Saturday, February 18, 2017

Game Theory: Stores Dumping Ivanka Trump

I was thinking about the whole Ivanka Trump brand being dropped from stores.  Nordstrom recently dropped the Ivanka Trump brand and said:

We’ve said all along we make buying decisions based on performance. We’ve got thousands of brands – more than 2,000 offered on the site alone. Reviewing their merit and making edits is part of the regular rhythm of our business. Each year we cut about 10 percent and refresh our assortment with about the same amount. In this case, based on the brand’s performance we’ve decided not to buy it for this season.
Some, such as the President, think the issue was political and not based on sales.  But using some game theory logic, I think it's very likely the case was sales related.

Assume there's only two groups of customers before the election.

A) People who like Ivanka Trump Merchandise
B) People who dislike Ivanka Trump Merchandise

It's almost certain some percentage of non-Trump supports would stop buying brands that were associated with Trump.  These people come from group 'A'.

The question is, for the customers lost in group 'A', would other customers make up the sales difference?

If you're an Ivanka Trump fan and a Trump supporter from group 'A', it's unlikely you can makeup the difference.

Hypothetically, lets say you have two customers, each who loved the Ivanka Trump brand and bought 10 outfits from her in the past.  Going forward, one customer says she'll never buy Ivanka Trump again but the other really wants to support Ivanka Trump going forward.  Will the Ivanka Trump supporter buy 20 outfits in the future to offset the loss from the other customer?  Unlikely.  She might be generous and up the purchase amount to 11 outfits, but that's it.

If there were way more Ivanka Trump supporters than non-Trump supporters, perhaps the Ivanka Trump supporters could make up the difference.  But given the split in votes in the election, it's not likely.

To make up the difference, you really need customers from group 'B' to make up the difference.  However, if you didn't like Ivanka Trump merchandise from the start (i.e. it's style, it's fit, don't need that type of clothing) it's unlikely you'll ever flip over and start buying it.  There may be a small few that decide to flip over just to support her for the sake of supporting her, but it's hard to imagine that group being large enough (i.e. most people will not buy something they don't need or won't use).

If Ivanka Trump merchandise were some general clothing commodity needed by customers (i.e. tube socks, underwear), you might be able to make the argument people could switch over.  But given it's supposed to be a lifestyle brand, it's hard to imagine the switch happening.

If Ivanka Trump merchandise were a major "destination brand", such as a Coach, Michael Kors, Kate Spade, etc. her brand could perhaps weather the storm temporarily.  Unfortunately, she's not in that category yet.

Update 2/23/17:

It seems that Ivanka Trump perfume has shot up to a top seller on Amazon.  This is perhaps the perfect example showcasing the counterpoint.  As a single "commodity" item ("commodity" here meaning interchangeable), it has a chance to have sales even out or go up.  If you are a person who generally buys perfume, lets say one bottle a year, you can easily switch over if you hadn't bought Ivanka Trump merchandise before.

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