Fashion chain Gap in deal with online retailer Zalando

Gap Inc (NYSE:GPS) has struck a deal with Europe's largest dedicated online fashion retailer Zalando to sell its core brand from next May, hoping to reach more consumers, particularly in markets where it has no physical stores.

The U.S. company already delivers to 24 European countries from its own website and has more than 200 stores on the continent but is not present on the ground in key markets such as Germany.

Berlin-based Zalando, which listed on the Frankfurt stock exchange last month, started out selling shoes in 2008 and now ships 1,500 brands to customers in 15 European countries, with Britain's Top Shop one of its latest big-name additions.

"Many customers in Europe still don't have access to the Gap brand," Zalando co-founder David Schneider told Reuters. "We offer a platform to enter 15 markets in local languages, in local currency, with free shipments, returns and so on."

Gap, which runs more than 3,500 stores worldwide, is trying to reduce its dependence on the highly competitive North American market and plans to open 40 stores in India at the same time as it strengthens in e-commerce.

Digital business head Art Peck is due to take over as chief executive next February after his division's sales grew 21 percent in the 2013 financial year to $2.3 billion, 6 percent of total sales.

Gap's bigger European rivals Inditex <ITX.MC> and H&M <HMb.ST> are also investing in e-commerce but are focusing on their own sites and are not listed on Zalando.

"We have to be where are customers are. Zalando is the most visited fashion e-commerce site in Europe," said Stefan Laban, responsible for Gap's business in Europe and Japan. "We want to be one of the biggest brands on the site."

E-commerce could grow to 30 percent of total German fashion sales by 2020, from 14 percent in 2012, according to consultancy firm Strategy&.

While the Zalando deal is focused on the main Gap brand, Laban said the company coul look later to extend it to other lines such as Old Navy.

Zalando, which increased first-half sales by 29.5 percent to 1.047 billion euros ($1.3 billion), reports third-quarter figures on Wednesday.

(1 US dollar = 0.8072 euro)

(Editing by David Goodman)