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UNIVERSITY OF ECONOMICS AND LAW

VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

CASE STUDY
Predicting Consumer Tastes with Big Data at GAP

Class: Digital transformation and artificial intelligence

Lecturer: Nguyen The Dai Nghia
Class code: 222MI5216
Group members:

Name Student code Mission Evaluation

1 Than Pham Anh Duy K214020172 Leader 100%
2 Nguyen Quang Dat K214020174 Member 100%
3 Nguyen Ngoc Thao Nguyen K214020180 Member 100%
4 Nguyen Quang Phat K214020181 Member 100%
5 Le Phuong Thao K214020183 Member 100%

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TABLE OF CONTENT
I. GAP Incorporated...............................................................................................2
II. Objectives
1. Eliminating creative directors to take full advantage
of Big Data ...................................................................................................2
2. Dissolving the barrier between the physical and
digital channels ............................................................................................3
III. Key issues
1. Difficulty in evaluating the current tastes of customers
and meeting their demands ...........................................................................3
2. Slow growth in core market .........................................................................3
3. Competition .................................................................................................3
4. Rise of E-commerse .....................................................................................4
5. Rise of fast fashion .......................................................................................5
6. Heavy and frequent discounting ...................................................................5
7. The transformation from asset to liability of GAP’s size and ubiquity .........6
IV. Evaluation
1. Big data in, creative director out ..................................................................6
1.1. Strengths ...........................................................................................6
1.2. Weaknesses .......................................................................................7
2. Product 3.0 at GAP ......................................................................................7
1.1. Strengths ...........................................................................................7
1.2. Weaknesses .......................................................................................8
3. Shifting the distribution model by selling products
on Amazon .......................................................................................................8
1.1. Strengths ...............................................................................................8
1.2. Weaknesses ...........................................................................................8
V. Recommendations
1. Market analysis ............................................................................................9
1.1. SWOT ...............................................................................................9
1.2. Porter’s five forces model .................................................................9
2. Recommendations ........................................................................................10
1.1. Applying big data ..............................................................................10
1.2. E-commerce ......................................................................................11
VI. Implementation
1. Timeline ............................................................................................11
2. Resources estimation .........................................................................12
3. Contingencies ....................................................................................12
4. Risk mitigation ..................................................................................12
VII. Conclusion .......................................................................................................12
VIII. Trello observation and progress .......................................................................12

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commercialization by eliminating creative directors to take full advantage of Big Data,

leading to the revival of GAP Inc. fashion positions for many decades.

2. Dissolving the barrier between the physical and digital channels.

To accommodate consumers' transition to multichannel buying, Art Peck extensively
invested in digital capabilities, putting a focus on removing the barrier between the physical
and digital channels. He advocated data-driven decision-making and encouraged his team to
use big data to closely comprehend more about consumers' activities and provide a better
customer experience.

Particularly, selling GAP products on Amazon could provide Peck and his managers with
access to a whole new data stream, allowing them to gain knowledge about the purchasing
patterns of current customers when they weren't making purchases through the company's
own digital platforms or in-person. It could also give them access to new customers who
weren't previously attracted by the company's distribution efforts. With this method, GAP
Inc.’s online sales remarkably exceeded $2.5 billion by the year of 2017 after witnessing the
decline in financial performance between 2015 and 2016.

III/ KEY ISSUES:

1. Difficulty in evaluating the current tastes of customers and meeting their
demands.
What was in and out of fashion was constantly changing as people naturally yearned for
newness when yesterday’s fashion had become commonplace or outdated. As soon as the
fashion trend broadly permeated society, people would find it no longer outstanding
anymore. This phenomena had pushed many tastemakers to constantly sweep the culture for
the latest ideas and inspirations. Notwithstanding, GAP Inc. failed to predict the customer
preferences that its creative directors had relied more on their personal style in lieu of sensing
or doing market research. Taking Rebekka Bay as an example illustrated that her design
aesthetic, created through her gut, resulted in the inconsistency with GAP’s optimistic brand.
Consequently, GAP was also unable to establish a consistent look over a period of time and
reinforce a brand’s purpose.

