The Meghan Effect
As we dive further into operations planning and scheduling, I thought it would be interesting to research companies that are facing back orders, and what the causes maybe. I surprisingly had difficulty finding companies as such, but eventually I fell upon a small denim company named Hiut Denim, based in England. As you can see from the title of the article, Hiut has a back order waiting list for three months after Meghan Markle, who will soon become a member of the British royal family upon marriage to Prince Harry, was seen wearing the brand’s jeans for an official visit to Cardiff with Prince Harry in January of 2018.
Markle has created what is known as the “Meghan Effect”, quite similar to the “Kate Effect” or the “Amazon Effect”, by disrupting the fashion industry. Hiut Denim is located in Cardigan, Wales and due to its low local population of 4,000 inhabitants and little exposure, they are able to operate under a job process with low volume, low standardization, complexity, and detail. Because of their past experience and understanding of the operations, the owners of Hiut Denim know how to create their sales and operations plans. They understand how to achieve their outputs from their inputs, they have created the master schedule, including their master production schedule which details the number of end items to be produced in a specified period of time. But they could have never planned for the surprise they received in January. Unable to handle this unexpected increase in demand, Hiut has fallen behind and must now move into a larger facility and hire more workers to produce more jeans in a shorter period of time.
The “Meghan Effect” demonstrates how important it is for businesses to understand their sales and operations plans. Because of the job process structure, Hiut has a smaller safety stock than other stores with standardized processes would. Each jean is made with great detail given not only to the waist, but also the length of the leg, the pockets, and the overall fit and flexibility. This specialized process, where jeans are made to order, makes it difficult for a company to prepare themselves for the future. However, going forward I believe that Hiut should continue to increase its production and inventory on-hand, but also take the time to figure out forecasted demand. By doing so, they can estimate whether or not their revenue will outweigh the costs they are accruing to increase their operations. The “Meghan Effect” will soon move onto another store and completely leave Hiut in the dust, if Hiut Denim allows it to. It is important that businesses recognize how to use this exposure and continue to run with it. Hiut Denim needs to keep the momentum of high sales by continuing to work with high profile celebrities now that they have the spotlight. This is a new strategy they will need to adopt in order to maintain its recent success.
Now I would like to ask you, what other ways do you think Hiut Denim could remain successful? Have you seen this happen elsewhere in the world?
http://people.com/royals/meghan-markle-jeans-hiut-denim-co-story/
https://hiutdenim.co.uk/
This is a very interesting article and I had no idea that one person could have such a huge impact on a fashion retail store. I decided to do more research on the “Megan Effect” and I found that Hiut Denim is not the only store which has experienced an increase in sales after Megan Markle donned one of its jeans. Other fashion and accessory brands have seen an increase in their sales every time Megan wore one of their products. Some companies have actually capitalized on this opportunity by using the increase in sales to promote their charitable causes. For example, DeMellier London has made sure that each successive sale after Megan carried one of its bags to an event will help support the cost of vaccination for a child (https://www.townandcountrymag.com/style/fashion-trends/a15842273/meghan-markle-effect-demelier-london-mireia-llusia-lindh/). This increase in positive publicity will hopefully result in a consistent increase in sales for these fashion outlets. Some people have actually gone as far to predict that Megan Markle and Prince Harry’s marriage will give a boost to the UK economy just like the wedding of Prince Charles and Diana when the UK economy was going through a period of recession (https://www.ft.com/content/04823ad8-d39a-11e7-a303-9060cb1e5f44). Tourism industry is likely to get the biggest boost after the royal wedding.
Something similar in history that comes to my mind is Jackie Kennedy and Jack Roger Sandals. One can argue that Jackie was responsible for bringing incredible brand awareness and inspiration to the brand. The brand would not have been able to exist if it wasn’t for Jackie and her initial idea. From there, the company took off and has been very successful in the retail market. Now, Jack Rogers is a dominant force in the market with recognition all over. The company was able to capitalize off of their connection with Jackie, and plan their resources accordingly.
