Veja cases de personalização no varejo

Nike’s status as a technology company has almost overtaken its status as an athletics retailer in recent years. The company made waves in 2018 with its introduction of the Nike Live store concept, a members-only store that relied heavily on the mobile app, and later that year the House of Innovation flagship concept, which had similar features.

Those concepts rely on the convenience of a variety of mobile capabilities, including mobile pickup spots, mobile self-checkout kiosks and features that let shoppers identify clothes hanging on a mannequin, or request a certain shoe size and color from a nearby store associate.

Nike’s latest advancement pushes the utility of its app even further. A new feature employs computer vision and the user’s smartphone camera to scan a customer’s feet and come up with a digital foot morphology, and then applies that to the company’s various shoe designs, providing customers with the recommended shoe size for them in each of the company’s footwear products.

Store associates, or “athletes” as Nike calls them, have the technology enabled on mobile devices they carry around in stores. Customers can also use the feature at home and save the digital scan to their Nike Plus profile so that every time a shoe is selected their recommended size will already be pulled up.

Since a customer’s size will likely vary by product, the app also includes a summary for why a certain shoe size was selected: perhaps because a shoe runs small or large, or perhaps because other people with similarly sized feet purchased this size. No matter what it is, Nike has a reason.

You can’t ‘just do it’ with shoes that don’t fit

The impetus for Nike Fit, which was tested in three stores over six months before being rolled out to all U.S. stores beginning in summer 2019, was an industry-wide sizing challenge. But it was also one that Nike heard complaints about, according to Michael Martin, Nike’s vice president of Nike Direct product and growth.

“Bad fit is a barrier to sport. If your shoes don’t fit well, then you’re not going to perform as well and perhaps you’re not even going to engage in sport that day,” Martin said in an interview, commenting on the brand’s mission to get more customers out and active every day. “It’s also a pretty big brand risk, frankly … We have people who say, ‘I love Nikes, they’re so cool, but they just don’t fit me. The whole brand — you just don’t fit me,’ and that is not a great situation for us to be in.”

Nike Fit aims to combat that by helping customers find not only a general shoe range for Nike’s products, but a per-product shoe size that factors in everything from performance intent to a customer’s personal preferences. The former is easier for Nike to get a handle on, as the retailer (and now its computer vision technology) knows the purpose of each shoe. For example, a soccer cleat may need a tighter fit than the relaxed fit of a casual sneaker.

For intel on what shoe fit an individual shopper might prefer, Nike’s technology pulls from people with similar foot morphologies, essentially the details of the anatomy of your foot, which frequently have comparable preferences, especially when it comes to performance footwear, according to Martin. While the company intends to give customers an ideal fit the first time around, the technology is set up so that a user on the app can change their preferences if, say, they order a pair of shoes online and find a different size more comfortable than what is recommended. Marking a shoe size as preferred feeds back into the technology’s artificial intelligence, which learns from a user’s selections over time and improves its recommendations.

Why doesn’t Nike just use the data to better standardize its sizes? According to Martin, that’s easier said than done. The lasts (shoe models), materials, lacings and performance intent for each style is different from the next, and the wide variety of foot shapes make it difficult to remove the fit variance for a given customer.

“This is not about improving sizing because sizing is a lie, from our perspective,” Martin said. “It’s a gross simplification of a multifactorial complexity.”

Nike Fit is a way for the retailer to account for that, and also a way to get its shoppers used to the notion that even though they’ve always thought of themselves as a size 6, it may not be the ideal fit for them in every product.

Becoming a tech company

The Nike Fit journey started with the acquisition, in 2018, of computer vision firm Invertex. Nike executives knew what challenges they faced in footwear and what they wanted to do, but needed more tech experience. At the time, they were intentionally quiet about why they acquired Invertex, saying the company would help them with “groundbreaking innovations.”

Even now, after announcing Nike Fit, the retailer is keeping further applications of the technology close to its chest. The possibilities for Nike Fit to expand to include other pieces of apparel — athletic shirts, shorts and bras, for example — seem natural, but for now, Martin would only hint that these potential uses, “are very interesting and not without notice.”

Regardless, figuring out footwear is Nike’s first priority with the new tech. In addition to helping customers find the right size in current models, data gathered from customers will also inform product development with an eye towards enacting meaningful changes in the shoe design and manufacturing process.

“This is about transforming the way we operate overall,” Martin said. “So we will and are already in the process of using this data from the thousands of people who went through our stealth tests to take a look at our lasts and understand which ones of them better represent our consumer’s population as a whole, and we’ll continue down that path.”

The retailer is also planning to use the data to adjust its buy depth: essentially, how much of an individual product and an individual size that the company buys. Over time, the hope is that Nike products will be a better fit for customers across the board, rather than using the technology to create custom-made shoes. Custom-created shoes are not only expensive and environmentally unfriendly, but Martin also believes that their current approach will create a better fit than custom-made shoes would.

“Fundamentally, where we want to take it is this: Where you’re no longer a number, you’re no longer a gender on the box, you’re just a name. This is just your shoe … this is the perfect fit, the best fit possible for you,” he said. “And we think that not only are we able to achieve that, but we’re going to be able to go further than that because the information that our members share with us will allow us to design better and better shoes over time.”

