Additionally, we willconduct a thorough analysis of Gap Inc.''''s competitors and industry trendsto identify potential opportunities for growth and innovation:By leveraging advanced data an
VIET NAM NATIONAL UNIVERSITY OF HO CHI MINH UNIVERSITY OF ECONOMICS AND LAW REPORT OF CASE ANALYSIS Summer Semester: 2022-2023 DIGITAL TRANSFORMATION AND ARTIFICIAL INTELLIGENCE PREDICTING CONSUMER TASTE WITH BIG DATA AT GAP LECTURE: Master Nguyễn Thế Đại Nghĩa Course ID: 212IS2110 MEMBERS IN GROUP 9 NO FULL NAME STUDENT ID 1 Nguyễn Phước Đăng Khoa K224111487 2 Nguyễn Hoàng Nguyệt Cát K214070510 3 Nguyễn Xuân Quỳnh K224111502 4 Nguyễn Như Hưng K225022046 5 Ngô Thị Thu Hiền K224111485 Ho Chi Minh City, July 4th 2023 1 CONTENTS I OBJECTIVE ORIENTATION II KEY ISSUES TO TACKLE III EVALUATE OPTIONS 1 Criterion 2 List of options 3 Evaluation of the option IV RECOMMENDATIONS 1 Recommendations 3 Market analysis 3.1 Five forces 3.2 5C Analysis 3.3 SWOT 3.4 Business model canvas 4 Financial analysis V IMPLEMENTATION 1 Timeline 2 Resources estimation 3 Contingencies 4 Risk mitigation VI CONCLUSION VII EVALUATION OF THE CONTRIBUTION OF MEMBERS IN GROUP CATEGORY OF FIGURES 2 Figure 1: Gap Inc.’s Competitive Landscape Figure 2: Business Model Canvas of Gap Inc Figure 3: Gap Inc.’s Financial Performance Figure 4: Gap Inc.’s Sales and Net Income CATEGORY OF TABLES Table 1: The timeline of our recommendation Table 2: Contingencies maybe happen with our recommendation Table 3: Evaluation of group 3 I OBJECTIVE ORIENTATION The retail giant, Gap Inc., has faced numerous challenges since 2000, prompting the need for a transformative approach to regain its former position Also, it was required to assess clothing trends and modify customer preferences Their ability to determine consumer preferences and quickly supply goods that meet those needs is a key factor in their success The purpose of this report is to evaluate the solutions mentioned in the case study Besides, our team will analyze the market and finances of Gap Inc., from which we will offer suitable solutions Additionally, we will conduct a thorough analysis of Gap Inc.'s competitors and industry trends to identify potential opportunities for growth and innovation: By leveraging advanced data analytics and market research techniques, we can uncover valuable insights into consumer preferences and behavior, enabling Gap Inc to tailor its products and marketing strategies accordingly By promoting data-driven decision-making and utilizing big data to analyze consumer preferences, Gap Inc will gain insight into customer behavior and provide a better customer experience To be more specific, product 3.0 is a cutting-edge innovation that combines advanced technology with Gap Inc.'s expertise in the retail industry Lastly, we will explore the potential benefits of strategic partnerships and collaborations with other industry leaders to expand Gap Inc.'s reach and enhance its competitive advantage 4 II KEY ISSUES TO TACKLE Slow growth in core market GAP has been dealing with a significant challenge of declining sales and profitability since 2015 One of the key factors contributing to this downturn is the company's failure to keep up with evolving fashion trends Responding to this, Peck - CEO of Gap Inc affirmed that there is a noticeable shift in consumer shopping habits, indicating a significant departure from the need to constantly add new clothes to their wardrobe This change in behavior has disrupted the traditional fashion industry, as consumers no longer seek out attractive fashion trends that once drove the business forward Consequently, Gap Inc has experienced a notable decline in revenue, highlighting the urgent need for innovative strategies to adapt to this evolving landscape Competition in the market The apparel industry in the mid-tier was dispersed and crowded With numerous players vying for market share, such as Primark and Uniqlo,etc ,Gap Inc had to find innovative ways to stand out from the crowd Moreover, despite being a well-known retail giant, Gap Inc finds itself grappling with its own brand image In an increasingly competitive market, the company has faced challenges staying relevant and appealing to consumers The rapid growth in e-commerce For apparel companies, it has never been more difficult to satisfy customer demand given the explosive growth of e-commerce The majority of consumer purchases were being made online instead of in physical stores With Amazon leading the way, consumers were 5 increasingly turning to the convenience and variety offered by e- commerce As a result, traditional brick-and-mortar retailers struggled to keep up The empty storefronts that once housed bustling stores now stood as a stark reminder of this changing industry Even established brands like Gap were not immune to this