Case 4 Big Data at Gap

Case #4: Predicting Consumer Taste with Big Data at Gap
MBA523
Danielle Furtado, Chris Leffingwell, Rober McCabe, Daniel A. Murphy, Nicholas Stamboulis
Arianna Thibodeau
Professor Li
June 19, 2019
Summary:
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When Gap Inc. was first founded in 1969 by Donald and Doris Fisher, the brand was
positioned as a retailer focused on a small assortment of products with its own private-label
goods. Since then, the brand has gone through many changes and has faced numerous challenges
over the years. Gap Inc. is the overarching company that controls five major brands: Gap,
Banana Republic, Old Navy, Athleta, and Intermix. The company’s 1983 CEO, Millard Drexler,
saw extreme growth in the company, but ultimately saw sales declines due to the fact that he
controlled all fashion decisions and relied only on his own opinions. After Drexler left Gap Inc.,
the company saw two more CEOs who similarly failed to revive the company before Art Peck
took the role in 2015.
Peck formerly took the role of President of Growth, Innovation, and Digital before
becoming CEO and planned to eliminate the role of the creative director within the company and
instead utilize big data as their competitive advantage. He faced a lot of problems during his time
as CEO including: the rise of e-commerce, fast fashion and the desire for high discounts by
customers. In order to fight against these risks, Peck introduced the increased usage of predictive
analytics and digital data to understand customer behavior. He used secondary data such as
Google searches to understand what customers were searching for in terms of new trends in
order to prepare for their demands. The company also utilized customer loyalty programs to track
in store purchases and to predict and anticipate what customers would want next from the brand
before the customers even knew what they wanted. Gap Inc. would send our coupons and
promotions for products based on what they think the customer will buy next. Peck ultimately
utilized Product 3.0 at Gap Inc. to compete against fast fashion brands like Zara and H&M as
well as understanding their customer’s journey in making purchases. Gap Inc. was able to reduce
promotions through tightening inventory and influencing customers to buy now instead of
waiting for a discount due to the fact that the product may not be available later. Product 3.0
changed the way Gap Inc. did business and allowed them to become a major industry player
during a time of increased e-commerce and the interest in fast fashion trends.
1. Why is Gap doing poorly in 2017?
Gap was doing poorly because they had two years of declining sales in an environment
where brick and mortar stores like them were constantly under pressure. By 2017, Amazon had
become a massive competitor in selling apparel online and retail stores really suffered because of
this. It was not Gap’s fault necessarily that Amazon was that big, but online shopping just really
took over. Gap did have some success with online shopping as their total online sales had
exceeded $3.5 billion. Amazon simply has more critical advantages than Gap does including
closer distribution centers to customers and better ways of analyzing predicted future consumer
wants.
Peck had the right idea by trying to focus on gathering more information and data about
consumer behavior, but by the time the company tried utilizing this, their competitors were too
far ahead of them. Trying to also predict future consumer preferences is hard to do because
individual tastes and fashions seemed to change quickly all the time. As the case stated even with
traditional research market surveys it is hard to determine the changes in fashion that would later
occur.
Eliminating all of the creative directors was a difficult decision to make as well because
now a lot of that responsibility relied solely on Peck or analytics. One person cannot be more
innovative or creative enough to outweigh the potential benefits of having multiple other people
involved in the creative process as well. It is a mistake to simply rely on data alone rather than
trying to utilize than skills and talents or creative directors who devote their careers towards
trying to find innovative trends. It seemed like the innovative vision of Gap was not the same
across all three of their brands as the case discussed Banana Republic’s creative director had
their own fashion labels that they also focused on at the same time.
2. Was Peck correct in firing his creative directors and replacing them with a big data-
driven creative process? Why or why not?
In the 1990's, Gap Inc.'s creative director's established the design direction of the brick-
and-mortar retailer's collection. Today, creative director's have become obsolete as Amazon and
big data are now the driving force behind fashion trends. Art Peck was appointed CEO of Gap
Inc. in October 2014 and he had previously served as President of Growth, Innovation, and
Digital. In 2015, "clothing became best-selling online sales category" and the following year,
represented 19% of apparel was sold online (Israeli & Avery p. 4). Amazon experienced massive
growth in e-commerce while Gap suffered declining sales due to a lack of data. Gap previously
relied heavily on shopping mall traffic and in-store sales data, but to address the consumers' shift
to omni-channel shopping, Peck invested heavily in Gap's digital capabilities. This is due to the
fact that big data can drive decision-making for Gap and personalization of apparel and
customization of the experience for the consumer.
In January 2017, Peck realized after two consecutive years of declining sales, something
had to change. As CEO, Peck implemented a digital strategy to address the millennial consumer's
preferences. This was done through mining and analyzing big data to calculate next season's
design and to predict future behavior is more scalable and scientific. Previously, Gap Inc.
followed the gut of one creative director for a collection of three brands. Peck ultimately used
big data to listen to the customer. The creative director position for each fashion brand was
eliminated because it was too much power and pressure for one creative designer. Peck's digital
strategy replaced the individualistic culture with a more collaborative and collectivist
environment.
The combination of big data obtained from Google Analytics, social media, Gap's own
sales and customer databases would become a vital part of the creative direction of Gap going
forward. Now inspiration could come from anywhere and a trend can be incorporated into each
brand simultaneously within three months instead of waiting months for creative approval. Fast
fashion requires an efficient supply chain that can deliver products as fast as, if not faster, than
retailers like H&M and Zara. Decentralized buying process and an integrated vertical supply
chain enables Zara to deliver small batches of seasonal products within four weeks versus Gap's