As shopping becomes more ubiquitous through online, mobile and brick-and-mortar channels, retailers need to become more trusted advisors to their customers and more capable of providing them with personalized, immersive shopping experiences, according to research from Accenture and the Retail Industry Leaders Association (RILA).

The research found that 63% of consumers surveyed are interested in personalized recommendations, and that the majority of them are willing to share their data in exchange benefits such as automatic credits for coupons and loyalty points (64% of those surveyed), access to exclusive deals (60%), the ability to gain points and rewards (56%) or special offers for items that interest them (53%).

The report was part of RILA’s “September is for (R)Tech” showcase, a month-long effort by the association to highlight retail technology initiatives and research focused on how consumer trends are shaping the future of shopping.

It’s no surprise that consumers are interested in receiving personalized recommendations, as many retailers and e-commerce marketplaces already offer at least a degree of such treatment. However, the results of this survey suggest that their interest in receiving personalized treatment is growing and runs deeper than just receiving straightforward product recommendations. For retailers, it may be a whole new kind of consumer.

For example, the metric of 63% of consumers being interested in personalized recommendations was up from 57% two years prior, according to the report. Also, beyond recommendations, those surveyed indicated they were interested in other forms of personalized treatment. About 61% said they want to get personalized design ideas from expert service providers (up from 46% in 2016), while 54% said they are interested in personalized recipe ideas (up from 44% in 2016) and 49% said they want personalized service suggestions (up from 44% in 2016.)

All of these insights could put more pressure on retailers to not just invest in personalization technologies, but also seek to build stronger, more personal relationships with their customers that will, in turn, enable them to more fully curate the shopping experience on a shopper-by-shopper basis.

The retailers who participated in this survey seem to understand that consumers’ expectations are evolving. For instance, 94 of the 100 retail executives surveyed said they believe the evolution toward ubiquitous shopping is significantly transforming the industry, and 93 said they foresee their own business being disrupted in the same way.

Among other data from the survey, 84 of the 100 retail executives said image commerce — for example, capabilities that allow consumers to take a photo of an item with a mobile device and then use the image to initiate a visual search — is important to their future success. Their thinking is on target with the finding that 56% of consumers surveyed said they would be interested in such capabilities.

Also, use of immersive technology such as augmented reality as part of the shopping experience is starting to capture the interest of more consumers, with 56% of home décor and electronics consumers saying they have used such immersive technology. This might be an area where more retailers need to catch up with consumer attitudes, as 63 of the 100 retail execs said the technology is very important, but only 37 of them said they are investing heavily in it.

It’s becoming clear that shoppers want to have richer, more personalized shopping experiences, whether in-person, online or via mobile. It’s also clear from this survey that they are willing to provide the personal data necessary to drive those experiences — at least in exchange for things like loyalty points or exclusive deals. It may be time for retailers to sign off on that trade.

Moiz Ali’s dream when he started personal care company Native was to sell at Target. Of course, there are many types of dreams: daydreams, pipe dreams, dreams that aren’t expected to come true and dreams that might, just maybe not for a long time.

Ali’s was the latter, and two and a half years after starting his company, which raised just $500,000 in venture capital funding, Native was acquired by P&G for $100 million. It’s now sold at Target. The personal care brand was introduced to stores along with another digital-first company, Quip.

A classic, straightforward success story — and yet, despite the recent wave of direct-to-consumer brands inundating the beauty and personal care space, the paths they take from founding to future are anything but straight.

“I always talk to these e-commerce businesses and they’re always like, ‘Yeah, we’re crushing it, here are the 40 things that are going right,'” Ali told Retail Dive in an interview, “and I’m like, ‘What is going on?’ Because my company has 400 problems. There’s maybe one thing that’s going right.”

Ali’s not the only one who has faced challenges, and the trajectories of many of these brands provide insight into broader patterns around the closely watched business model. One look at Walmart’s growing list of DTC acquisitions is enough to prompt the conclusion that selling to a bigger company is a common goal for digitally native brands, but that doesn’t show the complete picture.

No founder’s story is identical, but the first few frames are fairly similar.

Founders’ challenges

Many DTC brand stories start with an executive that identifies an underserved market: a product that either doesn’t exist or isn’t good enough. In Ali’s case, it was natural deodorant that worked. Several companies in the DTC space, including Function of Beauty, Madison Reed and Glamsquad, identified similar gaps in the haircare category.

Zahir Dossa, co-founder and CEO of Function of Beauty, set out with a mission to personalize hair products, starting with shampoo and conditioner, and followed by a leave-in treatment, which all solve for specific “hair needs” that he says few mass market products can address. With his model, customers can choose particular ingredient combinations to personalize their hair products to whatever hair needs they have.

“It’s an industry that we think could have an insane amount more specialization and personalization for any single person,” Dossa told Retail Dive in an interview. “I don’t think it’s a niche problem. I think it’s a mass market problem that wasn’t able to be addressed largely from a technological perspective. And so we thought we had a technological solution to this age-old problem … that could scale and be affordable.”

