I visited Banana Republic’s store in Union Square over the weekend. The mix of technology, smart back-end logistics, a personal shopping guide, and the irreplaceable in-store ability to touch, feel, and try on the items, resulted in an experience that will keep me coming back.
The store was uniquely clean, free of cluttered shelves, piles and piles of sweaters, shirts, pants, etc. A concierge greeted me and guided me (almost like a Bonobos Guideshop Guide) through my visit, prompting me to download the Banana Republic app, switch to in-store mode, log-in (I had purchased online before), and start scanning products. Once I scanned a product, I could find out more information, view suggested ensembles, read reviews, watch videos about the designer, etc.
I then picked a size by clicking a button and as opposed to carrying my clothes to the dressing room, I was assigned a room and the clothes were there waiting for me, delivered through a chute in the wall. When I wanted a different size, I requested one through the app. My concierge made some recommendations based on my past purchases, what I had already requested, and feedback I gave her, and those were also sent directly to my dressing room through the chute. I ended up trying on more clothing than I expected because my concierge made the experience personal. Anything I didn’t want, I just tossed in the ‘return’ chute.
The store didn’t have one item in a color I wanted, but it was available at another store nearby, and I was told it would be ordered, picked, packed, and shipped for free once I checked out. The inventory system was seamless across all stores as well as online. Finally, as opposed to waiting in line at the checkout counter, I just walked up to a tablet with credit card reader, scanned a QR code from my cart (similar to Walmart’s Scan and Go), and my items, including the shirt which would ship from another store, plus the total cost, were listed. I then swiped my credit card, got an immediate receipt within the app as well as an email receipt, and walked out.
-The store did what physical retailers do best: Allowed me to try on curated clothing and enabled me to interact with a knowledgeable stylist.
-The store didn’t do what typical physical retailers do worst: Have me search through tons of product to find the right size, lug clothes to a dressing room, tell me something is out of stock, and hold me up at the checkout line.
-The store did what online stores do best: Used technology to improve the user experience through automation and personalization.
OK, this trip didn’t actually happen because the store doesn’t exist, but if Hointer has it’s way, you could have a similar experience at physical retail stores in the near future.
At first glance, Hointer seems to be a smart take on retail. As I said in my previous post, the company has 1) changed the face of the typical physical retail showroom and 2) used technology to develop a more efficient way to shop. These two points are important, but they are the ‘cool’ part of the consumer story that the press has already reported on. The reason why I’m writing about Hointer is that there’s a grander vision behind the scenes which will permeate physical retailing over the next couple years.
Nadia Shouraboura, CEO of Hointer, sat down with me in her store at the Stanford Shopping Center to tell me more about the company. Nadia has a PhD in mathematics from Princeton, early experience (starting in 1994) looking at big data in retailing at Diamond (now part of PwC), and years of supply chain, logistics, and fulfillment experience at Amazon, where she was for 8 years before founding Hointer.
Nadia has put $10M of her own money into the business and has 3 stores up and running, the third one just opened in Seattle last weekend.
While the ‘cool’ consumer technology makes for a great story, here’s why Hointer is on my radar:
1. Hointer allows physical retailers to maintain the best parts of the in-store experience, ditch the worst parts, while adding the best parts of ecommerce.
2. Hointer is building what Nadia calls ‘micro-warehouses’ which we all knew were coming, but have had trouble implementing.
To the first point, Hointer wants to marry the technology, efficiency, unlimited inventory, and personalization of online shopping with the ability to touch and feel, try on, and instant gratification of shopping in a store. Hointer also enables stores to get rid of the worst parts of the physical retail experience like cluttered shelves, sales associates folding clothes instead of helping customers find the right outfit, lines at the register, etc.
A Hointer powered store can have a dramatically different look and feel because you don’t need all the inventory in the store. A single store can hold 1/5 of the inventory and possibly be 1/5th of the size of a normal store (think of the cost savings!) because inventory is accessible across all the locations and possibly the main ecommerce distribution center. If you remove so much of the product from the front of the store, Hointer opens up new creative possibilities for the look and feel of the space. That’s why the store in the Stanford Shopping Center feels so open, like an Apple Store.
