Retail is one area under severe pressure to respond to the transformative changes driven by Mobile Cloud and other digital tech. The pain point is that traditional retail is directly challenged by ecommerce, a challenge that can no longer be ignored.
This has led to a great deal of interest in “Omnichannel” Marketing, as well as other innovations. One innovation that particularly interests us is the combination of technology with “curated retailing,” especially as practiced by a young company, Stitch Fix.
Ecommerce – Eating Away at Retailing
According to the latest U.S. Commerce Department data, ecommerce sales reached $340 billion in 2015. This represents about 7.3% of total retail sales of $4.7 trillion (when restaurants and most auto related items are excluded.) The penetration number is even greater if the comparison is limited to only categories of items that are sold online – according to Macquarie Research only about $2.5 trillion would be included in the total retail sales – making the ecommerce penetration over 8.5%.
Ecommerce is forecast to increase to about $590 billion, or nearly 11% of overall retail sales, by 2020 (per an eMarketer forecast.)
“Omnichannel” to the Rescue
Omnichannel marketing is the most discussed trend in retailing. Omnichannel refers to trying to influence the consumer both online and in the real world, at the store. Mobile is obviously a huge constituent in the online area.
A recent study, “The 2015 Omnichannel Retail Index” (the ORI) provides an ongoing assessment of retailers’ progress in implementing “omnichannel” techniques. The ORI is published by the National Retail Federation (NRF) and digital commerce consultants FitForCommerce.
The ORI analysis concludes that retailers are making some progress in adopting omnichannel. It points to trends in mobile, such as:
- 86% of retailers in the index provide a shared shopping cart from mobile to desktop, up from 84% (December 2015 versus September 2015)
- 77% offer mobile-optimized email, up from 55%
Omnichannel – An Evolving Concept
Omnichannel includes a wide range of techniques, not just whether a retailer has an up-to-date web presence, or is actively addressing mobile. For example, the ORI study contains survey information on a very wide range of practices, such as:
- Ability for a customer to refine search results on a category landing page
- Store availability look-up on either a category landing page or a product detail page
- Live chat on product detail pages
- Asking customers for email addresses at in-store checkouts
- Offers of free return shipping
- In-store interactive displays and kiosks
- Associates offering buy in-store, ship-to-home services
- In-store WiFi
- Associates offering to find an item online or in another store
MobileCloudEra is interested primarily in how technology and marketing practices are coming together to offer new solutions – and pose new threats – for retailers.
Technology applied to marketing offers new aspects to the concept of omnichannel. An impressive example is in the area of Curated Retailing and the approach developed by Stitch Fix.
Curated Retailing: Stitch Fix, Fashion + Technology
Curated Retailing is one omnichannel innovation that cuts across the distinctions in online versus in-store. Curated refers to a consumer having shopping advice from a person who may be an expert, or at least highly familiar, in the product area the consumer is interested in. (Curation has also been extended to consumers sharing in choices made by celebrities.)
Curated shopping is not a new concept; it goes back many years. However, what is new, and highly interesting is the blending of computer software, mobile and cloud capabilities, with human assistance, to provide a curated service.
One company that stands out in this regard is Stitch Fix. The company, which started in 2011, has offered a service to women shoppers which involves supplying clothing and accessories that are curated by an expert stylist.
While there is human expertise used in the choices, it is heavily supplemented by software analytics. The company’s senior executive ranks notably include, in addition to a CTO, a Chief Algorithms Officer. The company boasts something like 50 people working in its data science area. The objective is to use computer-based analytics to refine the likely best choices in clothing and accessories for a given individual. This involves a process that includes data input by the customer as well as data gleaned over time from the individual’s history of choices of clothing and other items.
The service works as follows: The consumer starts by providing input to a questionnaire from Stitch Fix, used to develop a “style profile.” The consumer pays $20 as a “styling fee” per order, or “fix.” Each time they order clothes or other items they receive five selections to choose from. The styling fee is applied against purchase. If they purchase all five items, they receive a 25% discount. Stitch Fix currently offers an iPhone app, for mobile access and connectivity.
Stitch Fix has shown an impressive ability to scale its operations. It uses a force of expert style advisers, reported to be about 2000 or more in number. Its revenues (not reported by the company) were estimated at over $200 million in 2015 (by Re/code). The company has raised $47 million from venture investors.
The company’s business was built on providing clothing choices for women. However, in 2016 they inaugurated a pilot of a service for men that they plan to roll out later in the year.
It should also be noted that the tremendous amount of data that the company accumulates about consumer tastes and choices can be very valuable in the future in shaping new styles and products.
Regarding the overall issues in retailing, we regard retail as a classic case for observing the transformative impact of Mobile Cloud on established, entrenched companies. In retailing, the threat to these players is more direct than in most industries, where entrenched companies can resist the technology wave. Retailing, by contrast, faces the immediate impact of ecommerce.
It has been noted how slow, even tremendously astute companies, like Walmart, have been to react to the new technological realities.
We find a situation like Stitch Fix to be particularly enlightening. Major retailers could be taking a more active role in curated retailing and some are, notably Nordstrom. However, it should be noted that curation historically has no necessary relationship to technology and many curated services are based only on the human guidance. It is predictable that in the combination of tech and human expertise, nimble, innovative, emerging companies, like Stitch Fix can be expected to lead the way.
We recently featured an article on another company that is combining computer-based analytics and human-based knowledge, Spare5, in a different type of application, data filtering. Both Spare5 and Stitch Fix are interesting as case studies in the “sharing economy,” i.e., rewarding broad numbers of people, thousands, for their skills, which might be called on for specific occasions (like Uber).
They are also interesting because we are convinced that it is the interaction of human intelligence with machine-based analytics that will power more and more profitable use cases in the Mobile Cloud Era.