Function of Beauty sees 54 trillion possible combinations for customers to choose from and, ideally, sign up for a monthly or bimonthly subscription of that product once they find the right mix.

It’s similar, in some ways, to what Madison Reed is doing in hair color. The brand uses data to match a customer with the right hair color and provides a subscription service to conveniently replenish the product when needed. If that sounds like a niche, though, founder and CEO Amy Errett thinks you’re respectfully wrong. In an interview with Retail Dive, she batted down any suggestion that the brand would move into other beauty categories.

“There are a certain set of products that you should be using if you color your hair versus if you don’t color your hair. I am not worried that we will not have the proper SKU’s,” she said. “We’re hair color. That’s what I believe the brand stands for and I have no interest in color cosmetics — that’s not what we do.”

Investors, though, sometimes hold a different view when it comes to DTC brands trying to push their way into what they perceive as a small space, whether that’s natural deodorant or a strictly hair color business. Errett is also an investor, and has been for several years, which helped her when it came time to raise money for Madison Reed (the company’s racked up a total of $128 million so far, according to Pitchbook data emailed to Retail Dive).

Still, it can be difficult for digital natives to raise money, especially with a crowd of companies clamoring for venture capital to start their own DTC businesses. Ali credits Bonobos founder Andy Dunn and early brands like Harry’s with carving out a path for today’s startups to build on, noting that he didn’t have to explain the direct-to-consumer model when he went to raise money — he just had to convince them that Native could do it.

“They really had to prove that direct to consumer worked, that omnichannel could work, that the economics of advertising online could work for a brand,” Ali said of Dunn and other pioneers, “and that there were not venture-like returns, but good returns to be had in these businesses and they were interesting to larger CPG companies from an exit perspective.”

But while some challenges for DTC brands have been overcome, others are still very much in play in the investor space. In particular, the male-dominated industry can make it difficult for female founders to get the funds they deserve, and Errett is fully aware that some investors “just don’t get it” about female-focused brands.

“They get it that a guy shaves, but they don’t realize that a woman starts coloring her hair typically in her mid-to-late 30s,” Errett said. “She’s coloring into her 70s. She’s coloring, as she gets greyer, like every four to five weeks. There’s no issue about unit economics. If you earn the right to get their lifetime value, they’re there. So I think that there’s been a subset that haven’t gotten it, but it’s okay. I don’t care. We have huge income. I guess they should have paid attention.”

Others in the beauty space certainly are: Madison Reed recently inked an exclusive partnership with Ulta, which is quickly becoming the go-to specialty retailer for hair products as well as many DTC brands.

What’s lost through brick and mortar

Ulta CEO Mary Dillon has made a strategy out of targeting popular digitally native brands and bringing them into stores and online, often through exclusive deals or product launches. There’s good reason for it: According to a Forrester report emailed to Retail Dive, the top 20 cosmetics brands capture 90% of the sales at brick-and-mortar retailers, but 86% of the online share is held by brands outside of the top 20, giving Ulta more growth online as they pick up more sales in stores.

On the prestige cosmetics side of the business, Ulta’s strategy around exclusive partnerships pins it against rival Sephora, but when it comes to haircare, the specialty retailer seems to have the playing field largely to itself.

According to Errett, Madison Reed used to sell a root touch up product at Sephora, which has since been removed, and the brand never sold hair color products there, primarily because, “That’s just not where someone would go to get their hair color.” Instead, Madison Reed sells through Ulta and its own color bars, six of which currently exist and 12 of which are planned for 2019.

Dossa likewise commented on Sephora’s lack of game in the hair market, telling Retail Dive the retailer has tried repeatedly to get Function of Beauty to sell in its stores and that he’s rejected those bids because haircare products are “just not bought there, or rarely are.” He also noted that Sephora doesn’t have enough stores for a brick-and-mortar presence to be worth testing out for the brand. He either wants a partnership where the brand would be available in “thousands of stores” or no real permanent brick-and-mortar presence at all.

In this respect, Function of Beauty’s deep personalization actually hampers its opportunities to sell in physical locations. The ability to choose different mixes means that the brand isn’t mass producing a few products, but rather producing one specific product for each order.

“We’re changing the paradigm and offering something that’s actually very new and different. Now, we obviously have to do that through a very different channel,” Dossa said. “We cannot sell off the shelves like most other beauty companies can. It makes things a little bit more complicated, but at the same time we’re able to save a lot, which is why we’re able to sell such an expensive formulation and such an expensive process to the customers at prices they’re used to paying for products.”

Native, on the other hand, sells in both Target and Walmart, as well as through its own site, but Ali sees a lot more work ahead before he even considers opening Native-branded locations. Both Ali and Dossa have thought about temporary stores — pop-ups that serve more of a marketing purpose than an entry into brick-and-mortar selling, but neither has ambitions quite on the same scale as another D2C brand, Casper, at the moment.

