SEPTEMBER 2022

PREDICTING
CONSUMER TASTES
WITH BIG DATA AT GAP
Group 15

SUBJECT LECTURER
Digital Transformation and Mr. Nguyen The Dai Nghia
Artificial Inteligent
Nguyen Ngoc Phuong Nguyen Phan Ngoc Khanh Tran
K214020089 K214020104

Nguyen Tran Viet Nguyen Tu Uyen

K214020110 K214020108

OUR
TEAM

Meet the men and women who

make up our incredible team.
Table of Contents

04 Objective

06 Key Issues

08 Evaluate Options

12 Recommendation

21 Implementation

26 Conclusion
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

OBJECTIVE
Enhanced core market growth rate
Gap Inc. amassed a market capitalization of 42 billion in 2000 after years of building an
empire in the garment industry. However, the business begins to have some significant
issues after that. Sales started to fall off, and fewer people care about the brand.

Create advantages over rival fashion

firms to compete
The business strategy is out-of-date because Gap Inc. was still solely dependent on a
creative director until recently. The shorter trend cycles are too fast for the supply chain
management to handle. By responding better and quicker to customer requests and
providing products with greater value for money, new competitors like Zara and H&M began
to erode Gap Inc.'s market share.

04 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

OBJECTIVE
Utilize e-commerce
Customers are switching from brick-and-mortar stores to online retailers, and the mid-tier
apparel market, where Gap Inc. operates, is oversaturated. Gap Inc., with its 3,659
locations, must adapt to the changing nature of the sales channels. The business did not
make the necessary investments to enhance and expand their internet presence.

05 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

KEY ISSUES
01 Unable to fulfill demand

The conventional, creative-led model is no longer relevant. Both the model

and the time it takes to bring the new design into stores are too long. The
time taken to design, produce, and launch new products is up to 10 months.
Additionally, the establishments have an excessive number of expensive
products. Additionally, Gap Inc. does not satisfy client demand, which results
in the company not selling some of the inventory or forcing customers to
accept steep discounts in order to clear out the inventory. As a result, they
are not profitable

02 Massive discounts

The emergence of fast fashion as well as intense and ongoing discounting

are among Gap's top concerns.
As fast fashion retailers like H&M and Zara have grown in popularity and
begun to provide clothing at lower price points and for less money overall,
customer purchasing habits have changed.

06 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

KEY ISSUES
03 Pricing

Gap does not have the cost competitive advantage over its rivals and
charges a relatively low premium for basic clothing. Women's jeans range in
price from $60 to $90, while the identical item costs between $10 and $60
at H&M and between $30 and $50 at Uniqlo. For Gap's brands, pricing
competition would be challenging because many of their direct rivals sell on
Amazon. It would take years to resolve this persistent issue, which cannot
be fixed without a significant redesign of the supply chain.

04 Expansion of fast fashion

Within weeks, fast fashion merchants may transition trends from the runway
to their stores. The rivals of Gap Inc. were able to launch their goods far
more quickly than Gap Inc. They could get new products into stores in a
matter of weeks as opposed to Gap Inc., which had a ten-month fashion
cycle.

07 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

EVALUATE OPTIONS
Criterion
In order to compete with mass merchandisers and cheap
department stores like Sears and Target, Gap Inc. launched
a new brand in 1994 called Old Navy. This marked the
beginning of a time in which it was fashionable for
customers from all income groups to shop for a deal. Old
Navy was an instant hit with families, offering "wardrobe
must-haves" at "prices you can't believe" while including a
pleasant shopping experience. Within four years of its
debut, Old Navy became the first store to surpass $1 billion
in annual sales.

08 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

EVALUATE OPTIONS
Criterion
To accommodate consumers' move to multichannel
purchasing, Art Peck, as President of Growth, Innovation,
and Digital, made significant investments in digital
capabilities with an emphasis on removing the barrier
between the physical and digital channels. He digitized the
company's entire product line and launched retail services
like "reserve in store," "discover in store," and "ship from
store" that made it simple for customers to explore, buy,
and get their things seamlessly across channels.

“Our customers are omni today and that is a fundamental reality.

Many of our customers begin their journey with our brands on their
phone and they finish it in our stores. Many of our customers begin
their journey with our brands in our stores and they finish it on their
phone.”

09 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

EVALUATE OPTIONS
Option
Peck vowed to integrate "a clear brand vision with a
common operating model" in a plan he called Product 3.0.

Using predictive
analytics to increase
sales of current goods

Developing new goods

with predictive analytics

Gap employed data

analytics, like the
majority of retailers, to
guide its repurchases.