trend Recognizing the potential of online sales, Gap Inc made significant strides in expanding their digital presence By 2017, their online sales had surpassed $2.5 billion The evolution of fast fashion It was impossible to keep up with the dizzying speed and tempo of the fashion cycle, which saw new trends hitting stores every week as part of an ongoing cycle of renewal Due to decentralized buying and quick responses to client requests, Zara can supply items to store systems within as short as 4 weeks, while Gap Inc takes up to 10 months This lag in Gap's product cycle time puts them at a disadvantage in the fast-paced fashion industry As a result, Gap Inc found themselves falling behind in the race to meet ever-changing fashion preferences Big and regular discounts Retail analysts were concerned about an excess of price promotions at Gap, where 40% discounts were frequent This excessive reliance on price promotions raised concerns among retail analysts, who feared that Gap's brand image could be negatively impacted While offering frequent 40% discounts may attract bargain hunters in the short term, it could potentially erode the perceived value and quality of Gap's products Moreover, such a heavy reliance on price promotions may create a perception that Gap's regular prices are inflated, undermining customer trust and loyalty 6 Document continues below Discover more fCrhoumy:ền đổi số UEL1 Trường Đại học… 195 documents Go to course NHÓM-7- Phuclong - Hope it helps 45 100% (7) [221MI5217] Group 7 CASE GROW 17 100% (5) Practical 02 Google Teachable Machine 4 Chuyền 100% (1) đổi số 222IS2102 Group-6 - ewewewew 100% (1) 59 Chuyền đổi số BM1 - bm1 100% (2) 57 Quan Tri Kinh… Báo Cáo Thực Tập Ngôn Ngữ Anh Tại… 22 Outdated products Quan Tri 100% (1) Kinh Doan… The classic products offered by Gap were losing favor with customers seeking to establish a distinctive identity Instead, they sought out niche brands and independent designers that could provide them with a sense of individuality Gap's once reliable and iconic styles were no longer appealing to this new generation of consumers, who craved authenticity and personal expression As a result, Gap found itself struggling to keep up with the rapidly changing fashion landscape III EVALUATE OPTIONS 1 Criterion To build the basis for the formation of options, we need to provide specific, selective, and close-to-target evaluation criteria In this case of Gap InFirst, there's feasibility and efficiency To ensure a successful change process, the proposed options must be based on the company's available resources At the same time, the options must have a positive impact on the change-making process In order to provide the best solution, the company must understand how to use and allocate resources effectively Second, there is creativity, originality, and collaboration A prerequisite in the innovation process is to create uniqueness and superiority in products as well as work processes, thereby creating a foundation for building competitive advantages and regaining market share Furthermore, collaboration is a factor that contributes to the acceleration of the change process Third, the ability to broaden experiences and meet the needs of customers To address customer taste issues, solutions must aim to 7 improve customer experience by diversifying product segments and supply channels The fourth characteristic is the ability to accurately predict consumer behavior Accurate consumer behavior judgment is the foundation for deciding on actions to innovate, improve products, and business models Finally, the consumer and the company must maintain a mutually beneficial relationship 2 List of options Option 1 – Big Data in, creative directors out Peck eliminated the position of creative director and spread the responsibility for design of the brand’s seasonal lines to a collaborative team informed by hard data Due to this option, the future of the company does not depend on any individual Big Data helps to produce products that are suitable for the individual preferences of consumers instead of just depending on the subjective aesthetic eyes of the creative director However, without a creative visionary leading a company, it can’t establish a consistent look over a period of time and reinforce a brand’s purpose Moreover, Data science simply isn’t sophisticated enough to predict whether a product will be a hit Product 3.0: “a clear brand vision with a common operating model Gap used data analytics to inform its rebuys: after products were designed and placed into stores, real-time sales data was analyzed to determine which items to reorder and which to abandon On the other hand, it needs products for testing and unpredictable for raw material storage, rapid production 8 In imitation of his fast fashion competitors, Peck