tiểu luận digital transformation and artificial intelligencepredicting consumer taste with big data at gap

Issues need to be solved:- Slow growth in core markets- Competing in a fragmented and overcrowded mid-range apparel landscape- Rise of e-commerce- Rise of fast fashion- Strong and regula

VIET NAM NATIONAL UNIVERSITY OF HO CHI MINH UNIVERSITY OF ECONOMICS AND LAW

REPORT OF CASE ANALYSIS Summer Semester: 2021-2022

DIGITAL TRANSFORMATION AND ARTIFICIAL INTELLIGENCE PREDICTING CONSUMER TASTE WITH BIG DATA AT GAP

LECTURE: Master Nguyễn Thế Đại Nghĩa

Course ID: 221MI5207

MEMBERS IN GROUP 1

Ho Chi Minh City, November 24 2022 st

NO FULL NAME STUDENT ID CONTRIBUTIO

Table of content

1 Gap Inc overview: 3

2 Actual Gap figures: 3

3 Issues need to be solved: 6

4 Evaluate options: 7

4.1 Criterion: 7

4.2 List of options: 7

4.3 Evaluation of the option: 8

5 Recommended recommendations: 9

5.1 Solution Description: 9

5.2 How do solutions solve problems? 11

5.2.1 Slow growth in core markets: 11

5.2.2 Rise of e-commerce and fast fashion: 12

5.3 Market analysis: 12

5.3.1 Five Forces Model: 12

5.3.2 Model 5C: 15

5.3.3 SWOT: 18

5.4 Revenue forecast: 19

6 Implement the plan: 20

6.1 Implementation process: 20

6.2 Resources estimation: 22

6.3 Contingencies: 23

6.4 Risk mitigation: 24

7 Conclusion: 24

7.1 Targets: 24

7.2 Problems: 25

7.3 Recommendations: 25

1 Gap Inc overview:

- Gap Inc was founded in 1969 by husband and wife Donald and DorisFisher with the idea of making it easier to find the perfect pair of jeans

- In the more than 50 years since, the company has grown into five brands:GAP, Banana Republic, Old Navy, Athleta and Intermix

- Jeans-t-shirts, as well as denim-cotton are basic products and are one ofGAP's iconic staples Associated with Americana and Normcore fashionstyles

- Today, GAP is recognized as a fashion statement, representing the

"American dream" and modern American lifestyle

2 Actual Gap figures:

- Gap Inc competes in the global apparel industry and accounts for 2% ofthe world's gross domestic product (GDP) The US and Canadian marketsaccount for 84% of Gap's revenue Overall, the brand choice rate ofmillennial consumers, although it has decreased due to "no hot fashiontrends driving the business", is still at a relative level: Old Navy won toprated brands (53%), GAP is in the above average position (35%) andBanana has the lowest rate (22%)

- Gap's position in the market is also facing serious problems Gap cannotclaim premiums for basic skins Besides, Gap cannot meet the low costdemand like other fashion brands, including the Old Navy brand chain.

- Financial performance of Gap Inc in the years 2015 and 2016:

- Gap Inc.’s Segmented Net Sales in 2014-2016:

- Total return to shareholders of Gap Inc in the period 2012–2017:

3 Issues need to be solved:

- Slow growth in core markets

- Competing in a fragmented and overcrowded mid-range apparel landscape

- Rise of e-commerce

- Rise of fast fashion

- Strong and regular discount policies

- Size and popularity of GAPs converting from assets to liabilities

4 Evaluate options:

4.1 Criterion:

Design direction and inspiration for each product should not be focused on oneindividual Instead of betting the company on a single individual, the companyshould replace creative directors with a collective, decentralized process that nolonger requires the approval of the creative director

To ensure a successful change process, the proposed options must be based on thecompany's available resources At the same time, the options must have a positiveimpact on the change-making process The company knows how to effectivelyutilize and allocate resources to provide the most optimal solution

The company needs to learn more about customer behavior and deliver a bettercustomer experience, and test and refine new features as it listens to its customersthrough its “voice of the customer” initiative This will accurately predictconsumer behavior The accurate judgment of consumer behavior is the basis fordeciding on actions to innovate, improve products and business models

Big data mining must inform management decision making, identifying whichconsumers are more loyal to brands, comparing consumers to products they maylike or anticipate predict behaviors or characteristics that might drive consumersoff

Diversify experience and meet customer needs To solve the problems of customertastes, the solutions offered must achieve the goal of improving customerexperience, diversifying product segments and supply channels

The company must respond to the importance of assessing customer tastes andproviding goods that meet customer needs in a timely manner

Choose the right approach to fashion development for all three brands of Gap

4.2 List of options:

The adoption of technology will drive predictions about customer behavior and expected fashion trends, thus allowing Peck and his managers to document productinnovation to match customer preferences client Technology has also

revolutionized the way businesses operate in the modern marketplace, reflected in the adoption of online platforms to drive sales and gauge purchasing trends and patterns consumer market Thus, by expanding its e-commerce engagements through online retailers like Amazon, Gap will not only increase sales, but also mine data for market analysis purposes mine Such an innovative approach is crucial to Gap's success in the current clothing industry.

