predicting consumer tastes with big data at gap

In order to replace the position of creative director, he opted to apply theconcept of "Big Data in, Creative Directors out." He then went on to collect consumerdata using platforms like

VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND LAW

Predicting Consumer Tastes with Big Data at Gap

Lecturer: Nguyễn Thế Đại Nghĩa

Student name: Lê Ngọc Nhật Hà - K214080593

Nguyễn Mai Hân - K214080594

Hoàng Diệu Huyền - K214080595

Phan Uyên Phương - K214080602

Lê Gia Hân - K214081851

TABLE OF CONTENTS

2.1 Replace the role of creative director with Big Data 5 2.2 Big Data in analytics and predicting behavior 5

2.4 Changing distribution model 6

3 Minimizing risks and problems 10

Donal and Doris Fisher founded Gap Inc in 1969 Gap is one of the brands that created specialty retail, in which a retailer focuses on a single product category instead of carrying a diverse selection and producing its own brand of items In 2016, Gap owned 135,000 employees, and 3,659 company-owned and franchised retail locations in 50 countries, representing 36.7 million square feet of sales area, generating global sales of

$15.5 billion Until now, Gap is still seen as a prime example of this specialty retail Gap Inc managed five brands including Gap, Banana Republic, Old Navy, Athleta, and Intermix The Gap brand provided fashion products that are casual, simple, and comfortable and sold at affordable prices for both males and females Gap acquired the Banana Republic brand in 1983 with a strategy to penetrate the high-end fashion market Gap Inc created the Old Navy brand in 1993 with the motto "providing the must-have products in everyone's wardrobe" at "unbelievably low" prices Next, Gap Inc continued

to buy the Athleta brand (sportswear for women) in 2008 and the Intermix brand (high-end, modern women's fashion with sought-after designs) in 2012

Mickey Drexler became CEO of Gap Inc in 1983 Under Mickey, the company's sales increased rapidly at first but then recorded a severe decline The reason is that Gap's products rely too much on Mickey's aesthetic eye

In January 2017, Art Peck - CEO of Gap, struggled to find a way to turn the situation of Gap Inc after 2 consecutive years of seeing sales decline in an environment where traditional retailers were under a lot of pressure due to the competition of the market at that time Gap Inc had to come up with a completely new strategy and to achieve that, the common goal to be achieved was to assess clothing trends and change consumer preferences Their success depended mainly on their ability to assess customer tastes and provide goods that meet customer needs in a timely manner More specifically, Gap Inc aims to build a business model with modern technology, mainly focusing on developing Product 3.0 Thereby delving into customer behavior research and delivering

a better customer experience by driving data-driven decision-making and optimizing big data to analyze customer tastes Moreover, they intensify competition with new competitors such as H&M and Zara as well as strengthen partnerships with businesses specializing in e-commerce and bringing technology to business to create a foundation for using Big Data to analyze consumer preferences

KEY ISSUES TO TACKLE

1 Slow growth in the core market:

Gap Inc competed in the $3 trillion global apparel industry, which comprised 2%

of the world's gross domestic product (GDP) The two large markets, which are the U.S and Canada, accounted for more than $340 billion in this industry and 84% of Gap’s sales However, many surveys pointed out that people aged 27 to 42 were likely to be more frugal when shopping When CEO Peck of Gap Inc responded to retail investors,

he claimed that “there are no compelling fashion trends driving the business” and confirmed there had been a change in consumers’ buying habits leading to a lack of need

to replenish their closets

2 Competition:

The mid-tier apparel landscape needed to be more cohesive and modern

3 Rise of e-commerce:

Online channels were replacing traditional storefronts as the primary place for consumer purchases Clothing became the best-selling online sales category in 2015, led

by Amazon's growing power in the garment market, and 19% of clothes were sold through online channels in 2016, then by the end of 2017, Amazon was expected to surpass all other clothing retailers in the U.S Brands no longer required the same number

of shops as online sales increased American shopping malls were filled with empty businesses as both department stores and specialist retailers were under pressure to close locations However, Gap Inc possessed over 3,000 physical stores, whereas its online sales surpassed $2.5 billion by 2017