The 3 Hointer locations could be thought of as innovation and learning centers, but don’t expect to see the Hointer chain coming to a mall near you. As Nadia explains, Hointer wants to help physical retailers innovate their in-store experience, not compete with them:
A physical retailer like Macy’s, for example, has something great and something inconvenient. We don’t want to touch what’s already great: the brand, selection, merchandising, curation, etc. We want to give Macy’s and others the tame technological edge as Hointer. We are going to work with other retailers.
We don’t see Hointer as a retail business, but a technology business. Keep the best parts of stores intact and add technology to make it better. What goes away is the bad customer and retailer experience. And creativity can go crazy if you take away the traditional look/feel, or mess, in many cases. We want to work with retailers who are passionate about the customer experience.
For retailers, I think one of the main draws of Hointer’s technology will be it’s ability to enhance the in store model. Some of the best in store experiences are from luxury brands with store associates who are experts at clienteling. Hointer has the opportunity to bring clienteling to the masses. At most physical stores, associates are often busy with displays, cleaning up fitting rooms, checking out customers, and don’t have time to talk to give advice. Through Hointer, this old use of associates should go away and associates can be re-deployed to increase conversion rate, average order value, and loyalty through personalization. Just as customers are using their smart phones, sales associates will carry tablets with tons of data. An associate at Gap or Macy’s or C. Wonder could know your name and what you’ve scanned, tried on, bought, altered/hemmed, etc. Associates can easily switch between the different customers, offer recommendations, and truly engage with customers.
As for the second point about the micro-warehouses, Nadia drew an apt comparison to distributed computing. Distributing the warehousing capabilities – picking, packing, and shipping – across store locations, not just one main warehouse, can dramatically impact efficiencies for the retailer and improve satisfaction for the consumer.
The technology Hointer has developed to deliver jeans, shoes, or sweaters to the chute in the dressing room can be used to pick, pack, and ship products. Some stores are already moving in this direction. At Internet Retailer this week, Jason Merrick, Director, E-Commerce, Peter Glenn Ski & Sports discussed the intricate operations process of shipping from his stores. Peter Glenn Ski & Sports has actually been doing this for 7 years. Other retailers I talked to know that they need to do this, but haven’t been able do surmount the various technical and logistical hurdles. A conversation I had with MIRCOS Retail echoed this sentiment as one problem retailers have is that disparate systems don’t always play nice with each other. Micros obviously offers a nice solution to the problem and has a huge physical retail footprint to leverage. This will make Micros a force to be reckoned with as consumers demand a seamless shopping experience.
We’ve all been at one store which was out of stock of an item and a store associate called another store to see if the item is in stock at the other location, and if it is, to hold it for the customer. With Hointer, the customer can see inventory across all stores as well as online and easily place the order for the item at another location through an app. Through the micro-warehouse model, a customer has access to inventory potentially only seen online. This is the world we’re moving towards and retailers that can’t deliver this seamless shopping experience will disappoint and potentially lose customers.
Beyond delighting customer, though, the micro-warehouse scenario is also an opportunity to drive sales. Urban Outfitters said on its Q1 earnings call that it shipped $9m of product from stores during Q1. And Urban Outfitters thinks it would have lost some of those sales as the inventory wouldn’t have been available at the warehouse if the customer tried to order online. By hooking up inventory across all channels, Urban Outfitters is not just creating a better experience for the customer, but making more money:
The pick, pack and ship initiative that came online last year accounted for approximately $9 million in additional business in the first quarter, and we’re pretty pleased with that,” he said. “Yes, it is costing us a little bit extra in terms of staffing and supplies in the stores, but we feel that it’s more than made up for by the fact that, that $9 million, most of it would not have been shipped because it would have been out of stock in the distribution centers.”
While stores ranging from Peter Glenn Ski & Sports to Urban Outfitters have already taken the leap with in-store shipping, they are in the minority. After hearing all about mobile penetration this week, talking to dozens of retailers, testing out Google Shopping Express & eBay Now, and reading about Amazon Fresh’s expansion plans, serious retailers need to pay attention to shifting consumer demands and commit resources to figuring out the technology and logistics of this new personalized and on demand physical retailing reality.
*And possibly elves – see my last post.
