Data Case Analysis In 6 Hours
Predicting Consumer Tastes with Big Data at Gap
In January 2017, Art Peck, chief executive officer and HBS MBA ‘79, was struggling to turn around Gap Inc. following two years of declining sales in an environment where many brick and mortar retailers were under pressure. Peck took over as CEO in February 2015, after serving as president of growth, innovation, and digital, when he envisioned and implemented Gap’s digital strategy using an analytical approach (see vitae in Exhibit 1). Gap’s troubles were not new to Peck; the company had been struggling to regain its footing since 2000.
One way he hoped to improve operations was to eliminate the positions of creative director for each of the firm’s fashion brands and to replace them with a more collective creative ecosystem fueled by the input of big data. Creative directors were the visionaries of a fashion brand, serving as guardians of its image and providing its taste inspiration and wellspring of ideas. These designers, such as Karl Lagerfeld for Chanel and Christopher Bailey for Burberry, established a design direction for each line, created a small number of inspiration pieces, and oversaw and approved the designs of other products in the line. Their personal vision established and reinforced the look, feel, tone, and spirit of the brand.
However, Peck was critical about the amount of power this concentrated in one individual. Many creative directors with top notch design experience had come and gone during his tenure without
making a significant mark to boost sales. Labeling creative directors “false messiahs”,1 Peck reflected, “We have cycled through so many, and each has been proclaimed as the next savior.”2 Instead of betting the future on the next savior, he replaced creative directors with a decentralized, collective process that no longer required the approval of a creative director. Rather than relying on a single person’s artistic vision, Peck pushed the company to use the mining of big data obtained from Google Analytics and the company’s own sales and customer databases as the backbone to inform the next season’s assortment. Ideas could thus arise anywhere, even from Gap’s external vendors, and would no longer have to be vetted by a creative director serving as maestro of the collection. Once a trend was spotted, it could be immediately and simultaneously incorporated into all three of the company’s brands, hitting stores within three months. “There is now science and art, and they can come together,” in this new process, proclaimed Peck.3 With the elimination of his creative directors, he was upsetting 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.
Peck was also considering expanding online distribution by selling Gap’s brands on Amazon, an online retailer. His previous role at Gap taught him the importance of e-commerce and digital and he
Professor Ayelet Israeli and Senior Lecturer Jill Avery prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
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expressed his opinion that Gap could be at a disadvantage if it didn’t consider the Amazon opportunity. Selling on Amazon could provide an additional datastream about customer purchasing
behavior to inform Gap’s decision making.4
Gap Inc. was founded in 1969 by Donald and Doris Fisher and their son, Robert was chairman of the board in 2017. Gap was one of the creators of specialty retailing, retailers that focused on a particular product category rather than carrying a wide assortment and produced their own private label branded goods. It remained the largest example of the genre, with 135,000 employees and 3,659 company owned and franchised retail locations in 50 countries, accounting for 36.7 million square feet of selling space,
which generated global sales of $15.5 billion.5 (Also see Exhibit 7).
Gap Inc. managed five brands: Gap, Banana Republic, Old Navy, Athleta, and Intermix, and had historically been the authority on American casual style. The Gap brand offered female and male consumers casual, classic, clean, comfortable basics: jeans, khakis, button down shirts, pocket tees — at accessible prices. Some called it democratic fashion, “ordinary, unpretentious, understated, almost lowbrow,” while others labeled it iconic: “They elevated incredible basics to not just an iconic status in terms of clothing, but also a spirit – you felt like there was such a strong attitude, so much energy.”6 In 1996, Gap was at the height of its cool; actress Sharon Stone wore a Gap turtleneck on the red carpet of the Academy Awards.
In 1983, Gap Inc. acquired Banana Republic, moving into a higher price/quality tier. Luxurious materials were combined with detailed craftsmanship to support more expensive price points and attract a higher income consumer. In 1994, Gap Inc. created a new brand, Old Navy, to compete with discount department stores and mass merchandisers, such as Sears and Target, ushering in a period during which it became chic for consumers of all income brackets to shop for a bargain. Offering “wardrobe must-haves” at “prices you can’t believe,” embedded in a fun shopping experience, Old Navy was an immediate success with families, becoming the first retailer to reach $1 billion in annual sales within four years of its launch.7 Two acquisitions followed, Athleta (2008) a women’s fitness apparel brand, capitalized on the shift in women’s fashion from a jean-based foundation to activewear apparel. Intermix (2012) a multi-brand retailer of luxury and contemporary women’s apparel, offered consumers the “most sought-after styles” from a carefully curated selection of “coveted designers.”
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