Why the Oprah Effect Can Take Down Supply Chains

What company wouldn't want the endorsement of Oprah Winfrey? You get your cupcakes, book or moisturizer talked up on her TV show or, even better, get chosen as a "Favorite Thing."

It's the stuff of dreams for brand marketers everywhere.

Like this one-time struggling Florida cake maker, We Take The Cake, which was picked as a favorite thing in 2004 and now has a thriving and expansive business.

But Oprah's Midas-like Touch can easily overwhelm a fledgling company-just ask execs at Kashwere LLC, where operations were overwhelmed after Oprah declared her love for their robes.

She can also influence entire industries, as she did in 1996, with her episode on Mad Cow Disease and the cattle industry that led her to exclaim that she'd never eat another burger again. The next day, according to one account of the legal saga that ensued, beef futures plunged, leaving industry experts to call this the "Oprah Crash."

The woman can move markets.

Oprah recently moved more markets in downtown Chicago, in her season-opening show this week. Her presence at the Michigan Ave. shopping district accounted for an approximate 10 percent net gain in shopper traffic from what would have been expected, given the shopper traffic trend on Tuesdays in August, according to retail data from ShopperTrak. (Any bumps in sales at those stores weren't immediately available.)

So while Oprah's Effect surely delights CEOs and the bean counters, what about the supply chain, forecasting, logistics and inventory managers charged with ensuring that product is always available for purchase or ordering? (After all, counting on an Oprah blessing to pump life into your business is like basing your retirement savings on winning the lottery.)

Winning the Oprah lottery can be a blessing and a curse-even at companies that have the best supply chains. Take the case of Amazon.com and the launch of Kindle, its e-book reader. According to a February 2009 Wall Street Journal article, Oprah's Oct. 24, 2008, enthusiastic endorsement of the Kindle ("My new favorite thing in the world") had an unsurprising effect:

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