Even wholesale has its dark side. The lower margins, in part, have made it Madison Reed’s least lucrative channel, and beyond the brand’s Ulta partnership, Errett isn’t planning on booking other wholesale opportunities. Yet it remains an important way for digital natives to scale, as it gives them an opportunity to get in front of more potential customers in the places they shop most frequently — at least that’s the logic behind Native’s Target and Walmart partnerships. At the same time, though, Ali is cognizant of all that he’s losing control of when he sells through those channels.

“DTC — the feedback is instantaneous, you can communicate with every single one of your customers, you understand your marketing spend and customer acquisition costs, you understand what your customers want you to make next, you can have huge impacts to your business right away,” Ali said.

“With Target, you lose a lot of that. With any brick-and-mortar store, you lose a lot of that. You lose the direct connection with your customers, you lose understanding repeat purchase rates, you lose the ability to have an immediate impact the day that you decide to have that impact. But what you gain is also something monumental: incredible distribution, incredible branding.”

‘It’s obvious what we should be doing’

The alternative to wholesale — having your own physical locations — is costly, but some beauty startups have found other ways around it. Both Madison Reed and Glamsquad have found ways to make physical selling work while not truly operating a storefront. Madison Reed’s color bars are, in the end, salons that sell product, and Glamsquad was a beauty services business long before it was a product-based business.

Indeed, Glamsquad CEO Amy Shecter described herself as a “power user” of Glamsquad before she ever took on the role, and though the company just began selling its own branded products this year, starting with hair and jumping into cosmetics in April, she had thought about the company’s potential to sell its own products long before then.

“You can’t help it,” Shecter told Retail Dive in an interview. “The experience is so holistic and you get such great tips about the product, it made so much sense for us to take our services business into selling the products that we use as opposed to doing it for everybody else.”

Glamsquad’s core business is through on-the-go beauty services like blowouts, makeup and nails, which can mean anything from “a teen going to her prom or a bride who wants to have makeup before going to City Hall.” The services are done wherever the customer is, be it their house or a hotel, and the company’s “beauty pros” leave customers with detailed notes on which products they used and tips for using them again.

The selling opportunity is apparent, but Shecter doesn’t want that to change the way that Glamsquad services feel. Much like Madison Reed’s color bars, Shecter is focused on creating a great beauty service and using the data they get from it to sell relevant product.

“I’ve walked down the aisle of a department store and I’ve heard women say: ‘uh oh, here they come’ because it’s like this barrage of selling,” Shecter said of the traditional beauty retail experience. “It’s not like that at all. You still have the sanctuary of your moment and then the technology pushes really personalized product sales to you.”

According to Shecter, it was the level of feedback Glamsquad received from customers that really made private label products a possibility. The brand has received feedback from over 600,000 customers on how a given product works (and for which hair types), and they also get feedback from the beauty pros doing the services. That level of data is what Shecter credits with allowing the company to create personalized products based around what its customers love.

Ali has had similar experiences at Native and describes a feedback loop that’s led to mintier toothpaste, a different body wash shape and a limited edition scent becoming a permanent one. “It’s so overwhelming that it’s obvious what we should be doing,” he said, explaining that he and his team discuss feedback from customers obsessively during meetings. Most of the time it leads to product improvements, but there are also many calls from customers to get into different product areas that Native doesn’t currently have, which presents challenges for Ali.

It can be hard to tell when to expand into new categories and when to stay put. Many digitally native players seem bent on expanding their presence to encompass more than just the product they started with, whether that means Casper’s efforts to be more than a mattress company or Away’s dedication to becoming a travel business, not a luggage business.

Errett firmly believes in Madison Reed as a hair color-only company, but others aren’t so sure. Glamsquad expanded from hair products into cosmetics, and Native started out as deodorant and now sells several personal care products. Taking advantage of opportunities without overextending the brand is a challenge not to be taken lightly, and a harder one for brands like Native, which have the financial backing of a parent company like P&G to move into new categories faster than ever.

“There are definitely products that we think would be natural extensions for Native and there’s products that we think would be a little bit further out,” Ali said, noting that many customers over the winter have been asking the brand to launch lotion, ostensibly because their skin is drier. “So we’re like: ‘Okay, this is cyclical,’ and also: Is lotion a personal care product? A beauty product? Where does it fit into our brand strategy?”

Answering those questions is always important, but for startups, drawing borders around the brand could impact not only how big of a player they become in the space, but also which DTC brands still have room to grow and which will find themselves solving for a problem that’s already been claimed.

Clinique launched a standalone store with a pop-up concept called Clinique iD, which opened in SoHo, according to multiple news reports. The company did not respond to Retail Dive’s request for comment.

Customers can receive a skincare diagnosis at the pop-up stores to help them find the right moisturizer and can also test out a customized sampler of moisturizer, which comes with a personalized label, according to The Cut.

The move comes after the brand launched Clinique iD customizable moisturizers, which include 15 different possible combinations for customers to choose from, and allow shoppers to choose their own hydration base, as well as an element that treats a specific skin concern, such as irritation, according to a different report from The Cut.

