Industries around the world are abuzz about the untapped power of big data. The sheer volume of information available – about 2.5 exabytes (that’s one billion gigabytes for all of you fellow non-techies) of data created every day, an amount expected to double every 40 months – is overwhelming, leaving many organizations scrambling to figure out what it means for their business. We have seen interesting applications spring up – everything from hospital ERs predicting patient volumes weeks ahead of official CDC reports by leveraging Google Flu Trends (analyzing location-based Google searches) to analysts predicting Macy’s Black Friday sales performance by pulling location data from the mobile phones of shoppers in the mall parking lot.

As a more than casual lover of fashion myself, I hear this and wonder what power big data has for the $200bn US apparel industry. Fashion is a fickle, trend-driven industry, where predicting the “it” color or silhouette can mean the difference between a wildly profitable season and piles of leftover inventory marked down at the nearest discount retailer. Designers today rely on little data beyond their own intuition and self-proclaimed knowledge of taste; trend consultants may provide additional color on macro-trends, but no one can accurately predict which fabric or cut is going to fly off the racks in middle America. Furthermore, the lengthy design and production cycle means designers have to sketch products 12-20 months before they actually reach a consumer in a store, yet the average trends lasts from as short as a month to a half year. Fast retailers like Zara have found ways to dramatically reduce this turnaround time (in part by copying designs off the runways), but the question for designers still remains: in such a high-stakes environment, is there a better way to predict consumer taste?

The answer, in my opinion, lies in big data. Much like Google Flu can aggregate scattered, disparate pieces of information to predict a health trend, big data (and social media in particular) has the power to unleash mountains of information about consumer tastes and habits – and where and how trends originate and spread across time. Fashion is an inherently social conversation, and the average shopper is increasingly gaining a stronger voice in shaping a dialogue about what is trendy. We see this with the rise of applications such as Pinterest, where users post self-made collages of images; many fashionistas have created followings by assembling collections of virtual “outfits” that other uses can click through to purchase. I think of this as the “democratization” of fashion; whereas before, wannabe fashion-savvy consumers had to look to the runways to dictate their fashions, they can now turn to the blogs and social media posts of their peers to see what is trending. Case-in-point: at Thanksgiving dinner last night, I complimented my roommate’s outfit, and she mentioned that it was inspired by a famous online fashion blogger – who, coincidentally, was college friends with someone else at that dinner.

This phenomenon represents both a threat and an opportunity for the fashion industry. In a world where random college bloggers exert more influence over the purchasing habits of consumers than high-end designers, fashion houses need to think about how they can harness this conversation. Designers have more data now than they ever had before. Best-in-class retailers today collect POS information about consumer demographics, or do rigorous competitive shopping analysis. Yet, even these methods seem archaic, because they are backward-looking – analyzing what is already in stores and already being purchased. With big data, designers can scan social media like Pinterest and Facebook to see what colors, styles, and silhouettes are most popular, and among which groups, before they become a “trend” with a capital T. They can track these styles as they move across consumer groups, to help them identify the early tastemakers. Imagine if a designer knew that the same group of consumers who were the early trendsetters for peplums were now talking about, say, chartreuse. They could follow the spread of this conversation, and plan their designs accordingly so that chartreuse was already waiting on the store shelves by the time the trend took hold.

EDITD, a London-based consultancy, is on the forefront of this trend. They analyzed 25 million social media posts about the Spring/Summer 2012 collections, releasing reports on the top designers, colors, prints, styles, etc. Their work seems too elementary to be a gamechanger yet, but I expect that many other designers or would-be consultants will recognize that they need to either get on the big data bandwagon or risk becoming detached and irrelevant to their consumer base.

Sources:

“Big Data: The Management Revolution.” By Andrew McAfee and Erik Brynjolfsson. Harvard Business Review. October 2012.

“Big Data: The Next Frontier for Innovation, Competition, and Productivity.” McKinsey Global Institute. June 2011.

“EDITD Uses Big Data to Map Fashion Industry.” Big Data Insights Group. October 15, 2012.

“How Big Data is Used by the Fashion Industry.” By Katie Smith. Big Data Republic. November 13, 2012.

“How Zara Grew into the World’s Largest Fashion Retailer.” By Suzy Hansen. New York Times. November 9, 2012.


