Was Target's Missoni mob predictable?

The fantastic response to Target's launch of a designer clothing line from Missoni on Tuesday may have looked to the outside world like an enormous success. And as a publicity stunt the Missoni incident was a big win. Images of customers storming stores and sold out shelves made the news. Target's stock went up 2% that day. But it was, in fact, a disaster because the company was unable to fully capitalize on events.

Target's first mistake was that it massively underestimated demand, leaving money on the table as stores ran out of stock. Some of that pent up demand it may recapture in the coming days. Some will have simply evaporated.

Its second error was not having e-commerce infrastructure that could deal with the unexpected spike in demand. The customer stampede into its online store, which came as customers rushed its brick and mortar outlets, took the retailer's Web site down for most of the day. In so doing, it killed not just the day's potential online sales of Missoni merchandise but those of thousands of other products as well. That was preventable.

On Good Morning America commentators implied that maybe the Web site going down wasn't such a bad thing, since it drove more customers into Target's brick and mortar stores, creating an even bigger frenzy on which television news cameras could feed. But the stores didn't need the extra customers. The big boxes had crashed too, overloaded with customers and out of stock on Missoni merchandise.

Lucky shoppers who got the swag early on quickly established a secondary market on eBay and Craigslist, where they resold items. Their customers were no doubt other frustrated Target shoppers. Those sales should have belonged to Target.

Short of bringing in The Amazing Kreskin, could Target have better anticipated demand?

Possibly. A Target spokesperson interviewed by NBC said that Missoni stock was ordered based on its history with previous collections.

But Target was dealing with something new: An influential high-end designer brand with an all-new line for Target's more value-oriented buyer. It was an all-new fashion line -- one for which there was no historical data upon which to draw when making predictions.

Traditional predictive analytics doesn't help if the historical performance of previous collections can't be used as an input. More advanced retailers, who shared their own experiences this week in the art vs science of predicting fashion winners, take a more sophisticated approach: They look at the attributes of a given fashion, such as the fit, color, fabric, texture, the pattern (such as Missoni's trademark zig-zaggy designs) and look at how each has done historically. Is it trending up - or down? Then they combine those attributes to create a demand forecast for the product.

In this case, however, the brand clearly influenced the demand. Target might have gotten a finger on the pulse of demand by making use of social media analytics. For example, First Insight creates online social network games and other interactions and then assesses the "predictive relevancy" of each participant to gauge valuations and sentiment toward a brand or fashion item in real-time (for more details see the story link above). "The application can be used to determine high fashion items where there is very little history," says president Greg Petro.

Another vendor in this area, Crowdcast, uses a crowdsourcing model to make better decisions by allowing employees to "bet" on winners. The predictions of those who win more over time are given a greater weight. The idea here is to break down the silos: the opinions of multiple buyers will be better over time than that of just one, and associates on the store floor may be more in tune with what will sell than a cadre of buyers back at corporate.

There's just one problem with using these techniques in this situation, says IDC Retail Insights analyst Greg Girard. "They don't do well when the fashion is affected by a cultural event."

"When you have very little data and need to make big decisions, that's when you need expertise in there," says Mat Fogarty, Crowdcast's founder and CEO. But, he says, it's also an area where collective intelligence could have helped influence those decisions. It very well might have given Target a heads up that demand might be much stronger than it anticipated.

As an analytic tool, data from social networks offers real-time assessments of consumer behavior that can complement the historical insights brought forward by traditional predictive analytic techniques. "These social tools are in the process of reshaping the nature of many knowledge-based roles, merchants being one of them," Girard says.

Events such as Target's tumultuous Missoni line launch will only serve to hasten the rise of what he calls "the social merchant."

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Copyright © 2011 IDG Communications, Inc.

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