Gap - Gap Econmics PDF

Preview

Summary

Gap Econmics...

Description

1. Is Peck's decision to move from the creative director model to the predictive analytics model a good one for the Gap brand? Why? The Gap brand was facing a serious decline in sales and brand identity among key markets when Peck took over as CEO. The corporation lost the ability to keep their status as a premier brand and the use of the creative directors “gut feelings” had failed to anticipate the trending designs to entice shoppers back into stores. Gap was failing to gain core market shares with the increase in competition from “fast” retailers and the exploding ecommerce channel. Gap also suffered internally from an inadequate and slow supply chain model; the competitors were able to get their products to the market faster. We can see that Gap is also struggling with predicting their consumer needs as large in store discounts are frequent in order to get rid of excess inventory. Currently the creative director’s prediction model has failed and a shift to a data driven predictive model is needed to optimize the brand. In order to address these issues Peck decided to utilize data analysis on consumer behaviors in order to maximize utility for the consumer and maximize profit for the corporation. Currently the brand needs to improve their conversion rates on sales, target specific personalized marketing channels, lower inventory costs and increase brand loyalty. By analyzing the data collected through the online and in store portals Gap can use the consumer insights to improve their buying and selling strategies. Gap can also that data in predictive analysis by us i n g d u mmyv a r i a b l e st oa c c o u n tf o rs e a s o n a l i t ya n df u t u r et r e n d si no r d e rt of o r e c a s ts a l e sa n d i mp r o v ei n v e nt o r yp u r c ha s e s . The information would allow the retailer to establish patterns emerging from their consumer tastes and trends, personalize marketing tactics based on browser history to drive sales and optimize inventory to match the current in demand styles. “By uncovering patterns in past customer behavior, companies could develop heuristics or algorithm-

driven protocols to customize how they treated future customers to maximize satisfaction and/or profitability.” Sixty percent of consumers are now using the website to initially shop for items, leading to a wealth of knowledge to be collected from each consumer in order to personalize the experience and drive sales. Gaps current competitors are already using this decentralized model and are eating into their market shares; the changeover to big data seems inevitable in order to stay relevant. With the large transition to the e commerce site the corporation can utilize the new Product 3.0 database to create a deeper understanding of their consumer interactions in order to forecast upcoming trends, predict seasonal changes in inventory needs and realign the current supply chain process. Data allows Gap to focus around “being more commercial around things that are starting to move up the curve, or [getting] out of a product that is no longer relevant to the customer.” With this new understanding of their data collection they can begin to predict consumer behavior and calculate the consumer next steps to anticipate upcoming trends. However, I would caution about exploiting the data aggerated for each brand to be used to develop one universal marketing trend pattern that would apply to everyone. Outputs on the brands like Banana Republic will need to filter to their brand image which depend heavily on current trends and high-end consumers so. The data with need to filtered through “each brand’s vision statement served as a filter so that trends could be incorporated consistent with the brand’s image.” Old navy and Gap could utilize similar data trends and forecast predictions as the brands images are based on similar models. I believe that in order to be successful Gap will need to develop a team that can integrate not only the analyzed data but add a creative interpretation to their findings. Currently the data isn’t sophisticated enough to predict product hits and secondary data is needed in order to anticipate trends. Data driven by consumers past p u r c ha s e s

c a nr uni nt ot h ei s s ueo fmi s s i n gt h es h a r pc o ns u me rb u y i n gmo v e me n t st h a t c a no c c u rwh e na n e wt r e n di sde v e l o p e d . I no r d e rt op i v o tq ui c kl yt hed a t awi l ln e e dt ob ea b l et op r e d i c t o ra d j u s t t owh a tma yb ene e d e di nor d e rt os t a yr e l e v a n t ,t hi swo u l dr e q ui r es o mef or mo fh u ma n i n t e r a c t i o n si nt h ema r k e t .Bye l i mi n a t i n gt h ec r e a t i v ed i r e c t or , t h e yh a v es h i f t e df r o mo n e “ me s s i a h ”t oa n o t h e rb yo n l yd e p e n d i n go nt h ed a t af orr e s ul t si n s t e a d, t h e yn e e dab a l a n c e b e t we e nt h et wop r a c t i c e s . Ga pc o u l dc o n s i d e rd e v e l o p i n gat e a mt h a tc a nc o mp l e me n te a c hi n o r d e rt of o r e c a s tf u t ur et r e n d sa n di n v e n t o r yn e e d s . 2. Comment on whether or not Gap should expand their distribution model to include Amazon. Currently 55% of consumers in online shopping start their search on the Amazon webpage which could provide Gap with access to a larger audience versus just using data from shoppers on the company’s own platforms. However, there is a steep price to entering these types of partnerships with a large conglomerate who also happens to have over 10% of the inventory focused in your retail category. If they did consider this partnership their best option would be to sell as a third-party vendor in the Amazon marketplace which allows them to control pricing and consumers data. Large brand names have seen success by entering the Amazon marketplace like Kate Spade and Ugg’s which allows consumers to shop for these items at the same time as the browse other products. However, these brands have high brand association with their consumers and may prevent Amazon from using its consumer algorisms to offer viable alternative products. Whereas Gaps current lack of brand equity in the market could move consumers to choose the other products that Amazon offers. They would be entering a risky partnership where Amazon could potentially learn the styles and trends Gap created in order to sell knock offs to the same customers for lower prices. They may wish to start with their brands like Banana Republic and Athleta who have stronger brand association and like their higher fashion counterparts would

prevent Amazon from offering similar enough styles to lure consumers away. The major risk for Gap is that Amazon will also have access to their consumer data leading them to predict and develop trends of their owns aligning with the consumer needs and removing even more of Gap’s shrinking market retail share. In order for Gap to consider this partnership they would need to develop an extremely airtight detailed contract that negotiated a much smaller commission fee but outlined how much access they had between the sharing of the data collected on these customers. Gap could consider developing their own website to function like a marketplace by asking smaller curated brands to sell and promote their products on their webpage....