What Stitch Fix, Under Armour, NY&Co. and More Are Saying About Running Retail in 2016
Candid thoughts from top fashion, retail and technology leaders reveal pain points, lessons learned and winning strategies for connecting with consumers today.
Jessica Binns is a freelance writer based in New York City.
Stitch Fix on data science and men's wear: Founder and CEO Katrina Lake says she had an "epiphany" that much of the innovation in retail has been focused on how to get things to customers cheaply and quickly. "But when you have a Friday night date, you're not thinking about going on Amazon to find the cheapest dress," she notes. There's a lack of innovation in what people really want from the apparel industry, and while Stitch Fix is an e-commerce company, its inspiration results from "what brick and mortar used to be," Lake explains. The company uses data science to drive business decisions, and 100 percent of its sales are based on recommendations passed on from stylists to customers. For example, a stylist may know that a customer is going on vacation to Mexico and will love a fun new skin-baring romper, even though the algorithm says that particular item should only have a 25 percent chance of resonating with that customer.
What Stitch Fix predicts versus what actually happens in terms of customer sales is very closely correlated, Lake says — the tightest correlation chief algorithms officer Eric Colson, the former data science vice president at Netflix, has ever seen. Overall, the company employs 80 data scientists, 50 of whom hold Ph.Ds. "We have an implicit contract with the customer that giving up their data will make their experience better," says Lake. "We have to be careful to ask the right questions, because there are questions that would be helpful for marketing on our part but don't help the customer experience." Stitch Fix, which recently rolled out services for men, hypothesized that men and women are more alike in their shopping habits and preferences than was previously thought. "Men are now more fashion aware," explains Lake. "We were surprised to hear sentiments from men about what makes them feel hot, about ‘junk in their trunk' and ‘thunder thighs' [as pain points.]"
- Progress in payments: "Check in" is the new checkout, says Patrick Gauthier, vice president of Amazon payments. Thanks to innovative companies such as Uber and its seamless experience, the concept of checking out is disappearing. Explains Gauthier, some New York taxi drivers have had to run after customers who exited the cab without forking over cash or card — because Uber has "conditioned" them not to think about the physical act of paying. "This is transformative," Gauthier says. Meanwhile, PayPal's head of in-store products Chris Garnder says the lines between what is and isn't POS are blurring. The app from Subway, the sandwich restaurant chain, "isn't about checking out," explains Gardner. "It's about interacting and adding on more products and extras before you even get to the store."
- Under Armour on distributed commerce: With 165 million consumers spread over four platforms, Under Armour has a lot of users digitally interacting with its brands, says vice president of omnichannel and digital Sid Jatia. While Facebook has been very useful in driving activations for Under Armour, the athletic apparel company's Connected Fitness platform is probably its biggest distributed commerce channel, adds Jatia. Under Armour sources less than 5 percent of its traffic from distributed commerce today. "That number will double automatically as the community grows from 165 million to 300 million," says Jatia. "We think it can reach 20 percent." For Millennials, distribute commerce says, "If you love something, you can have it now." Transaction is second to engagement for these consumers. "Commerce can't be about selling," explains Jatia. "Selling is subordinate to building desire. The transaction is about enabling that desire." There's a lot of pressure from Wall Street to figure out how e-commerce factors into these potentially lucrative fitness communities. "We can't put a giant commerce store in the middle of your workout app," Jatia notes. "It makes no sense in terms of context and desire." Under Armour has come up with injury prevention innovations with its shoe tracker, which monitors when it's time to replace your sneakers for maximum performance. "To be your partner in crime to get the most out of your workout — that's the role of the brand," concludes Jatia.
- How to reinvent returns: "To categorize returns as a commodity suggests there's no room for differentiation," says Happy Returns CEO and co-founder David Sobie. "[Returns management] is the next competitive battleground for differentiating service." Todd Everett, CEO of Newgistics, says the "cognitive load" of figuring out returns can overwhelm consumers because every retailer has a different policy and process. "Those small changes from one retailer to another is a lot for shopper to process when you shop multiple sites," he says. The number-one customer complaint when it comes to e-commerce returns? How long is takes for shoppers to get their refund. "There's no problem taking my money," Everett says of consumer sentiment around online shopping and returns, "but it takes 10 to 15 business days to get my money back." While he believes the idea of getting a refund on the same day that a return is made is a "long ways off," Happy Returns already provides "credit on the spot," according to Sobie. Adding a returns bar or kiosk to shopping malls would help to drive foot traffic, which has been steadily declining for years. Innovative returns services could redirect people away from the dreaded Post Office and back to shopping centers, Sobie explains. "because going to the Post Office doesn't solve the problem of, for example, jeans that don't fit. It gives malls the opportunity to solve the problem."