Clinique is joining the ranks of beauty brands trying to win shoppers over with an in-store experience that’s more than just transactional. Similarly to Sephora’s Beauty TIP workshops, which encourage shoppers to play around with products before purchasing, the Clinique iD pop-up seems built around the concept of interaction.

Unlike the department store setup, the pop-up gives customers a place to shop only Clinique’s products and get one-on-one attention that can be harder to receive in a crowded department store. That being said, many department stores are likewise trying to up their beauty game to better compete with specialty players, with Macy’s adding augmented reality technology and brand agnostic store associates to its beauty departments, and Saks betting on a larger space and more in-store services.

Most recently, Neiman Marcus announced a partnership with BLVD to offer a slew of in-store beauty services and Bloomingdale’s renovated its 59th Street flagship to include more services, as well as two millennial-focused, private label brands and play stations for shoppers to interact with products.

The Clinique iD concept fits right in with those larger trends in beauty, but the brand is also taking advantage of retail’s push toward customization as more shoppers look for something unique. Store concepts and flagships are catering more and more to the ability to customize products, especially in New York. Retailers from Converse to Muji offer customization opportunities for shoppers, and Nike’s new flagship in the area likewise offers sneaker customization, as well as other pieces of apparel, for a cost.

It’s unclear how many of the Clinique pop-ups will open in the future, but a Glossy report notes that the brand plans on opening in several international locations along with a traveling pop-up in the U.S.

Retail technology is a long game and advancing innovations can be on the rise for a very long time. Look no further than Retail Dive’s list of the top five technologies we expected to reshape retail in 2017: Robotics; drone delivery; e-commerce anti-fraud tools; blockchain and bitcoin; and virtual/digital assistants. Many of those technologies have yet to see wide adoption.

Robotics, for example, was one of the hottest technology topics in retail that year, as several retailers expanded their use in their supply chains. But in 2019, the use of robots can’t be described as widespread, and is still evolving toward use in-store and for last-mile delivery.

Meanwhile, the excitement over drone delivery entering 2017 fizzled out amid regulatory delays, but that doesn’t mean the industry has heard the last of this technology. As for blockchain and bitcoin, a few retailers are experimenting with them, but most are still trying to understand what they are. Meanwhile, e-commerce anti-fraud tools and virtual/digital assistants have become real growth segments.

With that in mind, many of the hottest retail technologies heading into 2019 are iterations of earlier technology that may finally be at an adoption tipping point this year. These are areas of technology development the sector has been hearing about for a while, but are expected to be the focus of new energy and innovation in the coming months.

Customization enabled by tech

Is customization just another name for personalization, a notion that has dominated retailers’ shopping experience strategies in recent years?

It might be most accurate to describe it as the intersection where different forms of on-demand manufacturing technology meet the need for more personalized shopping experiences, as well as the evolving expectation among customers that they should have more control over product selection. In short, it’s about giving the customer exactly what they want.

Retailers like Eloquii have been heading in that direction for a while, and brands such as Adidas have experimented with on-demand, 3D-printed apparel. But Amazon’s recent acquisition of body-scanning firm Body Labs and new funding for scanning technology developers like Naked labs stoked new excitement in the concept. Furthermore, companies such as OnPoint Manufacturing can now enable the production process allowing shoppers to obtain apparel in fits and size combinations that even wider rack selections don’t provide.

Kirby Best, chairman of OnPoint Manufacturing, told Retail Dive, “Getting the right fit isn’t a size issue; it’s an inventory issue.” With that in mind, OnPoint created an Alabama factory that manufactures apparel based on unique size patterns and combinations of sizes (for example, a dress that’s a size 8 on top and a size 6 on the bottom). “Someone can order exactly what they want, and we can make it for them,” Best said.

He added that OnPoint is closely studying the rapidly evolving area of body-scanning technology, noting that these capabilities are becoming available in smaller formats and virtual offerings that will make them more broadly available and useful.

OnPoint eventually plans to open on-demand factories in multiple markets, but it’s not the only one investing in customization. Arts and crafts retailer Joann has embraced the concept, recently launching a MyFabric offering that allows shoppers to customize fabrics and have them printed with the help of WeaveUp’s digital textile technology. Joann also invested in Glowforge, a 3-D laser-cutting startup.

A Joann spokesperson told Retail Dive via email, “All of our customers are unique, and we want to enable them with tools and technologies that allow them to fully customize their items in any way they choose.”

BOPIS moves beyond mass market

Buy online, pick up in-store (BOPIS) is a good example of an area of innovation that is not new to retail, but could be set for a mass-market breakout in 2019. Several large retailers adopted BOPIS early on, and have continued to refine their approaches and develop new ideas for how stores should be designed and store operation transformed around the concept. Walmart, for example, has placed pick-up towers in stores and explored how BOPIS can be enhanced when paired with other technology innovations, like driverless vehicles that could bring customers to stores for order pick-up.

More recently, merchants, as varied as apparel retailer rue21 and pet products maven Petco, have adopted BOPIS, and by the end of 2018, it was becoming clear that retailer devotion to BOPIS paid off with increasing interest among customers. A GPShopper report last year suggested that more than two-thirds of more than 1,300 shoppers surveyed said they planned to use BOPIS services for holiday shopping needs.