10 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

EVALUATE OPTIONS
Evaluate
In the beginning, Gap struggled to adapt to the
observed shifting consumer behavior in the apparel
market.
Gap did not implement a sufficient system for product
selection in step with customers' evolving requirements
and expectations in the fashion industry.
Lack of new advancements at Gap that can satisfy
customers looking for affordable and fashionable
apparel items
Customers' lack of dedication has made it harder for
this business to comprehend their fashion preferences.
The management of Gap has to understand how its
clients' shared behaviors and similarity of interests and
preferences socially create their wants for fashion.

11 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Porter's Five Forces Model
• Low
• Numerous players
THE THREAT
OF NEW • Saturated market
ENTRANTS
• High rivalry among the competitors
• Strong brand identity

• High
• Low differentiation among the
THE THREAT OF
products
SUBSTITUTE
• Readily availability of the substitute
• Zero switching cost of the buyer

• Moderate to high
• Numerous dominating players
• Identical products
BARGAINING
POWER OF • Zero switching cost
THE BUYER
• Many substitutes
• Strong brand image, high quality,
skin friendly, environmentally friendly

12 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Porter's Five Forces Model
• Moderate to high
• Few suppliers and the quality of
BARGAINING
POWER OF material
SUPPLIER
• The manufacturer is wholly
depended upon the supplier for raw
material which is plastic
• No substitute
• Zero switching cost

• High
• Dominating players
COMPETITIVE • Products are really identical
RIVALRY • Zero switching cost of the buyer
• High advertisement and promotional
activities

13 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Market Research

01 Strengths 03 Opportunities

• Good brand Name. • Changing demographics &

• Innovation. priorities of western women
• Production of own raw started going to work.
materials. • Increased demand.
• Experienced in the personal • New technologies.
care • New product in the existing
category. market.
• Good distribution channel. • Existing product in new

SWOT
• Strong history of innovation. marketing.

02 Weaknesses 04 Threats

• No presence in the Japanese • Multiple competitors.

Market. • Declining birth rate.
• Second to P&G in market • The technology was
entry. accessible to everyone.
• Low international presence. • Government regulations.
• Using old methods of • Imitation of strategies.
manufacturing

14 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

Financial analysis
Prices Paid for Goods Sold and Rent Expenses

When compared to fiscal2020, the cost of goods

sold and occupancy costs fell by 5.7 percentage
points as a proportion of net sales.

ACCORDING TO ESTIMATES, COSTS WILL DROP 4 TO

5% IN 2022 COMPARED TO 2021.

Operating Expenses and Operating Margin

Operating expenditures grew by $260 million

but as a proportion of net sales declined by 5.3
percentage points in fiscal 2021 compared to
fiscal2020, mainly because net sales increased.

OPERATING COSTS ROSE BY $300 MILLION IN 2022

BUT FELL BY 4 PERCENTAGE POINTS FROM 2021 TO
2022.
15 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

Financial analysis
Gap Inc’s Revenue by Brand (2016-2022)

IN 2022, REVENUE IS PREDICTED

TO REACH 17 BILLION DOLLARS

16 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Suggested Aternatives
1. Predicting Consumer Tastes With Big Data At Gap Case Analysis
At National Level: Introduction Of Specific Gender Disposable

• Indicators to react quickly to competitor activity in the market.

• Allows the business to continue to maintain its competitive edge
while serving larger group segments.
• The introduction of gender-specific K-C would maintain its
PROS competitive position in the US Predicting Consumer Tastes With Big
Data At Gap market thanks to this initiative.
• It would avert P&G's danger to increase its market share through
its throwaway His and Her Predicting Consumer Tastes With Big
Data At Gap products.

• The production and marketing of the product would necessitate

the increased fixed cost.
• Because the product is new to the market and the consumers, it is
CONS difficult to forecast how they will react to it. This makes the product
even more unpredictable.
• Because the product is new to the market, there are many chances
that it would fail.

17 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Suggested Aternatives
2. Introduce a similar product with some changes

• The introduction of a comparable product would assist the

company in maintaining its competitive position in the market.
• If the equivalent product were changed, it would draw in new
customers, allowing the company to increase its market share and
PROS profitability.
• It would appear to be a novel product and Particular Big Data
Consumer Taste Prediction The functionality of the current item
would be extended at Gap.
• The firm may gain from the modification as a first mover.

• The clients' unknowledgeable reaction to the alteration.

CONS • Brand-new items must be introduced with intensive capital.
• Possibilities for the new item to fail.

18 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Suggested Aternatives
3. Concentration on Geographic Expansion

• The company's global presence will increase brand recognition

and its success.
• By participating in the new marketplaces, you can draw in new
PROS customers.
• Through foreign sales, the company has a chance to obtain
economies of scale.
• Boost the company's profitability and competitiveness.

• Cultural and environmental obstacles between various nations.