2. Slow growth in core markets.

GAP Inc. competed in the $3 trillion global apparel industry, which marked 2% of the
world’s gross domestic product (GDP). The U.S. and Canadian markets accounted for over
$340 billion and were expected to grow annually by 2% through 2025. These two markets
accounted for 84% of GAP’s sales. However, millennials were spending less on apparel.

This triggered the plan of closing 175 of its 675 GAP stores in North America as the
brand was at the sea to turn around a business mired in a long sales slump. Speaking to
investors at a retail conference, Peck claimed that “there are no compelling [fashion] trends
driving the business” and that there had been a shift in consumers’ buying habits by lacking
the need to replenish their closets.

3. Competition.
The mid-tier apparel landscape was fragmented and overcrowded, from classic to trendy,
or from thrifty to pricey. A variety of stores like Zara or H&M continuously launched new
products to match fashion trends, to be seasonal or to satisfy the needs of customers.

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Figure 1: GAP Inc.’s Competitive Landscape.

4. Rise of E-commerce.
In the United States, clothing became the best-selling online sales category, driven by the
increasing strength in apparel in 2015, and 2016 was the year witnessing 19% of apparel
which was sold through omni channels. This proved that consumers were shifting their
purchasing from brick-and-mortar stores to online media. For instance, Amazon, the world’s
largest multi-line and multi-brand Internet-based retailer, was on track to become the largest
seller of apparel in the U.S. by the end of 2017. Without any exception, GAP Inc.’s online
sales noticeably exceeded $2.5 billion in this period of time.

Observing the massive acceleration of E-commerce, there was a redundancy of offline

retailers that were about to face pressure to close locations. Hence, GAP Inc. had to figure
out many efficient ways to balance between physical stores and online channels.

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Figure 3: GAP Inc.’s Brand Representative Designs.

7. The transformation from asset to liability of GAP’s size and ubiquity.

On account of offering classic styles, customers had a tendency to forge a more unique
and modern identity.

IV/ EVALUATION
1. Big Data In, Creative Directors Out.
Improving running by eliminating the position of creative directors for each of the firm’s
brand and replacing them with a more collective and collaborative team proceeding by the
input of data.

1.1. Strengths
GAP’s decision making is not dominated by the individual decision maker. In reality, not
all fashion trends are completely accepted by everyone, specifically, creative directors stated
that this kind of product was in fashion but consumers didn’t feel so. Utilizing big data has
more chances to learn more about the customer’s behaviors and taste. Hence, we can create
more products and access to more customers.

Listen to customers. This approach was based on aggregate data from users, or a user’s
purchase history, actually gathered through their reviews on social media or online shopping
platforms. As a result, GAP was able to identify client’s needs and upgrade customer care
service, simultaneously.

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The future path of the company will not depend on any individual, declining the
dependence on the workforce. In the past, a core leader of an enterprise stepped down,
instead of immediately finding another suitable replacement and having a fear of activities
being delayed, the application and adaptation technology will rapidly resolve these issues.

1.2. Weaknesses
The crucial role of creative directors is inconvertible. Many creative directors with top -
notch design were tastemakers, trained in design and using their sensitive sense according to
their incredible eye, personality to shape the look, feel, tone, and spirit of future’s fashion. In
addition, creative directors were the visionaries of the brand as well as guardians who took
charge in its image and provided inspiration and wellspring of ideas for subordinates.

Big Data cannot produce products that match the vision and mission of the company. Big
data simply analyzes data from social media sites and develops algorithm-driven protocols to
customize preferring characteristics or features of customers to create a new product that
reaches maximum satisfaction. Meanwhile, creative directors will concentrate on the vision
and target of the company to create product lines matching with them. With a distinct point of
view generated from creative directors who will be visionaries, ensure that all the next steps
of the business will serve that common direction.

