While I usually try to avoid anything even borderline with popular culture — as the last thing I want to encourage is rumour, gossip, or unfounded hype — I just couldn’t avoid this topic after coming across this recent article on CIO that did a great job of explaining why the “Oprah Effect” can take down the best supply chains because it’s a serious issue for any retailer who comes up with the next big thing.
The “Oprah Effect” happens when Oprah Winfrey picks a product, which is often a book, but sometimes a favourite thing like a cake or a robe, and advertises it on her show — and when it does, fortune’s are made or lost. When Florida Cake Maker We Take the Cake was picked as a favourite thing in 2004, it’s business went from struggling to thriving, but when Oprah declared her love for Kashwere robes, operations were overwhelmed and a lot of potential customers were turned away unhappy when they couldn’t get the product they wanted in time for Christmas. In extreme cases, it can even move markets. When she exclaimed that she’d never eat another burger again in 1996 on her episode on Mad Cow Disease and the cattle industry, beef futures plunged the next day in what industry experts called the “Oprah Crash“.
While an Oprah endorsement can delight a CEO and marketer, it can agonize a supply chain manager who needs to ensure that the product is available for purchase when a customer wants it. Even the largest supply chain can be strained under an Oprah endorsement, and even when it has early warning. For example, Amazon was stocked out of the Kindle within a week of Oprah’s October 24 endorsement of the Kindle and was subsequently out of stock for most of the 2008 holiday season.
But what’s really scary is that the Oprah effect may not be limited to Oprah much longer. With the rise of new super-celebrities on a regular basis and up-to-the-minute trend reporting on the internet, any celebrity’s praise, or disdain, for your product could have a serious impact on your supply chain — as the fashion industry already knows. If Jessica Alba or Angelina Jolie gets photographed in a hot new dress or blouse from a relatively unknown designer, whomever manufacturers the fashion line will likely be bombarded with orders … that they may not be in a position to fill rapidly. If a major actress like Kristen Johnson or Sophie Monk or Alicia Silverston strips down for PETA and denounces fur or, gasp, your fast food chain … you know sales are going to drop (at least for a while). And with celebrities like Beyonce Knowles, Jay-Z, and Brad Pitt almost as popular on the Web as Oprah, it won’t be long now before any top 10 celebrity has the power to cause an Oprah effect to your consumer-driven supply chain.
Are you ready? What’s your “ramp-up plan” in case demand skyrockets overnight? What’s your “disaster plan” if a quote taken out of context suddenly sends your sales — or stock — diving? Don’t know? Maybe it’s time to do some risk analysis and scenario planning and find out.