That is likely to influence greater adoption and leveraging of the enabling technologies that support BOPIS this year. These include platforms, devices and mobile architectures linked with inventory and supply chain data that allow store websites and in-store associates to coordinate online orders, in-store available stock and shipping between stores. Ultimately, BOPIS and the technologies that enable it offer the most obvious proof points that retailers’ omnichannel visions finally are becoming reality.

Still, retailers need to be step-wise in their BOPIS rollouts. If they rush to market with BOPIS without adequately supporting it, it could end up being a sales killer. Danielle Roberts, senior product manager at Kibo, which provided technology for rue21’s launch, told Retail Dive, “BOPIS is not something everyone can just jump into immediately. In most cases, consumers will only give a retailer one chance to get it right, which means the inventory better be ready when that confirmation email says it is.”

She further added, “Consumers operate in multiple mediums. For them it’s not about loyalty to a device type or a physical store. It’s about convenience, cost and quality. In consumers’ minds, online and offline are already linked.”

Search options expand

Shopping search increasingly means visual or voice search, very likely through a mobile smartphone or another device that is not a desktop computer.

Visual search, in particular, is becoming a more frequent component of mobile app experiences, in everything from the apps of social networks like Pinterest, Snapchat and Instagram that adopted the technology early on to those of retailers. When used via mobile, it can be an omnichannel enabler, assisting consumers in app-based purchasing and driving social commerce, but also bringing them into stores — especially when searching for an image of a specific item shows which nearby stores might have that product.

Casey Gannon, vice president of marketing at Shopgate, told Retail Dive by email, “When it comes to apparel, home improvement, furniture or any number of other industries whose product relies so heavily on being visually unique and appealing, visual search is going to grow more and more important to reduce the path to purchase and navigate consumers to the products they want sooner. Although innovative now, it will soon be table stakes.”

In the second half of 2018, there was a flurry of announcements about retailers adopting or developing visual search technology. Luxury e-commerce marketplace Farfetch used Syte to enable visual search capabilities for its iOS app, which followed by a few months similar moves by Forever 21 and H&M. Walmart’s Hayneedle has been working with Slyce, though at the end of 2018, Walmart reportedly was working on developing its own visual search technology.

Thanks to devices like the Amazon Echo and Google Home, voice search also is on the rise, with Capgemini predicting that within three years, 40% of consumers could use voice search instead of text search via smartphones or websites.

Expanding the reach of voice assistants into smartphones and other devices, which Google has easily managed by embedding Google Assistant in Android devices, and which Amazon is working on as well, will further power growth in voice search. However, Mike Mallazzo, director of marketing at Narrativ, which uses machine learning to improve search, told Retail Dive that voice search for shopping still offers a limited perspective.

“Voice search right now worries me because in most cases it doesn’t show you the full range of results you get from other forms,” he said. “It may tell you about just the products from the company [like Amazon] that enables that search, and not the full range of content you get from other search results.”

Narrativ’s take is that the real innovation happening in search is taking place in the underlying data. Mallazzo said machine learning and structured data can deliver better search results, and assurance the product links embedded in a range of content throughout the web are valid and up-to-date.

Augmented reality and virtual reality find homes in narrow spaces

Retailers may be tired of hearing what these technologies potentially can do for them, as it’s a sales pitch they have been hearing for years.

In late 2017 and early 2018, an initial round of AR features in mobile apps targeted buyers of furniture and home decor, giving them a way to visualize those items in their own home environments. But, there are signs that AR and VR will be leveraged in stores and could figure prominently in omnichannel shopping and store operations.

Most recently, Walmart Labs developed an AR-based product comparison scanner for its mobile app that can be used in-store to scan entire shelf sections to compare product details, rather than using a barcode scanner to look up products one at a time. This and other types of retail AR app features could leverage visual search to become more useful and valuable to shoppers and retailers.

On the virtual reality front, Macy’s expanded use of Marxent’s VR technology to 90 of its stores by January 2019. The retailer provides shoppers with a VR headset to help them design their own room settings by visualizing and moving around 3D images of different furniture items. Early on, it saw a 60% increase in sales when customers used the technology, as well as a decline in returns, all of which convinced Macy’s to buy into VR to a greater extent.

Meanwhile, Walgreens, Home Depot and Walmart, among others, also have started working with InContext Solutions to use VR technology to help them with planning store designs and merchandise placement.

A CB Insights report on retail trends for 2019 observed that AR and VR are still “transitory” technologies, meaning they are starting to see some adoption, but still need to be better understood. “While augmented and virtual reality offer a myriad of benefits to retailers, high upfront costs remain a barrier to adoption,” the report stated. “Retailers will have to continue to experiment with how to best leverage the technologies to reap a return on their investment.”

Automated checkout/Cashierless stores

The sector has heard a lot about Amazon Go and its cashierless convenience stores, but what about other technology companies enabling automated checkout, as well as other forms of expedited self-checkout and mobile checkout?