- Pinterest can help drive retail sales: "The vast majority of people who buy from retailers on Pinterest are new [to that retailer]," says Pinterest president Tim Kendall. With just taps taps to place an order, the company's buyable pins don't force a tradeoff between the user experience and the retailer's experience. Kendall also notes that visually driven social platform has identified some useful trends in its users' behavior. "We see people starting to plan for the holidays in July," he says. "There's an uptick that you can't see elsewhere." He also reveals that a number of users refer to Pinterest in store to help inform their purchase decisions, and pins that have location data associated with them can notify users that a store nearby sells products they like.
- New York & Company on taking control of the brand: "Our biggest challenge is with mobile and pushing out content live in a timely manner," says Paul Carroll, vice president of digital and e-commerce creative. "Zmags allows us to push content to the site in under four minutes. In fashion, where things sell out quickly, it's a powerful tool to update content and keep it live and relevant." With more than 500 stores, NY&Co. finds it's difficult to generate enough content to feed every channel, from social to e-commerce. It's also tough to control the spotlight and coverage your brand might receive. When the National Teacher of the Year award was given out by President Barack Obama, the recipient was wearing head-to-toe NY&Co. "You can't plan for that," says Carroll, "but you can react and tell stories around it." And when BeyoncÉ's "Lemonade" song took the world by storm, NY&Co. had a dress in stores for a few weeks that featured a lemon print and seized the opportunity to "craft a message" relating to the pop hit, selling a lot of product along the way, Carroll notes. As a "very promotional brand," NY&Co. has discovered that certain promos that are successful online tank in stores. "‘Shop more, save more' worked online but was a disaster in our stores," says Carroll. "We're learning from user behavior online." NY&Co. also is a finding a new customer on Zulilly, with whom the brand formed a recent partnership. "It's a clearance channel for us," says Carroll, "but hugely successful."
REVOLVE on catering to Millennials: Raking in $400 million in revenue annually, REVOLVE — which was started with $50,000 and self-funded for its first 10 years — serves a Millennial customer base that craves premium upscale products from micro labels and unique, hard-to-find brands, say co-founders and co-CEOs Mike Karanikolas and Michael Kente, addressing ShopTalk conference attendees. Millennials increasingly are turned off by big, mass-market brands. "Wearing the same thing used to be a social signal of ‘cool.' It's the opposite now," explains Kente. The Millennial focus today is on individuality, self expression and uniqueness.
REVOLVE believes strongly in testing a trend to see if it pans out and reacting quickly to the results. Taking risks in fashion is key, they say, but retailers don't necessarily have to take "big bets." For example, in the spring REVOLVE noticed that gown-like dresses with floor-sweeping trains that girls were wearing casually were trending for several weeks. Says Kente, "these girls are wearing silk gowns dragging on the floor, and they're posting on social media that they're going to a restaurant. They're inserting elegance into their daily lives." The co-founders say REVOLVE is different from traditional retailers in that while the customer is the "final word" for most merchants, the e-commerce company is nimble enough to take bets on what it thinks the customer will want next. "We didn't know the gown trend would hit as big as it did," Kente says. "We only need to buy enough product to get an initial read on the data." Critics questioned whether REVOLVE could market higher-end products to Millennials. Its average single-item sale price is about $150, while the average order value stands at $300. "Millennials value quality," Kente says. "The oldest Millennials are 36 and at their maximum spending power."
For REVOLVE, it's important not to have a private-label strategy, according to Karanikolas and Kente, which they equate to knocking off designer brands. "We build brands in house with our infrastructure to foster a deep emotional connection with shoppers," they explained, "and nurture emerging designers with a unique perspective that's filtered through our REVOLVE filter." The seven lines REVOLVE has helped to build have been "massive hits" and also sold through retail partners including Nordstrom, Neiman Marcus and Saks Fifth Avenue. In fact, seven of its 11 best-selling brands are these portfolio brands. "The top brands driving business are our private brands — customers are searching for them," adds Karanikolas, noting they're priced at or higher than the rest of REVOLVE's selections.
Meanwhile, Karanikolas and Kente have their own vision of what a brick-and-mortar store should be. "A physical space is not a place for a rack of clothes but should embody the brand, the experience and the lifestyle," they explain. "It's a place for consumers to have high-touch service, fun and socialization."
- JackThreads on Millennial men: Around 70 percent of traffic to JackThreads' website comes through mobile devices, says CEO Mark Walker, who doesn't believe "there's a strong future for brick and mortar." Still, when the e-commerce-only men's wear company opens pop-up shops, it reaps average order values that are as much as 10 percent higher than orders placed online. Admits Walker, who spent 15 years with GAP and Levi Strauss, "Offline is needed … to convey the brand experience."
Jessica Binns is a freelance writer based in New York City.