wanted Gap to increase its competence at “combining spotting trends with reading real-time performance data and acting faster on that”, using real- time data from its registers and e-commerce purchase data to inform what the company reduced for inventory going forward through the brand’s vision statement as a filter Though, this option is difficult to follow trends and deliver products to market in a timely manner like competitors Product 3.0 shortened the development cycle down to 8-10 weeks enabled Gap to be much more nimble and responsive purchasing data Option 2 - Big Data and Predictive Analytics in Marketing Digital Data streams allowed companies to observe their consumer’s purchase journeys and collect a detailed trail of data about their online behavior The mining of big data could yield many actionable insights to inform managerial decisions making by uncovering patterns in past customer behaviors or characteristics It allowed “remarketing”or “retargeting” This means that the company can also optimize marketing campaigns as they can identify segments, potential customers, customer behaviors to reduce risks in marketing Furthermore, based on aggregated data using similar users, or purchases, to recommend products to customers and decide on the optimal price for a product is a way of optimizing marketing campaigns As digital data streams became more accessible and robust, companies were exploring how to use data - mining and machine - learning to induct consumer preferences and predict future behaviors Moreover, using predictive analytics is to sell existing 9 the fa ith innovative business models, lower prices, and unique offerings can pose a threat to GAP Inc's market share The company needs to stay ahead by continuously adapting and innovating Threat of substitutes: Consumers have the option to choose from a variety of substitutes for GAP Inc's products This can range from other clothing brands to second-hand stores, online marketplaces, or even renting clothes The availability and affordability of substitutes can influence customer choices and impact GAP Inc's sales Company: Gap Inc is a global apparel retailer based in the United States, founded in 1969 by Donald and Doris Fisher Gap Inc owns sub-brands such as Gap, Banana Republic, Old Navy, Athleta, Piperlime, and Intermix This company has a long seniority and success in growing its brand However, under Millard ''Mickey" Drexler's tenure, Gap Inc began to see sales decline Gap's competitive edge may be attributed to its strong brand portfolio, worldwide presence, franchising structure, and financial strength Every season, Gap establishes a million special products, and each product was provided with different colors and sizes Gap’s classification in each assortment includes 2 main products: basic products with enduring style through the seasons and products inspired by specific seasons Due to a lack of information about customer's behaviors, Gap Inc made a wrong decision when they established a new product, which did not satisfy customers Collaborators: 14 Gap's distribution methods are highly invested in digital capabilities to assist customers adopt omnichannel purchasing, with a focus on breaking down the barrier between physical and digital channels Gap Inc previously marketed its branded items through its own retail locations and web portals, avoiding the wholesale model to sell directly to customers To safeguard its direct distribution, the corporation did not franchise in any nation where it held company-owned stores Gap's distribution methods are highly invested in digital capabilities to assist customers adopt omnichannel purchasing, with a focus on breaking down the barrier between physical and digital channels However, efforts to widen the international area with the largest retailer of fashion in Europe - Zalando (2014) and Taobao’s platform from China (2011), and JD.com (2014) To interact with any organization, that enterprise must fulfill a specific function If there are too many suppliers, it will be costly for Profitably Gap to manage them, but if there are too few, the firm would be exposed to supply chain disruption threats Customers Gap offers clients fundamental items that are traditional, clean, and comfortable, such as jeans, kaki, and T-shirts at an affordable price Furthermore, Gap Inc has different customer segments by having 4 separate brands Gap Higher price and quality with Banana Republic; Old Navy to compete with discount department stores and mass merchandisers such as Sears and Target; Athleta - a women’s fitness apparel brand and Intermix - retailer of luxury and contemporary women’s apparel Given that GAP currently has four brands, the corporation may want to concentrate on broadening its items within these brands Most firms in the sector have