Big data can find out new fashion trends but cannot bring creativity to a fashion brand. A
customer’s individual taste develops under the social influences including the tastes or
fashion of others around them. Consequently, the deviation in the fashion industry appears.
Changes in fashion occur naturally as people relied entirely on Big data will yield inaccurate
and inaccurate predictions due to the fact that consumers are constantly changing their tastes
and preferences crave for newness when yesterday's fashion turns out boring or out of date.

The data that has been gathered will not be effectively utilized without the assistance of
knowledgeable creative directors. An expert will be aware of which metrics are helpful and
which are not. Additionally, they employ their knowledge to utilize that data in the most
efficient and practical manner.

2. Product 3.0 at GAP

2.1. Strengths
Product 3.0 relied heavily on the analysis of customer purchase data. deeply comprehend
the psychology of customer’s behavior. GAP gathers client information, evaluates, and filters
products, bringing to market the ones that best meet consumer wants and preferences.

Gradually switch to fast fashion on customer purchasing for numerous categories. Peck
has moved some manufacturing from Asia to the Caribbean for quicker deliveries. He set up
the fabric platform, bought the fabric in large quantities, and kept it on hand so he could
swiftly produce designs that followed the latest fashions. GAP has become much more
responsive to information on customer purchasing for numerous categories.

Combining spotting trends with reading real-time performance and acting faster on that.
Using e-commerce purchase data to move forward rapidly so as to release to the market
products which are able to meet customer’s requirements the most promptly.

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- Amazon traditionally charged its third-party sellers a commission rate of 15%;

however, given its size and brand strength, GAP might be able to negotiate a lower
fee.

V/ RECOMMENDATIONS
1. Market analysis
1.1. SWOT
Strengths
- GAP is one of the few retailers that has
more resources than competitors to the
point where it’s possible to create many
latest trends.
- A global institution with many brands
ranging from casual to fashion oriented
clothing.
- Many familiar brands that have a large
and loyal customer base.
- Old Navy (one of GAP’s brands) is still
considered to be very popular, even to
millennials.
Weakness
- GAP size and ubiquity made it become
casual in some customers’ eyes.
- Heavy discounts (up to 40%) can have a
reverse psychology effect that results in
less sales.
- Heavy reliance on many brick-and-
mortar retailers.
- Hesitant to changes (adapt to the digital
shopping)
- Slower production cycle time than
competitors.

Opportunities
- The surge of ecommerce platforms and
digitized shopping.
- Customers attach to phones and online
shopping is increasing at astonishing pace.
- Huge number of physical stores offer
strong ability for customers to try clothes.
- GAP’s ability to collaborate with huge
online platforms with cheaper fees.
Threats
- Lack of compelling trends.
- Customers change in buying habits (less
spending overall)
- Many powerful retailers have formed
with strong digital backgrounds and
cheaper logistic costs (H&M, Zara) that
attract lots of younger generations
customers.

1.2. Porter’s Five Forces Model

New entrants threat in industry: The risk of new entrants to the retailers market that
utilize big data is deemed to be low, due to the bigger existing brands that can already have
well-established data systems to control the market. This data focus market is extremely
fierce and the competition among the competitors is already very high, which causes
countless difficulties for the new incomers to the market. It requires huge initial costs as well
as thorough research to penetrate the market. High marketing costs and strong supply chain
networks have really reduced the power of the threat from new entrants.

Power of buyers: The bargaining power of the buyers is considered to be high (discounts
historically up to 40%). Customers at GAP can have the product options ranging from casual
to more fashioned. With the help of data analysis, customers can buy more delicate products
at lower costs, which moderates the intensity of the bargaining power of the buyer.

Power of suppliers: The bargaining power of suppliers is that the manufacturer is entirely
dependent upon the suppliers for raw material, and the quality of product being provided is

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dependent on the suppliers. Furthermore, there is not any replacement offered in the market
to provide materials, which is another reason behind the small amounts of the provider's
bargaining power.