The use of online platforms to drive sales and gauge consumer buying trends and market patterns is critical to Gap's growth in sales in the apparel industry extremely competitive Therefore, the solution to expand the sales market and reach customers through e-commerce e-commerce platforms through online retailers such as Amazon, Taobao, Zalando, JD.com is the solution At its best, it not only helps Gap increase sales, but also mines data for its market analysis purposes Such an innovative approach is crucial to Gap's success in the current fashion industry

However, no matter how developed technology is, it cannot completely replace the role of people in economic activities Peck was wrong to fire its creative directors and replace them with big data that drives the creative process, because creative directors can very well create uniqueness unique to the product and they are seen

as the trendsetters who are responsible for creating fashion reative directors are also responsible for acting as guardians of the company's image and product-related ideas and inspiration

4.3 Evaluation of the option:

Overall, the presented options are consistent with the defined criteria,according to our group's study All of those ideas are intended to address the salesdrop and enhance Gap's operations All alternatives center on utilizing big data,digital transformation, and other technology advancements to better customerexperience and improve products This strategy is ideal for keeping up with thegrowth of industry 4.0 In our opinion, technology adoption will encourage theforecasting of consumer behavior and anticipated fashion trends, enabling Peckand his team to record enhanced product innovation to account for consumerpreferences

Big data analytics provides Gap with the opportunity to effectively predictfuture customer behaviors This approach helps to look at the current trends ofcustomers and their interaction history with the company's website and other socialmedia platforms to gain insight into the customer's market and help The companyunderstands their fashion preferences.

Gap's move to sell its branded products through Amazon and Gap's efforts toexpand its international reach to build awareness of its brands in new geographiesthrough through building a partnership with Europe's largest online fashion retailer,Zalando (2014), China's largest online shopping site - Taobao (2011) and JD.com(2014) This approach has the potential to allow the company to increase its sales

by reaching new customers who don't like the current distribution network.Furthermore, selling Gap brands through these e-commerce platforms will allowthe organization to gain a whole new source of useful data to understand theshopping habits of existing and new customers potential goods At the same time,this also gives interesting information about the market and the popular productsthere From there, Gap will better understand trends and customer behavior in themodern apparel market

The use of online platforms to drive sales and gauge consumer buying trendsand market patterns is critical to Gap's sales growth in the apparel industry.extremely competitive Therefore, the solution to expand the sales market andreach customers through e-commerce e-commerce platforms through onlineretailers such as Amazon, Taobao, Zalando, JD.com is the solution At its best, itnot only helps Gap increase sales, but also mines data for its market analysispurposes Such an innovative approach is crucial to Gap's success in the currentfashion industry

5 Recommended recommendations:

5.1 Solution Description:

With the main goal of making a difference, GAP should apply technology,combined with the use of data to analyze tastes and changes in consumer behaviorand needs over time In this way, GAP's senior managers will be provided with allthe necessary information to orient new product lines suitable for customersegments as well as satisfy their needs

In the current 4.0 economy, e-commerce has become a retail trend The leadingsolution for GAP is to expand the sales market and reach customers through manydifferent channels, one of which is e-commerce platforms through online retailers.Today's leading online stores such as: Zalando, Amazon, JD.com, Taobao, Thehigher the conversion rate, the greater the profit.

- Improve customer engagement and experience Develop/improve the

online/in-person shopping experience: refer to the sales and service methods

of other businesses to learn and develop more, invest in the training of salesstaff and Customer care staff (before and after sales) Thereby creating afeeling of comfort and enjoyment of customers when purchasing, the interestafter purchasing and using the product and making customers return to thebusiness

- Clarifying product segments on the Website: concretizing and grouping

product segments more clearly through the introduction of product lines bygender or age For example, product lines for men or women; product linefor middle-aged or young people

- Investment in technology and advertising: Advanced technology helps the

company to capture the advanced process through which the company hasthe ability to cut various overhead costs and import production capacity

- Offer preferential policies, online discount codes: Promote customers'

shopping

- There are appropriate policies for potential markets.