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By now, all retailers know that digital marketing exists.  And by now, I would guess that a significant portion of them know that “digital” is more than just e-commerce, but rather social media and search with the goal of cultivating a brand, a loyal customer base and awareness. What is surprising is how slow luxury brands are to embrace this shift. Online ad network Martini Media revealed that luxury brands are spending only 31% of their overall ad budgets online (1).   The good news is that this is changing. Talk to any CMO or head of marketing at a luxury brand, and you will be hard-pressed to find one that does not reference “digital” as a key focus going forward.  What worries me is that many brands are not realizing that they have an entirely new consumer on their hands: the omnichannel consumer.  Nowhere is this more prevalent than in the luxury space, where aspirational loyalists and actual spenders help build up the brand mystique. Luxury brands need to cultivate a strong presence across channels to ensure that they grow their aspirational customers and strengthen their relationships with their existing consumers.

One aspect that luxury retailers need to optimize for is mobile. In 2011, 39 million Americans made at least one purchase via mobile phone (2).   We are seeing this trend in the luxury space as well; according to Aaron Shockey, the VP of Digital Marketing and Advertising at Neiman Marcus, mobile phones account for nearly 20% of their US sales, and 75% of their customers rely on digital channels when making a purchase decision.  Neiman Marcus is in fact embracing the omnichannel customer more than other department stores; while optimizing its online experience, it has created the NM Service App, which is being piloted in four stores, and is targeted to customers having information on their smart phones while in store. Another example of a pioneer in the omnichannel experience is digital wunderkind Sephora.  Heralded as a “Genius” by luxury think tank L2 when it comes to “Facebook IQ,” Sephora has also been able to channel the growth of their online platform to further develop their in-store experience and tie it all together.  According to Julie Bornstein, SVP of Digital at Sephora, the focus for Sephora digital now is looking at digital, in-store and e-commerce and looking at how they connect together.  This is immediately evident when you walk into some key Sephora stores (like the new Meatpacking location in New York), as iPads displaying interesting online features and allowing for comparison shopping are placed strategically around the store and iPhone check-out has become the norm (3)

 No luxury brand has generated such a buzz when it comes to marrying bricks with clicks than digital darling, Burberry.  Burberry has continually been ahead of the curve when it comes to embracing innovation in marketing and media compared with its luxury peers; whether it was launching on Instagram early or being a pioneer in an online sampling campaign on Facebook. The storied British brand took it up a notch when it recently opened its 44,000 square foot store in Regent Street in London developed as a physical expression of Burberry.com, fully immersing shoppers in a combined digital and physical experience (4).  From the tallest indoor retail screen in the world, to RDIF chips woven into apparel and accessories as well as triggers with bespoke multimedia content relevant to the products, Burberry is definitely setting the bar when it comes to servicing the omnichannel customer.

 To be sure, investing in the omnichannel customer takes a considerable amount of resources.  First, some luxury brands that have been afraid of diluting their brand by embracing digital marketing and e-commerce need to crawl out from underneath that rock.  Online is no longer a choice, it’s inevitable, and the brands that truly differentiate themselves will be the ones that elevate their customers via digital platforms such as social media and e-commerce.  Second, luxury brands that feel they are extremely successful when it comes to pure digital marketing and pure in-store experience are missing a key piece when they fail to examine how to integrate the two.  While this area may seem nascent now, consumers will respond very favorably to brands that spend the time and money unifying the experience across all channels. Countless leaders in the industry remind us that luxury is all about the experience, and there is no better way to enhance the experience than to innovate when it comes to the omnichannel shopper.

 

Sources

 (1) Mashable.com “What’s Next for Luxury Brands Online?”

(2) econsultancy.com “39m Americans made a purchase via mobile last year: stats”

(3) WWD, 9/26/2012, “A Look at What’s Pivotal in Digital”

(4) Luxury Daily, “Burberry unleashes tech expertise, heritage with most advanced brand flagship”

 

 


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I may have grown up hearing the paramount importance of location as it related to businesses, but when I recently heard someone utter the “location, location, location” phrase I realized that I hadn’t heard it in years. To my ears, it almost seemed backward to hear it as a significant consideration in business. As I thought about my reaction, I realized that this phrase has become alien for some key reasons: the recession and its impact on the availability of real estate, the success of e-commerce and multi-channel shopping, and the way people shop in terms of mixing “high” and “low” brands.

In 2008, with our economy in the throes of a recession, anyone could visibly see the shuttering of businesses and the increased availability of real estate. Real estate properties that ranged across the board be them closed, open-air, or strip malls, 10,000 square foot properties on 5th Avenue, or 1,000 square foot properties on Main Street, businesses that were looking for real estate had their pick. Finding the right location at the right price was no longer a problem for businesses that were still in a position to grow and expand. Even coming out of the recession, because base consumption patterns have arguably been altered, businesses are growing at a more controlled pace and not entering into leases that do not hold a very strong strategic value. Real estate is simply a buyer’s market at the moment and will continue to be in the foreseeable future.

