that gross margin has increased to 56.5%, and quarterly revenue also achieved a small rise. However, going forward, as the physical store network needs to keep expanding, Gap may face some new challenges.

Shu Yuan, who is responsible for招商 (brand recruitment) for sportswear brands in a mall in downtown Shanghai, categorizes the apparel brands still surviving in the mall into two types: one type has extremely strong brand power, and the other focuses on value for money—only those can persuade consumers. She pays attention to a metric called “multiplier,” which is an industry rule of thumb: it uses a multiple of manufacturing cost to set the retail price. If the multiplier is below 4, it will be hard to afford rent. “Right now, many emerging brands have multipliers in the range of 4 to 6. That range fits market development better and has already created intense competition for many (those with higher multipliers) older brands.” Shu Yuan feels that Gap is still somewhat ambiguous in terms of identity. People generally classify Gap as American casual, but there is no clear target customer profile, which may affect some mall leasing teams’ judgments. “The problem is that American-casual fast-moving consumption in China seems like it has never succeeded,” Shu Yuan said plainly. She also said that what she likes is Gap’s kidswear line’s distinctiveness; the maternity & baby and kidswear lines have a dedicated IP image called “Blairna Little Bear.”

Kidswear is indeed one of the four core product lines that Baozun helped Gap China sort out after taking over; the other three are the denim, khaki, and logo series. Gap China’s kidswear segment accounts for about 30% of the overall business. Regardless of store size, each Gap store basically sets up a dedicated area for kidswear and sweatshirts/hoodies. In 2024, Gap also opened a standalone kidswear specialty store in Shanghai Hongqiao Nanjing City, but later it was closed due to lackluster performance. To turn market recognition of kidswear into revenue growth, Gap will need to do more operational upgrades in 2026.

Meanwhile, as Gap China increases its product localization efforts, in its 2024 annual report in April 2025, Baozun Group stated that it would strengthen coordination with Gap Group’s “brand authorization team (FSAL department)” in Shanghai to ensure that innovation in China doesn’t completely detach from the global brand’s unified context. This indicates that Gap China will still need to coordinate with Gap Group at the design level in the future.

According to Baozun’s financial reports and earnings briefings, the company’s brand management business revenue continued to narrow losses, and it may achieve break-even on a single-quarter basis in Q4 2025. On March 25, Baozun released its full-year 2025 financial report. The report shows that Baozun’s net revenue in Q4 2025 was 3.2 billion yuan, up 6% year over year; within that, revenue from the brand management business grew 24% year over year.

02

Gap Retreats

If you put Gap China’s story back into the global context, you’ll find that it is only part of Gap Group’s system-wide strategic transformation. And this transformation is also a microcosm of international consumer brands more broadly reassessing the China market.

In October 2020, Gap Group announced it was launching a global strategic review of its Gap brand’s直营业务 (direct-to-retail) strategy, shifting comprehensively to a light-asset operating model. It rolled out the “Partner to Amplify” strategy, selling businesses in each location to local companies. In 2019, Gap Group’s market share in the U.S. was 4.8%, making it the largest apparel retailer in the U.S., but the Gap brand was no longer a core focus of the group. People’s understanding of it came more from the family value brand Old Navy. As of May 3, 2025, Old Navy has more than 1,200 offline stores in North America, accounting for half of Gap Group’s total North America store count.

Gap Group’s logic is not hard to understand: its growth and profits are concentrated in North America. Its overseas direct-operated markets are small in scale, higher in risk, and have large management costs. In fiscal year 2024, Gap Group’s net revenue was about $15.09 billion, more than 90% coming from the United States and Canada. Direct-operated businesses in Greater China, the four European countries (UK, U.K., France, and Italy), and India together totaled only about $1.5 billion, accounting for less than 10% of total revenue. Selling these markets as a package would have a minimal impact on the group’s financial statements, while the operating costs could be greatly reduced.

In 2021 to 2022, right before and after Gap China was sold, Gap completed authorization deals in the UK, Ireland, France, and Italy one after another, though the collaboration models varied across locations. In Italy, apparel retailer OVS received 11 Gap stores, without e-commerce involvement. In the UK and Ireland, operations were led by British apparel retailer NEXT, with Gap Group establishing a joint venture. All existing stores were closed, and Gap sections were opened inside NEXT’s offline stores; meanwhile, NEXT also took the lead in running e-commerce. Compared with that, Gap China’s Baozun model’s supply chain control—was a special provision that other authorized operators in other regions did not obtain.