Threat of existing substitutes: The danger of replacement is extremely high in the

industry. The main reason behind the high threat of alternatives is due to low differentiation
among the products even inside of GAP as well as other competitors’. Moreover, there is no
expense or lack of disadvantages of switching up a buyer, which is another factor that
increases the availability of replacements.

Competition in the industry: Fashion brands are always competing with each other to
launch new products continuously to match fashion trends, to be seasonal or to match the
needs of customers. Many institutions that have strong databases and low production cycles
take significant market shares.

2. Recommendations
2.1. Applying big data
Recommended solution : Applying big data into manufacturing and products’ strategy but
only demoting the power of creative directors- not fire them.

Issues addressing: Difficulty in evaluating the current tastes of customers and meeting
their demands, slow growth in core market.

While decentralizing the power of creative directors and pushing the use of big data is a
great option, completely removing them can be less effective than still having some
guidelines. The following are the pros and cons of maintaining big data and creative directors
simultaneously.
- Pros: The role of creative directors is irreplaceable. Because creative directors are artistic
visionaries and they establish the feel, look & tone of the brand. From the materials they have
established, low-level designers will create products and related materials based on it. They
will be the one who can and is able to create uniqueness for the product. Combining this with
the power of applying big data, analytics can predict the trends, preferences and “taste” of
customers. Therefore, creative directors can use this customers' data with their experiences
and modify their creations and products to increase the velocity of catching up with trends.
Meanwhile, they can always rely solely on data to maximize effectiveness of pumping out
suitable products. Moreover, they can continue creating their own unique fashion ideas and
have the chance to create new trends themselves.
- Cons: Big Data can help find new fashion trends but cannot bring out the creativity that a
fashion brand must have. And big data can also lead to bias in the fashion industry. Merely
analyzing data to find trends cannot completely replace the creativity and innovation that
people can bring because it only follows an individual in consumer behavior. Meanwhile
if the company depends on creative directors, it still has the initial problems of depending on
labor. By combining both of these problems, it can be compounded and lead to more serious
matters. The cost of maintaining both of them is also nerve-racking.

2.2. E-commerce.
Recommended solution: Cooperate with an e-commerce omni channel website (Amazon)
while building an online website of GAP.

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+ Invest in digital platform.

+ Tighten inventory.
+ Consider cooperate with Amazon.

2. Resources estimation.
There are 3 resources : budget, technology and partnership. Among that, budget is one the
most important factor to attract and build customers' trust came from high quality products.

3. Contingencies.
Implementing fabric platforming, buying large quantities of fabric and holding it in
inventory so that designs could be quickly created in response to of-the-moment trends.

Shortening the time it took for items to go from design to stores and postponed making
the final decision on orders until he could incorporate the most recent data trends from
limited-quantity early releases designed to test the waters. Cutting the development cycle
down to 8-10 weeks in some categories enabled GAP to be much more nimble and
responsive to consumer purchasing data.

4. Risk mitigation.
- Risk related to company’s interval:
+ Replaced creative director, strengthen the company’s foundation.
- Risk related to supply chain:
+ Develop comprehensive understanding of current supply chain risks.
+ Build clear strategies to mitigate risks and align with business stakeholders on any
business implications.
+ Project manage operationalization of risk mitigation plans inclusive of COO shifts.
- Risk related to Brand Relevance and Brand Execution:
+ We must successfully gauge apparel trends and changing consumer preferences to
succeed.
+ We must maintain our reputation and brand image.
- Risks Related to Strategic Transactions and Investments:
+ Further develop an omni-channel shopping experience for our customers through
the integration of our store and digital shopping channels.

VII/ CONCLUSION
GAP’s inability to adapt to the ever-changing fashion trends, marketing trends and
multimedia channels has severely affected its competitiveness, resulting in the reduction of
sales. However, by utilizing digital transformation, the situation can be greatly improved. The
business could consider applying big data analysis, along with e-commerce omni channels.
We believe that this will give GAP the flexibility to trends they are lacking as well as expand
their market by a huge margin.

VIII/ TRELLO OBSERVATION AND PROGRESS

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