C.S.'s Profile

You raise some interesting questions, Adi. Your first question on the risk of being too responsive to customers is an important one. I see a tradeoff between the use of Big Data to provide custom products and customer experiences and the ability of a company to independently set and project fashion trends. On the one hand, Big Data can be leveraged to tailor and personalize everything from in-stores experiences to online shopping and products. Big Data initiatives have the potential to increase customer loyalty and generate top-line growth. Numerous retailers, such as The Gap, are focused on implementing such technology in order to react quickly to changing customer demands. [1]

On the other hand, initiatives utilizing technology to collect consumer information and inform production decisions run the risk of being so reactive that companies lose touch with what their unique brands represent and who their target consumer is. In this situation, is there no longer a role for a creative director or unique vision? I would argue that holding someone accountable at the company for determining and maintaining a brand vision is essential.

Scale and growth stage are other key factors to consider here, since Canada Goose may have capacity and resources to integrate channels in a way that is very responsive to consumers, but smaller scale, later stage companies are likely more limited in terms of how they can respond to consumer demands.

In terms of product availability, I think this answer will vary depending on where products fall on the spectrum of value to premium. Traditional luxury companies, such as Dior and Chanel, have been able to achieve a perception of exclusivity through high price points, a selective distribution platform, and limited production volumes. Thus, I think that expanding accessibility (e.g., lowering prices or selling through the mass channel) and catering to all consumer needs would actually prove to be a detriment to a luxury brand like Canada Goose in the long run.

[1] “Gap Gets Personal With Big Data.” Retail Best Practices | RIS News: Business/Technology Insights for Retail, Supermarket Executives, 30 Apr. 2013, risnews.com/gap-gets-personal-big-data.
[2] “Has Luxury Gone Too Mass?” The Business of Fashion, 18 Jan. 2016, http://www.businessoffashion.com/community/voices/discussions/has-luxury-gone-too-mass.

I think it is interesting to note that the UK vote to leave the EU has in fact had negative repercussions for UK citizens. The second short term lever you mention, in which ABF will “selectively pass on cost inflation to retail customers,” begs the question of why UK citizens would vote for a policy that ultimately leads to higher consumer prices.

At the national level, countries have an incentive to establish trade barriers that protect domestic workers. History tells us that protectionism has the potential to lead to trade wars that result in a worse collective outcome for countries involved. Such has been the case for the unwinding of NAFTA on the American auto industry, for example. [1]

Thus, in regards to your first question, I think that it is critical that businesses have the right to lobby against government decisions. First of all, I think it would be very difficult to prevent or even restrict lobbying from occurring. But secondly, entities should be able to promote policies that are beneficial to them. This doesn’t necessarily mean that the policies businesses support are in the consumers’ best interest, but I believe that companies have a right to support whichever policies are in their best interest financially. In turn, consumers have the right to vote for their political preferences.

Regarding your second question on ABF’s responsibility to workers, I think that throughout this shift in supply chain, ABF will likely need to reduce its headcount in order to reduce manufacturing costs and compete with lower cost manufacturers. That said, I think that the company has a responsibility to support its employees and should thus reallocate workers where possible and train them in different services and divisions, such as eCommerce.

[1] Eisenstein, Paul A. “Auto Industry Declares War on Trump Over NAFTA.” NBCNews.com, NBCUniversal News Group, 31 Oct. 2017, http://www.nbcnews.com/business/autos/auto-industry-declares-war-trump-over-nafta-n815996.

You raise a number of key points in your assessment of the impact that a NAFTA revision could have on Ford’s manufacturing operations. I agree that due to Trump’s protectionist policies, Ford may need to shift its global supply chain and establish local infrastructure in other markets. In fact, Ford has already announced that it will be investing more heavily in its Kentucky plant and in Chinese operations. [1] However, I would argue that Ford shouldn’t only be concerned with building manufacturing capacity in “its highest growth global markets.”

There are other key factors management must consider, apart from areas in which consumer demand is high. Input costs, such as labor and shipping costs, must be taken into account. In addition, political factors, including trade and tax policies and political stability, need to be considered. In addition, the ability for foreign plants to reliably meet American safety standard regulations may also be an area of concern. It could be difficult for Ford to monitor and enforce these regulations. Ultimately, given political uncertainty both at home and abroad, I think it’s still unclear whether the ultimate cost of cars produced abroad will be greater or less than the cost of cars produced domestically.

In answer to your question on how shifts in Ford’s supply chain will impact consumers in the U.S., I think that the answer is depicted in the declining sales numbers that the American auto industry has been posting this year. [2] The sales decline has been driven by increased competition both at home and abroad and due to increased market uncertainty. As such, Americans are shifting towards cheaper alternatives, particularly cars produced in Asia. [3] This shift in consumer behavior will continue to have negative repercussions on American auto makers until Trump liberalizes U.S. trade policy.

[1] Vlasic, Bill. “Ford Chooses China, Not Mexico, to Build Its New Focus.” The New York Times, The New York Times, 20 June 2017, http://www.nytimes.com/2017/06/20/business/ford-focus-china-production.html.
[2] Lawrence, Eric D., and Nathan Bomey. “GM Sales down 15.4%, FCA Drops 10%, Ford down 7.5% for July.” Detroit Free Press, Detroit Free Press, 1 Aug. 2017, http://www.freep.com/story/money/cars/2017/08/01/gm-ford-fiatchrysler-auto-sales-july/527521001/.
[3] Butters, Jamie, and David Welch. “U.S. Auto Market Slump Persists.” Bloomberg.com, Bloomberg, 1 Aug. 2017, http://www.bloomberg.com/news/articles/2017-08-01/fiat-chrysler-july-sales-fall-as-u-s-auto-market-slump-persists.