The ups and downs of the India business provide a comparison sample. In 2015, Gap Group entered India through local large apparel group Arvind. Because its price positioning was mid-to-premium, combined with the impact of the 2020 pandemic, the partnership quickly fell apart. Arvind closed all Gap stores. Under the “Partner to Amplify” strategy, in 2022, retail giant Reliance Retail returned to India with the Gap brand. Not only did it open stores in key cities and core commercial areas, it also placed Gap into its fashion e-commerce platform AJIO, and leveraged the physical retail network of the mid-tier apparel brand Reliance Trends to open “stores-within-stores.” Entering India twice, Gap changed to two completely different playbooks—light assets, multi-channel distribution, and reliance on local retail infrastructure.

In fact, in earlier-entry regions such as Southeast Asia, the Middle East, and South America, Gap Group adopted an authorization strategy from the beginning, choosing direct operation only when it judged that it could obtain high profits in a market. “Partner to Amplify” was simply systematizing and globalizing that logic.

And China was the most complex piece in this global transition puzzle. In 2010, Gap Group had planned to heavily bet on the China market, entering Shanghai and Beijing and opening four flagship stores. Old Navy introduced in 2014, and the following year, revenue growth and store-opening pace in China for Old Navy once surpassed Gap. From the group level, Gap had believed that Old Navy had better cost performance—“more aligned with the consumption needs of China’s rising families.” However in 2020, Old Navy exited China along with the wave of Gap brand store closures. Whether it was e-commerce, co-branded styles, improving store displays, or introducing beauty products, none of it saved Gap’s performance in China.

03

A Specimen of New-Style Globalization

Throughout the entire 2010s, multinational brands in China generally sought direct control and high-speed growth. After the pandemic, the international geopolitical climate changed; consumption growth in mainland China slowed, and uncertainty increased. Multinational companies’ China strategies shifted in different directions. Today, Gap China’s three-year local reinvention may provide a brand-new reference sample for them as they reassess the China market.

Whether “authorization” and “localization” can truly coexist has been discussed repeatedly in recent years, but there are not many cases actually implemented at the supply-chain level. The special aspect of the Baozun model is that it didn’t just obtain brand authorization—it also obtained full control of the supply chain, allowing localization to be truly implemented at the product level rather than staying only as marketing copy. Seventy percent local design and production, a quick-testing mechanism for capsule collections, and differentiated styles exclusively for e-commerce—these are all built on the foundation of supply chain autonomy. From a financial perspective, the benefits are obvious: gross margin rose from around 45% before the acquisition to 56.5% in Q3 2025, approaching a relatively high level within the industry.

Another unique feature of the Baozun model is that it is not a traditional regional agency; rather, it is born from digital operations. With deep e-commerce foundations, system-level capabilities to integrate omnichannel operations, and strengths in data analysis, inventory allocation, content e-commerce, and social media operations—this makes the Baozun model more compatible with the current competitive environment in China, and it is also the fundamental difference between it and cooperation models of partners in Europe, India, and other places.

For Baozun, the benefits of fully operating a global brand like Gap are actually far beyond the growth of performance itself. If you track the earnings call transcript for these three years, you’ll find that analysts’ doubts about Baozun experienced an interesting evolution path. In 2023, they questioned whether Gap still had brand power in China, and whether an e-commerce operations company could lead a brand reinvention. In 2024, they questioned whether the operational improvements that had already appeared were real and whether they could be sustained. By 2025, as Gap China posted stable growth for several consecutive quarters, analysts began to care whether Gap China could become a “model project” for Baozun’s brand management business—behind this, in fact, is the capital market’s revaluation of Baozun’s value.

Whether Gap China can become a template for Baozun’s brand management business not only relates to the success or failure of Baozun’s transformation, but also points to a larger question: when the China market is no longer a certain-growth engine, how should the power structure between international brands and local operators be reallocated?

Baoiun may be able to find more opportunities through this. In 2023, Authentic Brands Group (ABG) Group sold Baozun the UK rain boot brand Hunter’s 51% intellectual property rights in Greater China and Southeast Asia. This was the second brand in Baozun’s brand management business, and as of January 2026 there are 12 stores in mainland China. In 2025, Baozun also gained the operating rights in China for the UK yoga apparel brand Sweaty Betty, with its first store in Shanghai planned to open before the end of 2026.

At the request of the interview subject, the person named Shu Yuan is an alias.

All rights to this article are reserved by First Financial.

Without permission, no转载 or translation is allowed.