4 Rise of Fast Fashion:

New competitors like H&M and Zara appeared as many old brands had to deal with new challenges, namely supply chains, low-priced delivery… This caused the slow

development of Gap when its average product cycle time was 10 months and Gap could not satisfy its consumer buying process as Zara The speed and pace of the fashion cycle were dizzying, with new styles appearing in stores on a weekly basis in a constantly renewing fashion cycle

5 Heavy and frequent discounting:

As buyers began to perceive fast fashion's lower-quality goods as disposable, clothing turned into a commodity, forcing steep discounts and low pricing Retail analysts were concerned that Gap, where 40% discounts were frequent, was engaging in an excessive amount of price marketing

6 Gap's size and ubiquity were transforming from asset to liability:

Consumers looking to create a unique appearance were moving away from Gap's classic offerings As a consequence, product assortment was the main key and Gap's model was failing for selecting the right assortment While Peck knew that the problem from 15 years ago could not be fixed overnight, the results for 2015 and 2016 were disappointing Despite a 4% increase in marketing expenses, comparable sales had decreased for eight quarters before increasing by 2% in Q4 2016 to give a 2% sales reduction for the year The market capitalization of Gap Inc had fallen to $9.2 billion, and the board was searching for longer-term solutions

EVALUATING OPTIONS

1 Criterion

The business was dealing with several difficulties when Peck was appointed The first is the core markets' modest growth, which according to Peck, is affected by a shift in consumer purchasing patterns, such as less of a desire for people to restock their closets The market is likewise fiercely competitive and saturated Then, in the 4.0 age, the advent

of E-commerce and the development of rapid fashion were both influenced by the development of information technology Another problem GAP is dealing with is heavy and frequent discounting Retail analysts expressed alarm about a glut of price promotions at Gap, where 40% off was frequently offered

2 Options

2.1 Replace the role of creative director with Big Data.

Creative directors have historically been in charge of coming up with original, new, and special items for the product They are a vital part of practically every business Peck started to have doubts about the creative director's abilities, after recognizing that the company was having trouble coming up with and defining precisely the right product

to market In order to replace the position of creative director, he opted to apply the concept of "Big Data in, Creative Directors out." He then went on to collect consumer data using platforms like Google Analytics, Google Trends, and social networks to influence products

2.2 Big Data in analytics and predicting behavior

Peck made the decision to invest in digital transformation skills after realizing how consumer behavior was changing This was done to maximize the potential from the shift

in customer shopping behavior from in-store to online Gap's adoption of digital transformation enables it to monitor client purchasing patterns and compile data on their online activity Gap is able to offer customers customized product recommendations that

are catered to their preferences by gathering such data In addition, Gap can make adjustments to product specifications and fashion trend predictions appropriate for the upcoming season to accommodate consumer demands

2.3 Production 3.0

Faced with the current "throne" of fast fashion, along with the pressure to create product trends in line with consumer tastes, Peck decided to implement the "Production 3.0" strategy Gap concentrates on creating and manufacturing products that are well-liked by the market and reducing those that no longer suit customer tastes by gathering and evaluating customer buying data Additionally, Peck has applied this method to specific choices, such as Gap was able to accelerate the production process thanks to the choice to relocate some production facilities from Asia to the Caribbean Since Gap has discovered that fashion trends in various countries at the same time are very varied, the design will continue until the product is shown in a store in this market

In order to rapidly and appropriately develop new designs in line with current trends and bring them to market, Gap has also purchased and stocked a significant amount of fabric

In order to lower costs and inventory pressure, Gap Inc has also employed techniques to create scarcity, which entails that companies only make and introduce a small number of popular, trendy products

2.4 Changing distribution model

Realizing the limitation in reaching customers, and wanting to take advantage of the opportunity to accompany consumers when the explosion of electronic devices is taking place, Gap Inc has cooperated with retailers of online sites such as Zalando, China's Taobao Mall, JD.com, and furthermore consider cooperating with the Amazon commerce platform to replace the model of direct selling at chain stores combined with online selling on its website