I agree that H&M has the potential to act as an agent for change in the industry and influence customer behavior. However, I don’t think that offering a program like clothing rental would be viable, given the H&M customer promise and operations model. As a fast-fashion, omni-channel retailer, H&M’s customer promise is “more fashion choices that are good for people, the planet and your wallet.” [1] I believe the issue is that there is a trade-off between fast-fashion and clothing quality. Unlike retailers like GAP, H&M clothing comes to market relatively quickly and product variety changes numerous times throughout each season. However, changing fashion trends often come at the expense of clothing durability. Renting and re-using clothing requires quality clothing, and H&M management would need to improve its clothing quality in order to launch such a program. Thus, I think that investing in more recycling initiatives would be a more sustainable option for H&M in the long-term.

In terms of how the environment will be impacted as consumers shift to online, I think that management will focus on adapting the supply chain such that consumers can more conveniently ship and return clothing purchases. I think that increasing overall convenience for consumers will involve higher transportation costs and put pressure on the environment. Management will need to focus on fulfilling customer orders as efficiently and at the lowest cost possible by optimizing its distribution and fulfillment strategy.

That said, I don’t think that H&M will ever be able to “eliminate” its effect on climate change, but I think that the integration of technology into its supply chain and investing in its online capabilities will shift the focus from brick and mortar to e-Commerce, and this will ultimately limit the negative impact of the company’s global retail footprint.

[1] H&M. “H&M Is Committed to Sustainability.” H&M Conscious, career.hm.com/content/hmcareer/en_us/workingathm/get-to-know-us/hm-conscious.html.

I’m a proponent of Target’s decision to build out smaller format stores. According to Business Insider, these stores offer a curated selection of inventory and a unique environment geared towards the surrounding population. For example, the Herald Square location in NYC offers products attractive to tourists and a large selection of beauty products, since the store is located nearby a Sephora. In terms of environment, management has employed distinct architecture and artwork that reflect local consumer interests and preferences. Management is also focused on shutting down the larger boxes that are under-performing. [1] On management’s recent earnings call, the COO recounted: “our July openers have been particularly strong out of the gate… the guest response has been phenomenal.” [2]

However, I disagree with your suggestion that Target “can no longer simply continue to incrementally improve each individual aspect of its business.” This isn’t just a matter of winning versus losing. I believe this is a matter of differentiation and knowing who the customer is. What makes Target different than its competitors, such as Amazon and Walmart? Target’s slogan is: “Expect More, Pay Less.” The chain offers higher end, more exclusive goods that are more fashion-forward. Omnichannel integration is a must for all retailers. The key for Target, I think, is learning how to tap into this segment of the market through the more curated offering that these smaller scale stores provide.
Furthermore, piloting these store formats in the manner that management is doing is key to ensuring that the format works. Since Target is making such a substantial investment, it is important to confirm that the idea is working before rolling it out. Our previous case on Ron Johnson at JC Penney demonstrates how implementing rapid, bold stroke changes can lead to failure.

The issue with your proposed solution to use customer browsing to trigger a demand forecast may also lead to issues in the supply chain. For example, how do you quantify customer browsing? How can target ensure that browsing data is reliable?

Regarding your second question, I don’t believe that innovations in e-Commerce technology will kill brick and mortar retail. There are a number examples of companies, such as Warby Parker, Casper, and Bonobos, that are building out a smaller scale retail base due to the benefits that brick and mortar offers. Why is this? Well, there are several benefits that are derived from brick and mortar. Customers often desire the ability to try on certain products, such as apparel. In addition, customers value the convenience, especially when delivery is expensive and requires substantial lead time. I would argue that Target can further develop its position in the market, catering to higher income consumers who can “expect more” through its curated stores.

[1] Keyes, Daniel. “Target Opens New Small-Format Stores.” Business Insider, Business Insider, 23 Oct. 2017, http://www.businessinsider.com/target-opens-new-small-format-stores-2017-10.
[2] Garcia, Tonya. “Target’s Small-Format Stores Are Turning into a Big Win for the Retailer.”MarketWatch, 19 Aug. 2017, http://www.marketwatch.com/story/targets-small-format-stores-are-turning-into-a-big-win-for-the-retailer-2017-08-16.

I spent some time walking around the Concha y Toro vineyard when I lived in Chile for a few months in 2011. What struck me was the “New World” sense of pride and the relatively entrepreneurial perspective that the Chileans have towards their wine. Relative to “Old World” producers, such as Italy and France, I sensed that Chileans had a more open mind towards creating partnerships with vineyards around the globe.

Joint ventures created between Old World and New World producers have been successful in the past. For example, the California wine maker Mondavi and more traditional Chateau Mouton Rothschild produced the Opus One which was considered an excellent pairing. [1] Therefore, I don’t think that Concha y Toro would risk losing its identity by diversifying its locations. Rather, I think that Concha y Toro has the opportunity to enhance its younger brand by partnering with established, traditional vineyards to create unique combinations of wine.
Yet it is critical that the company concentrate on limiting transportation costs. Although you mention that Concha y Toro bears its own shipping costs, I think that it would be possible to transfer some of these costs to the consumer, especially for the relatively premier vintages. The company could utilize more of a dynamic pricing model such that more expensive wines to transfer and more exclusive, highly rated vintages (e.g., wines that include joint ventures with Old World producers) are marked and sold at relatively high prices. Furthermore, the company should optimize shipments by combining deliveries and scheduling routes most effectively in order to bring down total transportation costs.

[1] Prial, Frank J. “Wine Talk; 2 1/2 Decades Later, A Very Good Year.” The New York Times, The New York Times, 23 Aug. 1994, http://www.nytimes.com/1994/08/24/garden/wine-talk-2-1-2-decades-later-a-very-good-year.html.