A second reason for why the physical location of a business is no longer of supreme importance is because businesses have proven successful in the online world. Retailers across a variety of products, be it apparel, beauty, or electronics, are quickly seeing that their biggest “store” in terms of revenue can be their online one. Retailers are also learning to harness the power of the multi-channel, understanding that a customer who shops both online and in-store is overall a more profitable, engaged, and educated shopper. Inventory management advancements are now possible as retailers may run out of a product earmarked for the website customer, but can fulfill that online order by pulling inventory from a physical store, and the customer is none the wiser. This inventory productivity increase is an incredible source of profitability. Since customers have become much more comfortable buying online, as well as businesses understanding what makes for a successful online store, investing in the online can pay off dozens of times over rather than opening another physical location.

Lastly, because customers these days are comfortable shopping in a “high” and “low” manner as it relates to various products, businesses are comfortable going into different real estate properties than they previously would have considered. People recognize when it is advantageous to invest in high-end luxury products as well as where and when to purchase products from lower end or budget brands. It is also considered cool to know how to do so well and in a way where one cannot tell the difference. Since customers are comfortable going into Neiman Marcus and Costco in the same day, retailers are becoming increasingly comfortable entering real estate that is not specifically dedicated to a price point. This realization is working its way up the retailer ladder definitely starting at the bottom with non-luxury brands. Luxury brands are slower to act on this consumer insight because of fear of down-grading their brand or that their customers simply aren’t there. I’d argue though that the high/low buying patterns of customers should allay those brand-debasing fears.


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The number of online portals dedicated to the business of fashion has mushroomed well beyond what the virtual universe previously imagined as capable of harboring appetite for commercial viability. Today’s range of business models has come to encompass vanilla browse-and-check-out solutions, rentals geared towards deflating the oxymoron “affordable fashion,” nick-of-time offers and rewards, personalized style advice from professional fashion gurus, DIYs, community blogs…

Has the problem been solved though? Or is today’s online shopper merely being forced to wade through overwhelmingly crowded “Black Monday” equivalents of offers and information, in effect kissing a bunch of frogs before they find the style equivalent of their true prince charming?

In advising the flagship brand of a premier fashion publishing house working to transplant its print infrastructure into the online world, the following emerged as successful design elements of a robust online fashion solution:

Find Out What Scratches Their Itch

With the advent of features such as “like” on Facebook and applications such as Pinterest combined with traditional credit card spending pattern data, it is easier than ever before to get inside the mind of today’s shopper and find out exactly what they’re looking for. The online fashion world needs to greedily swallow this wealth of information and translate it into effective algorithms that power personalized recommendation engines. The goal – sophisticated and customized offers and advice that help the consumer attain fashion nirvana without trying.

Make It Special

Across each individual’s respective level of willingness-to-pay, the demand is one for personalization and customization. The individual user is supreme while blindly targeted mass fashion, rewards, and style advice are so last season.

Moreover, today’s fashion connoisseur seeks insider access to the fashion world – exclusive products, events and stylist advice. For instance, Neiman Marcus’ and Bergdorf Goodman’s Incircle rewards program provides exclusive tiered-level member benefits while Moda Operandi provides first dibs on fashion that is hot off the runway before it hits the stores. Leveraging burgeoning user preference databases, it is possible now to both – reward existing customers and convert prospects into brand loyalists by providing what they once deemed as purely aspirational.

Don’t Be A Late Bad Date

Today’s applications that enable us to pinpoint exactly where our target user is or what the next big special event in their life might be makes it possible to plant offers in a timely manner – be it an iPhone alert incenting them to march into the sample sale happening a block away as they’re ambling through a neighborhood or an email offering those irresistible killer stilettos before their anniversary. Play the game that matches the right offers with the right users at the right time.

Invite Their Friends To The Party

Whether they want to secretly imitate their friends or outrageously compete and outdo them, the community aspect is key as demonstrated successfully by sites such as StyleHive.com. Facilitate interactions across users by allowing them to share their fashion mantra on online forums, gain feedback from friends and users with similar preferences, and attend events together in a way to drive consumer engagement, making your site their fashion mecca.

While algorithm-based powerful recommendation engines will accomplish much of the heavy lifting to achieve the above goals, a discerning human eye that serves the right fashion recipe to the right user will never go out of style.


