The future of retail looks like this: A customer walks into a store and a sales associate says, “Welcome back. We think you’ll like this product.” The product offered is chosen not only by using the consumer’s prior purchases but also by the store’s intelligent software. The software knows the product’s characteristics (including style, fabrication, color, design, fit, etc.) match what the customer likes.
The software is not using the kind of algorithm that Amazon uses to sell books (“customers who bought this also bought these other things”); it’s much more sophisticated than that.
It works the way Spotify recommends new music. Spotify looks at the many characteristics of a song and identifies how it compares to other songs, making its recommendations highly personal, targeted and effective.
The software I’m describing is the same idea. It identifies which characteristics of a garment are attractive to a consumer and recommends products that consumer is likely to purchase. In a way this is not an advancement, but a return to the kind of service you could get when your merchant knew you personally. It is the mass customization that internet has always promised but rarely delivered on so far.
To address the question of why this doesn’t exist yet, I went to the recent National Retail Federation’s Big Show in New York, the largest trade show for the retail industry. The exhibit floor of the show holds thousands of vendors who are offering technology solutions to retailers. To my surprise, no one is talking about using software this way, so I raised it in my conversations. Mike Webster, SVP and general manager at Oracle, told me flat out, “The software is there. The culture isn’t there.”
He is not alone in that opinion. Rob Armstrong, Senior Director Americas Marketing at Zebra Technologies, said, “I agree with that vision, the technology is there.” Stuart Aldridge of Columbus Consulting was a little more qualifying about it but he agrees, “the technology is there but it’s in its infancy.”
Is the fault then entirely with retailers? Steve Sadove, former chairman and CEO of Saks and former CEO of Clairol and all-around retail guru, told me, “This is…clearly the direction of the industry as part of the personalization transformation. This is where the business has to go.“ Here again, the experts agree. Katherine Bahamonde Monasebian, EVP and Chief Digital & Technology Officer at Barneys New York, told me, “That’s where we have to go. There are no other choices…The future is super, hyper-personalized.”
So if the technology is there and the retailers want it, what are we waiting for? Why is no one talking about this at the biggest display of retail technology of the year? I talked about that with another NRF Big Show exhibitor, Infor, on their corporate podcast.
In that conversation, Josh Calixto of Infor said we need to “ease into it.” He believes it will work better if consumers can choose to opt in or not to avoid the “creep factor” and the risk of scaring consumers off. He also likes the idea of introducing it with an alert on a customer’s phone rather than coming from a sales associate. Jenny Reese of Infor thought the right sector to start with is luxury because those consumers are open to personalization and luxury is where “the creep factor is lowest.”
But what about consumers who are repulsed when they see a retailer has and uses personal information? About that I have three stories.
The first is about a company called TrueFit whose CEO, Bill Adler, told me, “we’ve mapped the key fit and style attributes for the footwear and apparel styles that account for over 50% of the market.” But that’s not all. Adler added, “we’ve also mapped the style and fit preferences of nearly 100 million users who have opted in.” True Fit’s platform is now beginning to be adapted for the purpose I’ve described above. It uses artificial intelligence to match product attributes with consumer preferences, refining its recommendations with machine learning on three billion units of purchases and the returns of 540 million consumers. True Fit does not get access to personally identifiable information, only the retailer knows who the consumer actually is and that helps ameliorate the creep factor. It could be just a short walk from here to more widespread adoption of cross-retailer personalization for individual consumers.
The second story is about a company called Revolve Group, Inc. an online retailer of women’s contemporary clothing. According to its IPO filing, Revolve has up to 60 points of data on every garment it sells. Revolve uses those points to design its own garments with characteristics it believes will sell. Revolve then correlates the garments to consumers it knows will like those characteristics. Revolve creates its own brand names and sells its data-designed products using its own brands. Today, Revolve-owned brands comprise eight out of the top ten brands it sells. Revolve says it is turning fashion from “a predictive art to a data-driven science.” The company is doing just the type of personalization of products I described above and it is making its business better. The implications of what Revolve is doing online are enormous for consumers, the cost of returns, inventory management and ultimately, for higher profits for retailers. It also implies that retailers who don’t use a laser-focused personalization strategy will be left behind.
The final story is something I experienced recently after buying a new bicycle. Shortly after I bought it, the bike was recalled due to a faulty part. The manufacturer’s website said the fault could “result in a sudden loss of steering control while riding.” It asked customers to “please stop riding your bicycle immediately.” Neither the manufacturer nor the retailer contacted me about the recall. I found out about it through an article in my Google News feed from an obscure biking publication I had never read before. The consensus of the technology people I spoke to at NRF Big Show is that Google software might have read the bike receipt that was emailed to my Gmail, but it was definitely monitoring my shopping. All of that is creepy for sure. But it’s possible that Google News prevented me from having a serious accident. I don’t love being spied on but if it saves me from injury or worse I have to admit, I’m ok with it.
Where That Takes Us
We’re all creeped out when people watch our behavior surreptitiously. But when we benefit from it (and it’s not the government), we’re happy with the benefits and we accept it.
What it takes for a better vision of service to consumers is leadership. If you’re a big retailer and you talk about mapping the genome of your inventory and matching it to consumers’ tastes, you get resistance. But the future is coming and these changes will make retail stores worth going to again. Imagine: You go into a retail store and the things you want but can’t find on your own will be right in front of you ready to try on. Who wouldn’t like that?
Culture is the hardest thing to overcome in implementing change. As one senior technology executive said to me, “The problem is that our customers don’t invest with intent… [Their systems are] an accident of legacy that builds over time.” Retail is now under enormous pressure and the winners are not going to be the ones who cut their prices the most. Winners deliver what consumers want and will pay full price for. The smart money says that the vision above is going to happen. It is waiting in the wings for the right leaders to grab it and make it real.
Date: Feb 04, 2019