1. Why is Gap doing poorly in 2017?

There was a transition in the way the company was determining which product to
launch, more precisely from a subjective point of view to an objective one. The switch
was from being a company that relied upon creative directors for the final word
regarding a launch of a new collection to a company that relied on previous data to
predict future trends. As such, this system was still in its early days to see a positive
real effect that could reverse the declining sales trend originated in the 2000’s. The
poor situation of GAP is not a product of just a bad year, but of a series of bad ones
that could not be reversed even though there were many changes in managerial
positions.

On the other hand, the fashion market and industry went under changes due to the
change of habits of the customer and the disruption of internet technologies. First,
there was a slow grow in the US apparel market that was explained by the decline of
clothing expenses by the millennials, which accounted for almost all of GAP sales.
Second, there were many competitors such as ZARA and H&M that were taking GAP’s
market share based on a fast fashion business model. Third, the rise of e-commerce
platforms such as amazon meant that the customers had even more options to buy
products and that the way of shopping changed from brick-and-mortar stores to online
retailers, which at that time was not a strength of GAP. Finally, the change of customer
habits also played a role: the products were viewed as commodities as there was a
large offer, which in turn increased the power of customers to drive down the prices.

2. Was Peck correct in firing his creative directors and replacing them with a big data-
driven creative process? Why or why not?
The answer is that Peck was both correct and mistaken. He was right in asserting that
big data was the future trend and the basis of the fashion industry in the upcoming
weeks. It was demonstrated that companies could leverage the usage of big data to
predict trends and to enhance their supply chains by optimizing lead times. However,
he was wrong by determining that no creative input is required. All the additional
papers state that big data is a critical success factor in the fashion industry, but that it
has to be used as a support tool by human experts that can identify possible mistakes
in the data presented. Furthermore, the experts should determine what information to
look for and based on that take the decisions. In short, these papers conclude that big
data management must be a pillar of the fashion industry, but in order to make the
most out of it there must be a co-creation of knowledge process through which
companies nurture their ideas with inputs coming from the data and the experience of
the creative directors.
3. What do you predict will happen to Gap Inc.’s sales going forward as a result of
this decision? How will it affect each of its brands’ equity?
If Peck would stick to his decision of relying just on big data management, I think that
even though sales (or overall profit) might not strongly decrease over the years, they
could completely lose their positioning as a leading brand in the fashion industry. Since
Mickey Drexler became CEO of GAP, the company transformed itself to become a
trend-setting machine and to reach its highest market capitalization ever. He led the
company to become iconic among its customer target for being ahead of time in
spotting trends, creating and selling products around them before everyone else could
do it. By solely using a big data management, the company might lose its edge in
designing and launching new trends, since big data relies on previous information to
establish predictive models. By doing so, GAP might lose its edge and customer base,
since it might lead to an association as a second mover based on previous trends. The
customers might think that GAP products are recycled from previous trends and would
not fulfill their needs of wearing clothes that represent fresh or futuristic trends, as it
used to be in the past.

4. 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?
It should not work the same, since each brand is aimed at a different market segment
and carries different value propositions. According to Exhibit 3 and Porter’s
competitive strategies, Old Navy would be on the lower end of the cost-differentiation
axis, thus focusing its business model on a cost leadership strategy, which
attractiveness would be the low prices. On the other hand, on the upper end of the
cost-differentiation axis would be Banana Republic, which would be focused on a
differentiation strategy, offering exclusive products created with luxury materials and
with detailed craftmanship techniques. Finally, the brand Gap would be more in the
middle of the axis following a differentiation focus strategy based on the millennial
population.

Using the previous information as background, Old Navy’s customers could be better
served since this market segment would be well satisfied by having the lowest prices,
an area in which big data could greatly help by enhancing the supply chain and
predicting generic future trends. On the other hand, for the other two brands, using a
big-data-only model would help to reduce prices, but would not completely replace
the creative director’s role for establishing new trends that were not yet seen in the
past. Solely using this approach could mean for the consumers that they are not
receiving enough differentiation in their products they are buying and might change to
another brand.

