Target's release of the Lilly Pulitzer fashion line has been at the forefront of the retail news this week. We asked our CORe bloggers what they might have done differently if they were in Target's shoes prior to the launch.
This past week, Target planned on introducing a limited supply of the popular brand Lilly Pulitzer at discount prices online and in stores. What they didn’t plan on was the circus that would follow, as Black Friday-like lines started forming outside of stores the night before and their site nearly crashed before the items became available, delaying the start time.
#LillyforTarget West Coast Head for home stuff not the clothes, racks were empty in 5 min. #LillyforTargetForHyenas pic.twitter.com/kI1eefciqR
— Loren Boyce (@amzbls) April 19, 2015
Based on my learnings of these concepts in CORe, if I were in Target’s shoes I would have tried to estimate demand better. Target should have known that when you lower the price of items, the quantity demanded increases because more people are willing to pay for the items at those prices.
When you lower the price of a $200 dress to $30, this is akin to adding lighter fluid to an already growing fire, with this collaboration. Now you include many more people whose (WTP was between $30-200), that now want to purchase the product.
Target wielded many classic strategies used to increase demand, such as advertising and decreasing prices of complements (clothing accessories) while increasing their availability. Because the alternatives (like the actual Lilly Pulitzer line) were more expensive, there was an increased demand for Target’s lower cost line of Lilly Pulitzer.
If I was Target, I would have done more than monitor social media to estimate demand. I would have sent an email survey to Target customers, Lilly Pulitzer customers, and other general consumers. This would have been a cost-effective way to gather a large scale data of consumer preferences. In Target’s defense, it’s difficult to assess demand since those items have never been sold before. In addition to the surveys, Target could have run a very small pre-promotion to the offering, to get some sort of sense of demand.
Target also could have raised the prices of the line, trying to find the revenue maximizing price, although this would be inconsistent with their brand of bringing shoppers “national-brand (or better!) quality for less (usually a lot less!)”.
On a graph it would look like a low price, high quantity demanded, and low quantity supplied. Thus, producer surplus would be low and consumer surplus would be high.
Further exacerbating the issue, some customers who bought items later put them for sale on Ebay.
Ebay auctions are a cross between an open outcry auction format and a Vickrey auction format, and by introducing competition among buyers this effectively reveals customer’s true willingness to pay for the items.
On Ebay, the items ended up selling for 3x the amount Target originally sold them for. This not only infuriates customers who just want to buy the items at the prices Target set, but also makes Target look bad as some customers take advantage of the situation and profit off Target’s low-priced offering. Surely this was not Target’s intent.
While many say the promotion was still successful for Target because so many people were talking about the brand, if Target had simply put more thought and time into assessing demand, they could have avoided the backlash by adding a few more items to the line to ensure items were available for a bit longer.
That way, people like my girlfriend who waited up until 2 AM ET and then went to bed and got up at 6 AM ET to looking to shop wouldn’t have been disappointed, met with only the dreaded “out of stock” sign on every page and no one to answer the customer service line, inundated with many other callers.
There has been a lot of buzz in both the business world, and the general world, about Target’s new Lilly Pulitzer summer wear collection that sold out in minutes – if you want some entertainment watch videos of it on YouTube, people were going nuts cramming clothing into shopping carts as they pushed others out of the way.
To me, it looked kind of like a scene from the Lion King…Circle of Life anyone? (Pun intended).
(source: http://a.dilcdn.com/bl/wp-content/uploads/sites/2/2013/06/SCAR-GIF.gif)
For those of you who haven't seen the movie, this is Scar singing his famous ditty, “Be Prepared”.
One of the most interesting things to me about this whole debacle is that there are so many concepts that I have learnt from all of the modules in CORe that are directly applicable to this Target scenario.
I can now think through the post-fiasco reactions and the pre-“success” thinking and have insight, suggestions and understanding and that is cool!
Supply and Demand. This is the underlying driver in the Economics for Managers course. CORe dives into additional concepts like consumer Willingness To Pay, supplier Willingness To Sell, optimised pricing and more, but the tenant that all of these rest on is supply and demand.
Target claims to have been very closely tracking social media for interest surrounding their Lilly Pulitzer launch; they did their research, they ran the numbers, and they got it seriously wrong.
What didn’t they take into account during this initial sizing of the demand market that could have made a difference for them? Did they look at historical examples of other specialty line launches that Target had run? Did they look at competitor scenarios? Did they take into account what competitors were or were not launching in a similar time window? Did they research Lilly Pulitzer’s sales and the market affinity towards Lilly Pultizer?
The interesting thing is, I bet that Target did research all of those things, they just didn’t end up with the right conclusion.
One of the things that CORe will teach you is that each discipline has a great deal that needs to be accounted for and that a lot goes into it. There are so many factors and relationships between these factors that play into every outcome and it is hard to get it right. That being said, it is possible to get it right if the correct mix of people, education and work is put together.
There are many other CORe teachings that factor in this story, secondary markets, optimised pricing, focus groups, the demand curve, elasticity of price, I could go on, but I will spare you. My real point is, if the Target team had just gone through CORe would they have made the same choices? I like to think maybe not.