• The geographic expansion necessitates significant capital
expenditure.
CONS
• K-C could be unable to secure potential sales from international
markets where competition is fierce and competitors are hard-
working and innovative.

19 | GAP INC.
 PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

RECOMMENDATIONS
Suggested Aternatives
4. Invest in both advertising and technology

• Marketing attracts new customers, expanding the company's

clientele.
• Using sophisticated technology enables a corporation to adopt a
technique that would allow it to reduce its various overhead costs
and production capacity through imports.
• It would provide K-C with a better sales growth than specific non-
PROS
reusable products since the market segment has more room to grow
than the non-reusable market sector, which is already saturated. Big
Data Prediction of Consumer Tastes at Gap.
• Improves the company's reputation because the new technology is
environmentally friendly.

• Significant capital expenditures are required to upgrade the

technology and promotional efforts.
CONS • The business's practices are simple to copy.
• To handle the brand-new company item, a skilled work force
would be needed.

20 | GAP INC.
PREDICTING CONSUMER TASTES WITH BIG DATA AT GAP

IMPLEMENTATION
21 | GAP INC.
TIMELINE
Top priority: Improve the product

Developed
fabric
Work again with platforming and
the retail purchased a
execution of the significant

01 company
merchants 03 amount of
materials

Remove the
position of
Creative Design
02
Distribute the
duty among a
cooperative
04
Director group

Hire more data

analysts to
become
knowledgeable
trend
forecasters 06 Inventory
control 08
05 07
Invest in Create an
modern unique internet
marketing and sales channel
digital and expand
platforms distribution
chanel

22 | GAP INC.
 RESOURCES ESTIMATION
Get rid of the creative director job and give a
collaborative team guided by data the task of
designing the brand's seasonal ranges.

23 | GAP INC.
CONTINGENCIES
Fabric platforming was used,
which involved purchasing a
lot of fabric and keeping it in
stock to enable speedy
creation of patterns in
reaction to current trends.

CONTINGENCIES
Reducing the time it took for
products to get from the
design stage to the shop and
delaying the final purchase
decision until he could take
into account the most current
data patterns from limited-
quantity early releases
intended to test the waters.

24 | GAP INC.
 RISK MITIGATION

THE RISK OF Develop a thorough grasp of the hazards facing

THE SUPPLY
CHAIN the supply chain today.
Create precise risk mitigation plans and
coordinate with business stakeholders on
potential business consequences.
Project-manage the operationalization of COO
shifts with risk mitigation strategies.

THE RISK OF To be successful, we must accurately predict

BRAND
RELEVANCE sartorial trends and shifting consumer
AND BRAND preferences.
EXECUTION
Our reputation and brand image must be
upheld.

THE RISK OF By integrating our store with internet shopping

STRATEGIC
platforms, we may further establish an omni-
TRANSACTIONS
AND channel purchasing experience.
INVESTMENTS

25 | GAP INC.
Conclusion

The Big Data strategy would not

benefit Gap in the same way.

Gap's inability to adjust to the

shifting fashion trends in the
apparel industry has harmed its
ability to compete, as seen by
the recent decline in sales
volume.

The company's creative

directors have failed to consider
the present market's dynamic
elements, which has prevented
them from creating brands that
are compatible with customers'
shifting fashion preferences.

26 | GAP INC.
Instead of replacing the creative directors with big data
drive creative process, Peck could hire young creative
designers while taking customer segments into
consideration, with an inclusion of a proposed big data as
a technique to obtain additional information and valuable
knowledge about the consumers' preferences and taste,
and emerging industry trends. Peck could also conduct
surveys online to get a better understanding of what
exactly the consumer wants.

Because customers' likes and preferences are

always changing, relying only on big data would
result in faulty and wrong forecasts. As a result, big
data would not be as accurate and dependable.

27 | GAP INC.
By changing designs according to new
fashion trends and customer needs. Gap
can come up with designs suitable for
each class of customers and generate
higher sales.

Focus on using secondary data and

anticipating market trends, Gap can
easily know customer needs, new
fashion trends. These data can be
analyzed from Google searches, social
media sites and fashion magazines to
create a new product.
28 | GAP INC.
Based on the problems raised in the case study,
Peck's choice to use big data analytics in place of
creative directors makes sense since it promotes
product innovation in step with consumers' shifting
buying tastes and behaviors.

Gap may ultimately need to use technology to

achieve multiple market intelligence goals in order to
maintain its competitiveness in a market with heated
competition.

Gap should change market approach

to identify customer needs and change
their products to generate better
revenue and increase its position in
the market.
29 | GAP INC.
 PREDICTING
CONSUMER TASTES
WITH BIG DATA AT GAP
Group 15