In general, the solutions that Peck offers are aimed at solving the problem of declining sales, brand recognition, and other difficulties that businesses face Additionally, Peck's solutions all center on digital transformation, utilizing Big Data to enhance both the quality of the products and the consumer experience And in today's industry 4.0, applying technological advancements to the management of such businesses

is an appropriate tactic Not only that, but the use of digital transformation also enables businesses to make necessary adjustments to the way they run their operations to improve their competitiveness in the constantly evolving fashion market in the leisure sector Gap can specifically generalize from the data and analysis synthesis and make suggestions, modifications, and product improvements that are better in line with market preferences

At the same time, Gap Inc's cooperation with online fashion retailers such as Zalando, China's Taobao Mall, JD.com, and Amazon marketplace not only helps businesses expand their customer base but also take advantage of use for market data analysis purposes

Although one cannot deny the benefits that digital transformation brings to people, especially in the business field, Peck's solution to replace the position of creative director with Big Data, in this case, is not feasible Because although Big Data can help businesses make accurate predictions, it cannot create a unique and special product like a creative director Not only that, it is the creators who understand the brand's values best,

so they are the most suitable factor in shaping product trends In addition, Gap Inc's move

to exploit the potential in the fast fashion field means that this business also contributes to increasing pressure on the waste problem when most fabrics are made from nylon fibers difficult to decompose Additionally, working with significant trading platforms can help Gap reach more people and boost sales, but there is always a hidden risk to the brand's recognition

Based on the synthesis of the problems that Gap Inc encountered and the analysis

of the solutions that the business posed, the following are recommendations to address the imperfections in the solutions of Gap:

The use of Big Data to make predictions about trends and product ideas which are

in line with consumer tastes brings a high precision but lacks originality and novelty Therefore, Gap Inc should consider taking advantage of the harmonious coordination between the role of creative director and Big Data to exploit the strengths of each party in the research process as fully as possible Businesses will use Big Data in analyzing actual consumer behavior Based on the information that Big Data brings, the creative director will be the final decision maker for the next product trend of the business according to his own perspective, experience, and knowledge

Apart from production following fast fashion trends to improve competitive ability against potential competitors, Gap should also consider improving the value of its products by using eco-friendly fabrics and improving its product quality Not only will this help Gap fulfill its responsibility to the environment, but it can also help Gap stand out from the multitude of businesses that are also following this fashion trend

In addition to cooperating with online fashion retailers and e-commerce platforms, Gap should also invest resources in developing its own website to minimize the risk of depending on these businesses, and at the same time create its own mark among consumers, reinforcing its brand recognition Businesses should develop both offline and online platforms adequately to reach a wide range of customers and meet the shopping needs of each customer group

We have developed a strategy displaying the execution time, measuring the sources, and avoiding any potential hazards based on the provided answers

1 Execution time

In an effort to recover, develop, and improve Gap Inc.'s position, we recommend the following timetable:

● January 2024, omitting the creative directors of each fashion brand and adopting the use of the decentralized model and Big Data

● May 2024, utilizing Big Data to forecast customer behaviors

● From the start of 2025, redesigning the distribution model, and investing in digital as well as e-commerce

2 Sources measurement

There are three sources: budget, technology, and partners

Budget: High-quality items are one of the most important elements for attracting

and retaining clients It is proposed that Gap utilize its funds to improve product quality

to meet client desires Additionally, marketing and advertising expenditures are recommended This would enhance GAP's product identity and consumer experiences while leaving a favorable impression Making them loyal clients is not a far possibility

Technology: Investing in technology is unquestionably an essential and crucial

factor Currently, it is considered that the majority of people prefer to purchase online since advanced technology, particularly e-commerce platforms, becomes extensive By investing in digital applications, predicting the behavior of customers, developing shopping experiences, and even partnering with online retailers such as Amazon, the company could increase its income and profits, as well as acquire additional data that is essential for market analysis in the future

Partner: Without the assistance of other partners, Gap Inc cannot make revenue on

its own To construct the e-commerce platform and Big Data applications that evaluate client behaviors, Gap Inc must work with Amazon and Alibaba, two of the largest online