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Innovation in the Digital Age - Lecture 5| Case Summary
Summary of the required case material for Lecture 5 of Innovation in the Digital Age: HBS "Predicting Consumer Tastes with Big Data at Gap" case.
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Innovation in the Digital AgeLecture 5 | Case Summary | Predicting Consumer Tastes with Big Data at Gap
- Introduction:
• 2017: A. Peck (CEO) struggled to turn around Gap after two years of declining sales in an
environment where many brick-and-mortar retailers were under pressure. Gap has been
struggling to regain its footing since 2000 and Peck knew this.
• 2015: Peck became CEO and implemented Gap's digital strategy using an analytical
approach → eliminate the position of creative director for each of the firm's fashion brands and to
replace them with a more collective creative ecosystem fuelled 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 its wellspring of ideas. Their personal vision reinforced the
look, feel, tone, and spirit of the brand. Peck was critical about such individual power. Many
creative directors with top-notch design experience had come and gone during his tenure
without making a significant mark to boost sales. He thus replaced creative directors with a
decentralised, collective process that no longer required the approval of a creative director.
Rather than relying on a single vision, Peck pushed the firm to use the mining of big data
obtained from Google Analytics, Google Trends, social media, and the company's own sales and
customer databases as the backbone to inform the next season's assortment.
→ Ideas could arise anywhere, even from Gap's external vendors, and would no longer have to
be vetted by a creative director serving as a maestro fo the collection.
→ The strategy could be simultaneously incorporated into all three of the company's brands,
hitting stores within three months. Science and art came together in this new process.
→ Peck upset the delicate balance between creativity and commercialisation, between designers
and merchants, that existed at most fashion brands and that had supported Gap's fashion cycles
for decades.
• Peck also considered expanding online distribution by selling Gap's brands on Amazon. He
acknowledged the importance of e-commerce/digital and expressed his opinion that Gap could
be at a disadvantage if it didn't consider the Amazon opportunity → It could provide additional
data about customer behaviour to inform Gap's decision-making.
- Company Overview:
• 1969: Founded as a specialty retailer, which focused on a particular product category rather
than carrying a wide assortment and produced its own private-label goods. With 135,000
employees and 3,659 company-owned/franchised retail locations in 50 countries, it remained
one of the largest example of the genre.
• Manages five brands: Gap, Banana Republic, Old Navy, Athleta, and Intermix.
• Been the authority on American causal style offering both female and male consumers casual,
classic, clean, comfortable basics at accessible prices.
• 1983: Gap acquired Banana Republic, moving into a higher price/quality tier. Luxurious
materials were combined with detailed craftsmanship to support more expensive price points.
• 1994: Gap created Old Navy to compete with discount department stores by offering
wardrobe must-haves at prices you can't believe embedded in a fun shopping experience.
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, Innovation in the Digital Age
Immediate success, becoming the first retailer to reach annual sales of $1bn within 4 years.
• 2008: Acquired Athlete, a fitness apparel brand, capitalised on shift in women's fashion from
jean-based foundation to activewear.
• 2012: Acquired Intermix, a multi-brand retailer of luxury/contemporary women's apparel,
offering the most sought-after styles from a curated selection of coveted designers.
• 1983: M. Drexler became CEO. During his time, sales grew from $480mln to $14bn and Gap's
market cap swelled to $42bn. He was described as a visionary executive who helped transform
Gap from a grab-bag of styles into a trend-setting machine that made simple clothes look great.
After being among the first to predict the rise of business casual, Drexler lost his magic touch as
he attempted to inject more fashion into Gap to attract younger shoppers who were migrating to
edgier competitors. Two CEOs followed Drexler, but were unable to restore Gap's success.
• Every season, Gap produced unique products, offered a variety of colours/sizes. In its primary
categories (women/men/children/baby) there were two types of products:
1. Basic with styles that endured across seasons
2. More fashion-forward items that captured the spirit of a particular season
• Creative directors influenced the full product line, but their touch was most heavily felt on the
latter group, where more fashion innovation was desired.
- Digital and Big Data at Gap Inc.:
• Prior to being CEO, Peck was President of Growth, Innovation, and Digital. Here he invested in
digital capabilities to address consumers' shift to omnichannel shopping, focusing on
dissolving the wall between physical/digital channels. He noticed today's customers are omni;
after checking out things online, they would go to the store (or vice versa).
• Peck digitised Gap's product inventory and introduced retail services (e.g., reserve in store,
find in store, and ship from stores), which made it easy for customers to browse, purchase, and
receive their items seamlessly across channels.
• Peck promoted data-driven decision making and pushed his team to utilise big data to learn
more about customers' behaviours, and thereby deliver a better customer experience. To him,
personalisation is an outcome of big data, which is why he found it important to work on it and
listen to the voice of the customer through big data.
• Peck's team found that despite the explosive popularity of online/mobile shopping, 80% of
Gap's customers still preferred to visit a store to try on the clothes. As a result, Gap was working
with Google/Avametric to develop an augmented reality (AR) app that allowed shoppers to
test out different looks in order to improve their online and mobile shopping experiences.
• Data-driven decision making required that customers be trackable, and Peck lamented that
customers were identifiable online but anonymous when they shopped in a store. He searched
for ways to have customers opt-in to self-identify when they shopped in a store:
→ Opportunity to bring personalisation capabilities and customisation relevance to bear in a
store environment ... 60% of people visiting the website are recognised as unique visitors,
enabling Gap to personalise experiences based on things like browsing and purchase history.
Doing so is providing movement on numbers like conversion, time of website, click-through-rate.
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