5. Should Peck allow Gap Inc.’s brands to be sold on Amazon? Why or why not?
What opportunities and challenges does this plan present? If Gap sells through
Amazon, should the company be a wholesaler or a third-party seller? Why?
Peck should allow Gap to sell their products through Amazon since the latter is a big
player in the e-commerce and retailer industry, which means that Gap could reach
many more customers online as it could do by their own website. This means that Gap
increase their sales without committing too many resources and efforts. Also, through
Amazon Gap could increase their online presence and collect data from a new source,
thus supporting Peck’s plan of using big-data to predict trends.

However, the plan also present challenges as how to negotiate the terms by which
these sales would be performed. Since GAP used to be a strong brick-and-mortar
fashion retailer, switching to aim to perform a large share of their sales through a
virtual environment would mean that they have to start almost from the scratch in this
distribution channel without no strong expertise in this field. Maybe GAP could face
problems regarding the pricing, publicity and supply chain in order to cover the more
orders coming ahead.

I think that GAP should be a third-party seller, since a wholesale model would imply
giving away the most precious resource that Peck considered to be: the data. By being
a third-party seller GAP could exploit all the data get to know better their customers,
using these benefits to improve their sales and margins.

6. What is your assessment of Product 3.0? How would you improve it?
The concept in overall is good: it tried to anticipate the client’s behavior saving
resources and time. However, to completely substitute the human judgement was the
mistake. The Mikayla DuBreuil & Sheng Lu article found that big data
techniques and human judgement were very similar for predicting two
out of the three most critical components for fashion trends forecasting,
namely design details and patterns. Therefore, predicting future trends
by only using big data in these fields could have been an efficient way to
save resources by not hiring a creative designer. However, for the color
component, an external opinion should have been considered. Also, I
would not completely discard the creative designers, but would consider
their opinions as inputs when calculating the final regression that would
result in the product to be designed. As a last option, I would have hired
a part-time or freelancer creative designer to analyze the data collected
by the system and create new trends based on this information and not
just based on their own knowledge/experience.

7. Would you change other elements of the marketing mix to address Peck’s
problems? Which ones and how?
Yes, I would mostly focus on the promotional front improving customer engagement
with the brand through the usage of social media or through apps as the case of the
Nike SNKRS app. However, I would take this way only for the GAP brand, since it is
most likely that they will be receptive to this idea given that their target segment is
millennials. For the Banana Republic brand, I would focus on the product-place front
by enhancing the customer experience with specialized shops in areas where the
target customer usually shops by establishing a strategy of runway-retail store as Tory
Burch did, as seen in the Silva, Hassani & Madsen article. Finally, for the Old Navy
brand I would focus on the place by increasing the sales volume through online means.
Given that this brand is based on a cost leadership strategy, customers might not value a
physical store that much and might prefer to save time shopping online, which would
mean a cost reduction for the company by closing the brick-and-mortar stores.

8. For which purposes 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?
It is useful to track to gauge consumer reactions to products and marketing campaigns
by mining of likes, shares and comments on Facebook, Instagram, Pinterest and other
social media. Through this technique companies can offer more personalization to
their products/services, understand better their consumer’s needs and tailor
promotions and special offers more effectively. In the Silva, Hassani & Madsen article
there is the example of Burberry using Big Data to address better their millennial
customers. However, big data models can be flawed as seen in the example of the
H&M post-Christmas campaign, in which the predictive model suggested selling
reindeer sweaters in January. That means that for special events, dates or new
phenomena such as the coronavirus pandemic, these predictive models might not be
as accurate as desired and might need the intervention of a specialist that has a final
saying the decision to be taken.

The role of science in marketing would be to put information on the table to take
decisions based on reality and not on estimated guesses. The art would be to
transform all these data into new insights that could lead to an increase of sales and to
improve brand positioning. In other words, the decisions and the innovation nowadays
should come after analyzing the current trends brought by the data mined. Science
should rule when it comes to making an objective decision, such as how to estimate
price or supply chain issues, but art should rule when subjective decisions are required,
such as adding a creative touch to a product line.