fewer divisions of operations than GAP, thus this strategy will not only help to minimize competition but 15 will also help the company expand its customer base Besides that Gap has developed email programs to take care of customers by personalized for them Competitors Based on exhibit 3, we can see the mid-tier apparel landscape was fragmented and overcrowded Some new competitors, such as H&M and Zara have a clearly styled and compressed supply chain By the way, they deliver low-priced looks knocked off from luxury fashion runways within weeks of their unveilings Due to some prices of competitors in exhibit 4, it makes clear that brands of Gap Inc have a higher price than other competitors Figure 1: Gap Inc.’s Competitive Landscape Climate/Context Even though Gap Inc is a worldwide firm with many years of experience, 16 it, like many other businesses, is influenced by macro variables such as national regulations and corporate plans For example, in December 2015, the FED rate jumped from 0% to 0.25%; the gap must account for the growth in indebtedness Also that year, a "Sanctions War" between Russia and Europe erupted, severely affecting both Russia and the EU's economies, causing many firms, including Gap, to suffer from awful dropping sales Strengths: - Strong brand recognition: GAP Inc is a well-established and recognized brand with a global presence It operates multiple successful brands, including GAP, Banana Republic, and Old Navy, which have a loyal customer base - Diversified product portfolio: The company offers a wide range of clothing and accessory options across multiple brands, catering to various customer segments This diversification provides a competitive edge and helps to mitigate risks associated with fluctuations in specific product categories - Global footprint: GAP Inc has a strong presence in multiple countries, including the United States, Canada, Europe, and Asia Its international operations contribute significantly to its revenue and growth potential - Supply chain and distribution network: The company has an efficient supply chain and distribution network that allows for quick turnaround times, on-time delivery, and cost-effective operations - Effective marketing and advertising: GAP Inc has a history of successful marketing and advertising campaigns, which have helped build brand awareness and drive customer engagement 17 Weaknesses: - Declining sales performance: The company has experienced declining sales in recent years, primarily due to changing consumer preferences, increased competition from fast-fashion brands, and a lack of innovation in its product offerings - Limited online presence: Despite efforts to strengthen its e-commerce operations, GAP Inc lags behind its competitors in terms of online sales Its online platform and user experience need improvement to effectively compete in the digital retail space - Reliance on a few key brands: GAP and Old Navy are the two main revenue drivers for the company While both brands have a strong customer base, any decline in their popularity or performance could significantly impact GAP Inc.'s financials Opportunities: - Expansion into emerging markets: GAP Inc has the opportunity to further expand its presence in emerging markets, such as China and India, where there is a growing middle class and increasing demand for international brands - Strategic partnerships and collaborations: The company can explore partnerships and collaborations with other brands or designers to create unique and limited-edition collections, attracting a wider range of customers and driving sales - Sustainable and ethical practices: With increasing consumer awareness and demand for sustainability, GAP Inc can invest in sustainable and ethical practices in its supply chain and operations to appeal to socially conscious customers 18 Threats: - Intense competition: The retail industry is highly competitive, and GAP Inc faces competition from both traditional and online retailers Fast- fashion brands that offer trendy and affordable options pose a significant threat - Economic downturns: GAP Inc.'s sales and profitability are heavily dependent on consumer spending Economic downturns, recessions, or geopolitical uncertainties can negatively impact consumer confidence and spending habits - Online retail boom: The growth of online retail poses a threat to traditional brick-and-mortar retailers, including GAP Inc The company needs to enhance its online presence and improve its e-commerce platform to effectively compete in the digital space - Changing consumer preferences: Shifts in fashion trends and changing consumer preferences pose a challenge for GAP Inc The company needs to continually adapt its product offerings to stay relevant and meet the evolving needs and tastes of its target market - 19