Regarding the “Meghan Effect” or the “Kate Effect”, I think it is important to point out how sporadic and random such an event can be. Markle could have been wearing any brand of jean that day which would have yielded a similar result. There is no real way for companies to foresee this occurrence and adjust their inventory appropriately. Accordingly, I do not really believe Hiut Denim is at fault for their poor job of delivering product. Being a small, detailed oriented brand, Hiut Denim focuses on well made, personalized products, which counters a high quantity, worldwide demand influx. In the future, I would recommend a small, custom brand like Hiut Denim to still keep some products in possession that would aid with severe back order. Doing so will help alleviate the “Meghan Effect” for the time being and allow for time to further produce and add to inventory to meet demand.
I am so glad you stressed the need for Hiut Denim to capitalize on their current success. So often celebrities will wear/use a company’s product once and demand will skyrocket for a short period of time before returning back to its previous level. Before Hiut decides to hire more workers and move to a larger factory they need to plan how they will retain customer attention and loyalty. In a recent article I read about the “Kate effect”, where the historical royal blue Issa dress sold out in a matter of minutes after Kate wore it to announce her engagement to William, the publicity actually ended up ruining the brand. The company was unable to afford production from the sudden and unprecedented popularity. With the surge in demand the company began to seek investors to help them keep up. The rotation of new investors and CEOs led to disruption and disarray within the business and 2 years later it shut down.
This isn’t just happening with clothes and the royal family it is happening all over the world with millions of goods and services and celebrities who endorse them. One recent “celebrity effect” comes to mind in the case of singer/songwriter Khalid and his big break. The young 20 year old was fresh out of high school when he began uploading his music to Soundcloud and by luck Kylie Jenner played one of his songs on her snapchat. Followers instantly became curious of the song and the singer’s popularity skyrocketed over night. Khalid’s fan base grew every day from then on and the rest was history. I hope that Hiut Denim can follow in Khalid’s footsteps as he was able capitalize on that moment of attention and turn it into a successful career.
https://www.vanityfair.com/style/2017/02/kate-middleton-effect-issa-engagement-dress
http://www.marieclaire.co.uk/entertainment/people/kate-middleton-effect-478732
https://www.economist.com/node/15810608
I think in this case, running out of stock isn’t seen as a bad thing for Hiut Denim. Normally, companies may experience customer dissatisfaction if a product runs out or they have to wait for that product. But for Hiut, the jeans running out proves to the customer that the jeans are very popular and stylish, which might make the customer more willing to wait for the jeans. One example I can think of is in middle school when UGG boots made a comeback, there were girls who waited months to get theirs in the mail just because they wanted to be like everybody else. In Hiut’s perspective, even if some customers decide against purchasing the jeans because they do not want to wait for them, it’s still good branding. Meghan gave them unexpected publicity, so they will be receiving a lot more visits to their website. Based on this knowledge, maybe they should relook at the safety stock of other items that might appeal to the same customers as those who were going to buy the jeans. This article talks about how beneficial the “Meghan Effect” is as a marketing tool for the fashion brands she wears.
^^I forgot the article https://www.ft.com/content/c54cc866-d5f0-11e7-8c9a-d9c0a5c8d5c9
Marshea, great find with these articles. They are very topical with what we have recently covered in class. It is very difficult to forecast demand for a small denim company when a strike like the ‘Meghan’ effect occurs. While reading your response how could a company such as Hiut Denim predict such an increase in demand? What effect does Markle truly have on their customers? And did this trend of increase in sales spread worldwide?
Kudos to Huit for planning ahead. As we have touched on in class, they created a master schedule and forecasted demand directly after Meghan Markle wore their jeans. Headquartered in a town with only 4,000 residents, a company like Huit can only dream for this free publicity. Arguably the most recognizable face in their country is sporting Huit product.
Obviously, their quality and attention to detail has Markle’s by the hip, I would continue to specialize each pair of jeans and hike the price after the increase in demand. Mass producing at a lower cost and quality would diminish from the appeal that drew the next member of the royal family to their product.