We are likely to witness much more movement on smart/automated/cashierless checkout schemes in 2019. Amazon may be poised for a more rapid expansion of Amazon Go if reports are correct that it’s seeking airport space and mulling a plan to open 3,000 stores by 2021. But other technology companies, like Standard Cognition, are saying deployment of their solutions by other retailers will begin to ramp up in 2019.

Evan Shiue, head of strategy at Standard Cognition, told Retail Dive via email that its automated checkout platform will be in “thousands of stores” by the end of 2019. “Our early customers span the pharmacy, convenience and grocery segments.”

While not all sizes and types of retailers have been considered viable candidates for automated checkout, Standard recently acquired a mapping software start-up, Explorer.ai, whose technology could open up the addressable market.

“Mapping is a continuous process, as we always need to be tracking who has what. If we can’t do it quickly – the whole store in minutes — we don’t have an accurate picture,” Shiue said. “This is a challenge that all autonomous checkout companies, including Amazon Go, have faced. Whoever solves it first has the best shot at working with large-format retailers.”

That doesn’t mean such retailers will do away with cashiers and other forms of payment, as Amazon is doing with Amazon Go. “We think cash and credit payments will still play a role in these stores, so we’re providing payment kiosks,” Shiue said. “So far, every retailer has told us they don’t want to be app only — they also need to accept cash and credit.”

In a retail landscape where customers are overwhelmed by choices — where to shop, how to shop, which brands to shop — loyalty is more important than ever. It’s not just about the sheer number of competitors, though. The convenience of retailers like Amazon and Walmart puts additional pressure on the rest of the field to provide not only a unique experience, but also rewards that make it worthwhile for shoppers to stick around.

The space was reshaped when a slew of retailers reinvented, upgraded and dropped loyalty programs. The multi-retailer Plenti program shut down after Macy’s and several other important participants bailed. And several retailers have tweaked or added internal loyalty programs. Program changes have ranged from department stores, including Macy’s, Nordstrom and Kohl’s, to big-box and specialty retailers like Target, DSW and Lululemon.

While some of the changes are likely just the result of natural investment in that part of the business, retailers also face pressure from higher shopper expectations. In particular, the beauty sector has built a strong loyalty reputation, with category leaders like Sephora and Ulta both laying claim to popular, frequently updated programs. Even Sally Beauty released a new one in October.

A report emailed to Retail Dive from Gartner L2 showed loyalty program increases across several different sectors, with launches reported in 2018  by 14.9% of department stores, 5.2% of specialty retailers and 5.9% of activewear retailers. There’s still room for growth, though, according to a report from intelligence firm Beroe, which claims that the market will reach $201 billion by 2022. That report, which was emailed to Retail Dive, also notes “growing demand for customizable digital reward programs,” in turn leading to higher costs for retailers.

In addition to a trend toward personalization, loyalty programs are also experiencing several other, sometimes contradictory, movements.

The decline of the store-branded card

Sitting at the heart of every loyalty program, below all of the 10% off coupons, buried underneath the free tote bags and blankets for every $50 purchase, lies a trove of email addresses, phone numbers and purchase history records. And while shoppers are busy trying to get a promotion for their next purchase, retailers are focused on scooping up all that customer data, analyzing it and using it to hone a strategy to get customers to shop again — just one more time.

Of course, the goal isn’t really to get shoppers to come back once. The goal is to create a connection so strong that customers want to keep giving up their business. As a result, loyalty programs are being used more and more to build connections with retailers beyond data collection. Partially that’s because customers grew frustrated with retailers asking for data at the checkout counter and doing nothing with it, but it’s also because retailers found other ways to collect data, Yoav Susz, vice president of revenue at Optimove, told Retail Dive in an interview.

“People wanted to have data about their customers, people purchased in physical locations, they didn’t have any other data points about the customer and by having them join a loyalty program, they were able to capture some of that data and then be able to target those customers,” Susz said, noting that was a main driver of loyalty programs. “As data has exploded and data has become more commoditized and everybody has data about a vast majority of their customers, in my opinion it’s becoming just less crucial to get people to opt into these loyalty programs. It becomes much more crucial to be able to look at your customer base and understand who you should be engaging with and talking to them,” he added.

That’s led to many retailers lowering the barriers for entry to their loyalty programs, mainly by getting rid of requirements for store-branded credit cards, which are a tough sell already, and a tougher one for younger consumers with past (and future) recessions on their mind. Macy’s recently expanded its loyalty program to members without its store card, Nordstrom upgraded its own to allow non-card holders to participate and J. Crew launched one without a card requirement.

Susz sees this as an indication that loyalty programs won’t really exist in the future. Not that brand loyalty won’t, but that retailers will cease trying to cultivate it through a sign-up program and increase efforts to maintain two-way relationships with customers instead. Either way, cultivating loyalty will be a necessity, as 70% of shoppers don’t see loyalty as a reason to pay higher prices and the percentage of shoppers who can identify a favorite brand in any given space has declined substantially over the past decade, according to L2.