three month lag and ten month product cycle.
Art Peck waited two years to embrace change, adapt and modify their design and
marketing strategies to today's millennial consumer. The termination of the creative directors
disturbed the "delicate balance between creativity and commercialization, between designers and
merchants, that existed at most fashion brands and that had supported Gap Inc.'s fashion cycles
for decades" (Isreali & Avery p.1). Consumers demand a mobile experience and spend less time
in stores trying on the wrong size, when they can verify inventory online and save time, money
and gas. Consumers were still visiting malls, just not Gap. Gap needed a creative design and
digital strategy that gave the millennials a reason to replenish their closet.
3. Does the big data approach work for all three of Gap Inc.’s primary brands: Old
Navy, Gap and Banana Republic? Why or why not? Which brands are better/worse served
by this strategy? Why?
Based on our team discussion, the big data approach would not necessarily have an equal
positive impact on Gap Inc’s primary brands. This is because all three of Gap Inc’s primary
brands are positioned differently in the market and thus appeal to different customers. Gap is
positioned as a high-quality classic brand targeting the average consumer, Banana Republic is
positioned as a high-end brand targeting the high-income fashion forward consumer, and Old
Navy is positioned as a low-end brand targeting bargain shoppers. Customers expect and look for
different sets of value and style in each brand. It would be wrong to assume one strategy will be
equally successful across all three brands.
The big data approach might work for Old Navy as their business model is focused more
on implementing fast fashion and improving their supply chain through digitalization and big
data. These big data analytics and supply chain improvements are based off the assumption that
the brand is ready to quickly react and respond to customer demands through data analytics. This
big data approach is not aligned with the business model of Gap and Banana Republic. Bringing
in the big data approach will dilute the positioning of these two brands; as the big data approach
fits better for companies that are reactive to customer’s and trends. Gap and Banana Republic are
focused more on creating their own fashion trends, not so much working off established trends -
like Old Navy does.
It is our recommendation that Old Navy continue to use the big data analytic approach, as
it best fits their business model of reacting and responding to fashion trends. As for Gap and
Banana Republic, we recommend they switch back and hire creative directors/designers. In order
to align Gap and Banana Republic with their business models, you must allow them to create
fashion and have customers follow.
4. For which purpose is big data/predictive analytics more or less useful in marketing?
As we move into a world filled with more data, what is the role of art versus science in
marketing? Under which conditions should “science” rule and under which conditions
should “art” rule?
Big data and predictive analytics have changed so many aspects in the marketing field.
By having this data, firms are able to identify loyal customers, making better recommendations
for their customers, and predicting typical behaviors of customers who may churn. By analyzing
past patterns of their customers’ behaviors, firms are able to develop algorithms that can help
them customize customers’ experiences in order to maximize satisfaction and profitability per
customer.
First, firms can use this data to make better recommendations for their customers. These
recommendations come from the patterns and interests of other customers with similar interests.
This data is typically gathered through reviews or purchase histories tracked through loyalty
cards. This topic is extremely useful for firms because they can invest their marketing budget to
target customers who are more likely to shop at their location and not waste their money on
customers who will never visit. By utilizing the budget in a more efficient way, firms can be
more efficient in their marketing campaigns.
GAP can also use data to predict future fashion trends and forecast demand. Companies
are able to analyze historical fashion trends and be better prepared to produce the newest style in
a short amount of time in order to capitalize on the first movers who adopt the trend. Also, by
forecasting what your stores will demand in inventory, firms are able to place more accurate
orders from their suppliers and decrease waste. This waste could be both financial, as they are
only ordering what they believe they will need and preventing over-ordering, which could lead to
markdowns and cost the firm money. This waste could also be tangible, as the firms are placing
more accurate orders, they are preventing unnecessary waste and freeing inventory space and
preventing the creation of textile waste that will typically end up in a landfill. Although
achieving this trend prediction is difficult, as it is hard to predict what we will be doing in the
future, it can be extremely useful for the firm.
As we move into a society where data is everything, art versus science becomes a more
stable aspect in the way many firms function. However, where the line should be drawn between
the two is often up for debate between varying companies. In our opinion, science and art should
be separated and utilized for different functions within the business. Science is typically used to
gather historical data and identify patterns and trends in a certain data set in order to better
predict what will occur in the future. However, being in such an artistic field, eliminating the
creative roles was a stretch. While some new trends are based off of the previous years’ looks,
many are completely different looks that have not been seen in years or even decades. People
are able to follow fashion trends and suggest the next best look much better than any data mining
tool could. Our team believes that science should be left to measure what is and is not working
out well for the company, and art should handle the design and fashion side of the business.
Fashion is often times about emotions and how those clothes make you feel, which we believe is
something that science cannot capture in any form of analysis.
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Case #4: Predicting Consumer Taste with Big Data at Gap

June 19, 2019

took the role in 2015.

1. Why is Gap doing poorly in 2017?

driven creative process? Why or why not?

customization of the experience for the consumer.

three month lag and ten month product cycle.

by this strategy? Why?

equally successful across all three brands.

like Old Navy does.

should “art” rule?

more efficient in their marketing campaigns.

future, it can be extremely useful for the firm.

something that science cannot capture in any form of analysis.

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