I think this kind of “effect” is very interesting. A lot of companies often pay big money for this kind of exposure. This trend in particular dates back hundreds of years even! Queen Victoria hosted a lavish ball where everyone in attendance was required to wear a certain type of silk, made by weavers in the city of London.(http://www.radiotimes.com/news/2018-03-28/did-queen-victoria-really-throw-a-costume-ball-to-help-the-spitalfields-silk-makers/) Albeit, her point was to help directly boost the business of a failing industry that was losing money due to outsourcing, it caused a similar reaction to what we witness with Meghan: too much demand and not enough to labor or supplies to meet it resulting in huge back orders. Having your product on a royal arm is clearly all that is needed to boost business.
It is interesting though, that these companies can never really forecast the demand that comes as a result of this decision. As we have been talking about in class, clearly, there is often a disconnect between a perfect estimate and reality when it comes to demand.
Interesting post Marshea! The Meghan Effect is something that I have never heard of before but it seems quite interesting. The fact that one celebrity wearing a pair of jeans can lead to a three-month back-order is astonishing. Huit denim should definitely take advantage of this boom. Custom fit jeans are a highly sought-after commodity, with few companies offering the flexibility in sizing as it seems Huit does. Nonetheless, it is impossible for companies to know or plan for when a celebrity will shine the spotlight on one of their signature items. Hiring more people and moving to a larger facility in order to decrease the production time is a good step for Huit to take because they want to maintain the customer base that Meghan has sent running their way. Additionally, they will also need to increase their orders of inputs. They may need to make more orders instead of standard lot size orders so as to efficiently plan for the future sales without having to pay more in holding costs. Huit Denim should probably adjust their master schedule because regardless of whether this sudden fad dies, Huit will have more customers who demand shorter production time then they have been used to. And as a previous comment stated, Huit denim got this exposure for free! To not take advantage of it or follow up with something else would be a terrible management decision. And lastly, this sudden increase in production may increase costs in the short run, but a way to get around this would be for Huit to also provide a “generic” style that is quick to make and cheaper. Doing this will take some of the pressure off of the resources and people that are used in producing the jeans.
Huit Denim will obviously have to plan for an increased number of sales by ordering raw material in excess of normal orders to meet the extra demand. This is a crucial period for Huit Denim because the increase in demand will reveal a lot about Huit Denim’s ability to expand its operations and meet the customer demand. If backorders continue to build, they will see declining customer satisfaction as well as declining future sales after this brief fad. Huit Denim can capitalize on this opportunity by increasing its on hand inventory and fulfilling is backorders without sacrificing quality. Huit will also probably have to reevaluate its EOQ based on the new demand. Because Huit Denim produces its custom jeans in a made-to-order fashion it has an inventory of raw materials but no inventory of finished goods. Huit can streamline its operations so that as soon as a pair of jeans is made for a customer, it is immediately shipped to the customer, but the cycle time cannot be reduced without a change in processes. In order to decrease backorders, Huit can increase the prices of its jeans to reduce the quantity demanded while also increasing revenues. Usually demand for a trendy item is inelastic as people have unrealistic expectations and distorted perceptions of the value the fad item will bring them, so people will pay exorbitant prices to get the item. Also, Huit could potentially make an anticipation stock of jeans that match the most frequently ordered size/dimensions of jeans. However, this increases the risk of holding onto excess inventory and wasting valuable materials and warehouse space, especially if holding costs are high. Any sort of fad, such as a fidget spinner or crocs, will put stress on the operations of the manufacturing firm. A mature master production schedule can help a company weather increased volatility in demand.
I haven’t kept up with the Royal family very much, but after reading the article, the Meghan Markle effect is very real and I’m surprised. In terms of planning and forecasting, no brand always knows that a celebrity or influential person will wear their products. Often, stylists will source clothing from everywhere, whether it is from the designer directly or through intermediate retail partners. This could be potentially a reason why the Welsh brand now has three months of backorders from not realizing that Markle would showcase their jeans. I think it could be worth the effort if Hiut Denim could have carefully tracked their customers, so if a buyer or stylist for Meghan could have been identified, inventory could have been prepared. Of course, this isn’t always easy to identify. And I’m sure that the royal family and its connections are careful to remain clandestine. Interestingly, there was a scientific paper published about a complex model in determining customer’s perceived value for a brand, and the product attributes it has. Going forward, Hiut Denim could predict customer’s perception using this diagram and continue to expand from the Markle effect.
https://www.sciencedirect.com/science/article/pii/S0895717710002979