E-tailers are collecting data to predict what you’ll like – and boost sales.
Katrina Lake, right, chief executive of Stitch Fix, a women‚Äôs clothing retailer that sends clients boxes of clothes picked by a combination of personal stylists and big data, with Brittany Busacca, styling manager, at the company's headquarters in San Francisco, Aug. 12, 2014. The business is one of a handful of start-ups making aggressive bets that highly personalized online shopping can deliver a better e-commerce experience.(Peter DaSilvaThe New York Times)
Katrina Lake is staring at the ceiling, trying to remember the last time she bought clothes in a store.
Lake is impeccably dressed, in crisp navy pants, tan sandals and a semi-sheer white cotton top. Simple bangles and an elegant gold necklace top off her look. She obviously shops, but in recent years, all her clothes shopping has happened online. She thinks others are ready to shop online just as much — they just need a helping hand.
That is why she started Stitch Fix, a women’s clothing retailer that sends its customers boxes of clothes that are picked by a combination of personal stylists and big data. It is one of a handful of start-ups making aggressive bets that highly personalized online shopping, in which sites choose items for you based on your preferences and their algorithms, can deliver a better e-commerce experience.
Trunk Club, for example, is similar to Stitch Fix, but it is for men and is more expensive. Club W tailors wine to its monthly subscribers, who fill out a “palate profile” when they sign up. And Birchbox, a beauty store, delivers monthly installments of sample-size goods tailored to your needs for $10 for women or $20 for men.
“At a mall or online, the choices are overwhelming,” Lake said. “Then if you buy something and you want to return it, it takes a long time. People just expect a more personalized experience now.”
The sort of shopping offered by Stitch Fix is still a tiny slice of the overall e-commerce pie, which the research company eMarketer predicts will increase by 20 percent in 2014, to $1.5 trillion globally. With this kind of rapid growth, many tech entrepreneurs see room for opportunity, and some traditional retailers are picking up on the trend, too. Late last month, Nordstrom said it had agreed to buy Trunk Club.
With these new personalized shopping sites, the magic comes from data. The sites learn about you and then compare your information with profiles of thousands of other people like you to predict what you might want to buy.
People using Birchbox tell the company their skin color, hair type, age and favorite types of products, for example. The company compares that information with other profiles, sees what those people are most likely to buy, then fills a box with beauty samples that match those preferences. Full-size versions of the products can be bought on the site.
Stitch Fix hired Eric Colson, its chief analytics officer, from Netflix, where he was responsible for TV and movie recommendations based on what customers previously watched. A computer program used by Stitch Fix helps filter a huge catalog of clothing and accessories.
The program then matches items to a separate, and huge, collection of information about people, including their sizes, shapes, color preferences, style habits and current trends.
“I think there’s way more data science at work here than people may realize,” said Bill Gurley, a general partner at the venture firm Benchmark, an investor in Stitch Fix, who is on the company’s board. “There’s a 15-page profile, there are over 66 characteristics tracked and there’s a predictive heat score for every single item against every single user,” meaning a way to determine the likelihood that a customer will keep an item.
Ultimately, though, a human stylist chooses items from the computer-edited list and packages them into a nice little box with a description of each one and a personal note explaining what you have received and how you might wear it.
Lake said her concept for personalized online shopping came out of a desire to combine the upside of in-store help with the convenience of e-commerce. “In traditional retail, they have the benefit in that they have real people that in theory could offer a very personalized experience,” she said. “So, how do you bring the experience that people are having online, and how do you personalize and get to know someone well?”
That sort of real-person interaction might still happen at high-end physical stores like Nordstrom. However, physical shopping is increasingly a transaction of convenience, often involving online research before purchase.
“Over 90 percent of commerce still takes place in the brick-and-mortar store,” said Bill Martin, founder of ShopperTrak, which uses Nielsen-like tracking devices to monitor shoppers’ visits to stores and malls. “But 60 to 70 percent of purchases are now researched online.”
Retailers are trying to personalize shopping in physical stores, too, say retail analytics companies like CQuotient. These efforts include loyalty programs that let sales employees easily pull up account histories of their customers’ purchases, and even in-store beacons that communicate with a shopper’s cellphone and can send relevant offers and coupons.
Retailers like Urban Outfitters, Mango and Zara appeal to their mobile-friendly young shoppers with benefits like exclusive access, rewards and even, in the case of Urban Outfitters, a streaming radio station.
But none of those options, as yet, direct shoppers to personalized selections. That is something Birchbox is hoping to achieve, in addition to its online option, with its recently opened first physical store in New York’s SoHo district.