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The past few years have witnessed a wave of new fashion e-commerce models including flash sales, personal subscription, social merchandising, mass customization and collaborative consumption. However, which models are really here to stay? Are some models simply a gateway to traditional e-commerce?

The personal subscription model generally involves consumers joining a monthly club, completing a personal style survey, and selecting products each month to buy for a flat rate. Subscription models appear great for retailers as it ensures them a steady stream of predictable revenues. Subscription retailers also capture data on the tastes and size measurements of individual customers in order to deliver personalized product selections. This enables retailers to better manage inventory risk and allegedly drives customer loyalty. [1] Customer acquisition costs are also low and customer lifetime value relatively high as it often an effort for customers to end their subscription.

I am not convinced that this model, however, is in the customers’ best interests. Using Birchbox as an example, while $10 a month might not seem like a lot of money, it adds up when you are paying this amount every month and, often times, for years! Moreover, while the products are supposed to be “personally curated,” they rely on limited information and preferences that were filled out by the customer when they first signed up for the service. After receiving completely useless samples that I would never use, I finally ended my Birchbox subscription after months of actually wanting to do so. I am certain that there are more customers like me who realize that they are better off using the $120 they spend of Birchbox a year to buy themselves beauty products in reasonable sizes that they will actually use! We are basically spending $120 a year to receive free marketing materials and a cute box. Furthermore, Birchbox does not make it easy to cancel your subscription. In their FAQs, they say the following about opting out of the yearly subscription’s auto-renewal (a practice that I believe is incredibly unfair to the customer): “Yearly subscribers may cancel only during the first month of their subscription. After this date, yearly subscribers are not eligible to cancel their subscription. Yearly subscribers may choose to opt out of auto-renew by clicking the ‘Opt Out of Auto Renewal’ link on the Account page under Birchbox Membership Details. This link is available during the final month of your annual subscription. To opt out earlier, contact us at 877-487-7272. This will prevent your annual subscription from automatically renewing at the end of the year.” [2] And naturally, the auto-renew option is always ticked until a customer physically un-ticks it.

Other subscription models such as Beachmint, which includes Jewelmint, Stylemint, Beautymint, and newly added Homemint and Intimint, are relatively more lenient on the customer as they allow you to “skip” a month by opting out in the first five days of the month. However, they are not that forgiving. In Jewelmint’s FAQ, I noticed the following disclaimer, “If you do not select any jewelry that month and do not elect to skip the month, your credit card will be charged $29.99 and you will be given a credit to use for a future purchase on JewelMint.com. This credit is good for up to one year and may be redeemed toward the purchase of any piece of jewelry available in our collection on JewelMint.com at any time during the month.” [3] So not only do you not get refunded for forgetting to skip a month, your credits expire within a year! This seems more like work than fun to me.

When I was signing up for these services (purely to research for this blog), I noticed that the questions they ask you in the style profile that determines the products they present to you in your personal “showroom,” are very limited. There were times when I was given a choice of four types of looks and asked to choose which one suits me the most. I was not allowed, however, to choose more than one option or to select none at all. This leads me to believe that their selections are far from accurate and are not personalized at all. They fit consumers into narrow buckets and do not address the fact that most women do not stick to only one type of fashion profile.

I believe that consumers will eventually get frustrated with these subscription websites, resulting in their either having to pivot or totally close down. Shoedazzle, which launched as a subscription-based shoe sales site that delivered a pair of shoes every month for $39.99, got rid of its subscription model in April and adopted a more standard, pay-per-item e-commerce setup instead. While the CEO, Bill Strauss, insisted that this change was not indicative of a failing model, and was simply a way for the business to grow and appeal to a larger customer base, there is no way to confirm this as it is a private company. [4] Furthermore, this statement in itself implies that the growth of subscription models is limited. None the less, the original model did enable Shoedazzle to attract 10 million members, leading me to believe that the personal subscription model, and perhaps even other new innovative models, might simply be a gateway to traditional e-commerce.

[1] Business of Fashion, “E-Commerce Week – The Rise of New Business Models”

http://www.businessoffashion.com/2012/01/e-commerce-week-the-rise-of-new-business-models.html#more-28461, January 2012

[2] Birchbox, FAQ

http://www.birchbox.com/about/faq

[3] Jewelmint, FAQ

http://www.jewelmint.com/help

[4] betakit, “Are Subscription Goods Start Ups Hitting a Wall?”

http://betakit.com/2012/04/02/are-subscription-goods-startups-hitting-a-wall, April 2012


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