- GAP worked with Google and Avametric to develop an augmented reality app that allows shoppers to try on different styles to improve the shopping

experience try different styles to improve the online shopping experience.online on their mobile device

- Personalize experiences based on things like search and purchase history,

delivering the best experience for customers when they're ready to informbusinesses when shopping

- Take better care of your customers by emailing them For example, if a

consumer forgets an item in the shopping cart, there will be an email orsmall text message reminding them of that, as well as sending them acongratulatory message on holidays, birthdays, etc

5.2 How do solutions solve problems?

5.2.1 Slow growth in core markets:

The main cause of this problem is the lack of information about customers to beable to capture their tastes, and solutions based solely on the Creative Director'svision are not effective Therefore, Gap Inc Failure to accurately determine theneeds and tastes of consumers leads to the introduction of inappropriate productlines To solve this problem, increasing the application of technology is one of thebest ways, using big data can help the company analyze consumer behavior in realtime and thereby issue warnings Based on that information, management will re-establish product lines that are more suitable for each customer segment and createproducts that satisfy customer needs

Expanding the sales market and approaching customers through multimedia willopen up many opportunities for GAP to develop in the context of the graduallyshrinking market E-commerce will become the most important bridge betweencustomers and businesses Online retail platforms will help GQP expand itsdistribution network, exploit the potential of the market, and attract morecustomers without having to rely on traditional advertising channels

The expansion of the market will remove the complexity of production methods inbringing products to consumers If the old way was from the manufacturer, then tothe retailer, and then finally to the customer, now the product is supplied directlyfrom the manufacturer to the consumer This will save time, as well as eliminateintermediaries, reduce transaction costs, thereby increasing the profit of thebusiness Through market expansion to e-commerce platforms, GAP can price itsown brand.

5.2.2 Rise of e-commerce and fast fashion:

With the changeability and low prices of the fast fashion industry, a series ofbrands following this model sprang up such as H&M, Zara, These brands caneasily gain a significant share of the apparel market by offering fast fashion items

at low prices that compete with Gap Inc Therefore, Gap should drive digitaltransformation With AI, the company can quickly build stores and brands on the e-commerce platform, resulting in a higher user experience Not only that, AI Visiontechnology also helps to arrange the right products in the right places to increasethe purchase rate of customers This method can also be used in physical storeswith similar results Ultimately, Gap's brand will be enhanced and the userexperience when making transactions at Gap stores will be improved Since then,the position and competitiveness of Gap Inc has also been restored and developedmore and more sustainably

5.3 Market analysis:

5.3.1 Five Forces Model:

● Threat from new competitors (medium)

The fashion industry has always been an attractive industry for startups because ofits convenience and timeliness The life cycle of a fashion product is short, thedemand is diverse, flexible, and the supply process is long The fashion industrywill become an increasingly attractive market, but in this area there are also a fewlarge, well-known brands such as Zara, Macy's, Access to distribution channels is

considered the biggest barrier for new entrants in the market With thedevelopment of the e-commerce platform, they will no longer have to worry aboutcosts such as space, electricity, water to operate the store, By cutting those costs,the cost of products are also reduced, as well as using technology to recommendproducts related to the item customers are searching for, enhancing theirexperience New entrants into the market using e-commerce platforms will putpressure on GAP If GAP wants to succeed in this field, it needs to come up witheffective marketing strategies as well as find ways to reach customers.

● Power of supplier (low)

This doesn't matter much because GAP buys raw materials from many differentsuppliers Suppliers will not be able to charge too much because they will loseorders to competitors However, for the exclusive suppliers of a certain product, itcan also put pressure on GAP, which can reduce the profit of the business

● Threat from substitute products and services (medium)

The fashion industry is a specific industry, and there is no substitute for anyproduct The need to buy clothes is a regular need of every person, especially withthe rise of the fast fashion industry in recent years The threat of substitute products

to the company is due to the dynamic nature of the industry, their risk to GAP isnot yet alarmingly high

● Power of the customer (high)

Customers have great power over the fashion industry For direct stores, customerscan choose to go to different branches, even though they are from the samecompany, based on the service attitude of the staff as well as their convenience Ifcustomers are not satisfied with some products or care policies of this business,they will look to competitors, this will make the business lose a part of profits.Consumers are very picky, they always want the best: the price they pay to own islow, but the goods must be of quality GAP's long-term profitability will be deeplyaffected by this issue

● Fierce competition of competitors in the same industry (very fierce)

When a certain business creates a trend in the fashion industry, it causes a fever inthe market Customers have a lot of choices when deciding where to shop, what