The shift away from store-branded credit cards is “probably a 20-year trend,” though, according to Shannon Warner, vice president in Capgemini Invent’s North American retail practice. She noted that a large number of retailers had credit card portfolios where they owned the receivables, and hence all of the profits, associated with those cards. The benefits to having a store-branded card have since dropped, however, as retailers sold off their portfolios to banks and received more “muted” benefits, leaving them with fewer reasons to launch store credit cards, and fewer still to require customers to open one just to get rewards.

“As long as the economy is good and debt rates are pretty steady and so forth, that is an incredibly profitable, lucrative way for a retailer to fund the profits of their business, which gives them more flexibility to do different, more exciting things on loyalty and other things that drive cost in the retail model,” Warner said. “But when the economy is bad, when debt rates go up, when there’s more unpaid debt, basically, that creates an enormous amount of risk within a retail portfolio.”

Pay-to-play loyalty

At the same time that some retailers are trying to make it easier for customers to join, others are ratcheting up the price tag. Amazon Prime, which started out at $99 a year, upped its price to $119, and others have introduced a similar model, including Wayfair, which launched a $29.99 yearly membership program and Lululemon, which is testing one that, if rolled out further, would cost upwards of $128.

There are contradictory ways of viewing this trend. On one hand, putting a price tag on a loyalty program means customers have to really want to join it, potentially limiting a fee-based model to retailers with strong brands, strong value propositions or both. There will likely be fewer members than a free loyalty program would amass, and L2’s report went so far as to say that removing barriers to entry was “key to combating declining program engagement.” On the other hand, if a retailer can create a program with as much value as Amazon Prime, then the model makes a lot more sense.

According to Bram Hechtkopf, CEO of Kobie Marketing, Amazon Prime is partially so successful because it creates emotional loyalty with customers, which is based on status, habit and reciprocity. That emotional loyalty, over time, also makes the retailer’s customers less price sensitive because they’re already paying to receive the benefits of the membership.

“What wins out in the research we’ve done are: convenience, which leads to habit, and you can think about Amazon Prime as a good example of that,” he told Retail Dive in an interview, “and status — how a brand makes you feel. Amazon Prime actually makes people feel like they have elevated status, even though you pay for it and anybody can pay for it. It gives people a sense of pride.”

Having members pay for a membership program also allows retailers to offer more valuable services, like free two-day shipping that’s become a staple of Amazon Prime, which might make a paid program more worthwhile to customers than a free one that simply offers $10 off periodically. Though Warner expects more retailers will have both options in the future.

Some of the benefits for a paid program can impact loyalty by a decent amount, though, according to a Capgemini report emailed to Retail Dive. Two-hour delivery increases loyalty for 55% of shoppers, and same-day does the same for 61%, per that report. The downside to the model, though, is that offering those services is not just costly for the customer, but also for the retailer.

“For example, a customer who wants to have their groceries delivered to their home twice a week — that’s a very expensive value proposition for a retailer and something that actually makes it very difficult for them to be profitable,” Warner said. “So, selling a membership helps them to provide that customer with more personalized, more engaging services, but also helps them to offset the higher cost to serve and retain their existing profit margins. I would argue that most of these retailers who are introducing cost-based subscription services are probably not even breaking even in what it costs them to serve that customer.”

Indeed, loyalty programs or policies that are too generous have been a problem for some retailers in the past, and have even forced them to change popular practices in order to maintain profitability. Bed Bath & Beyond has become famous for a generous number of coupons that its customers love, but which are hurting the company’s financials and were partially responsible for a recent downgrade by S&P Global.

L.L. Bean, likewise, was forced to pull back on its lifetime return policy after the retailer discovered that the policy was being abused 15% of the time. It’s a trap that’s easy to fall into if retailers give promotions or services out to anyone that walks through the door, Susz said.

“If I’m giving someone a discount or if I’m giving someone the right to return or I’m giving them a coupon, I need to make sure that that’s somebody that has a high lifetime value and it’s worth my while,” Susz said, cautioning against treating every customer the same. “Otherwise you do end up giving the wrong offers to the wrong people and if [you] know that somebody is a quote-unquote ‘promo pirate,’ you need to make sure that you’re not doing something that is just cash-flow negative.”

More than 10% off coupons

As loyalty programs evolve, so do the rewards. Discounts aren’t necessarily going away, but experiential rewards and services are becoming much more prevalent as retailers look for ways to increase the value of their programs. According to L2 Gartner, 61% of brands offered both experiential and monetary benefits in 2018, compared to 47% the year before, and that’s also translated to which types of rewards have been adopted on a broader scale.

Birthday perks were up by 7% in 2018, early product access and early sale access both increased by 11%, and free service and service discounts rose by 3%. The report also noted that the most successful brands offered a mix of monetary and experiential benefits, as well as “boosting personalization efforts and creating a seamless mobile experience.”

We’ve seen glimpses of member offerings that are far from ordinary. Sephora launched a members-only social platform, for example, which encourages shoppers to talk to each other about everything from how well a product works to beauty trends to the best items for a particular problem (e.g. dry skin, acne, etc.). The idea was to create a space where loyalty members could learn from each other, no purchase necessary.

Nike took it a step further with its launch of an entire members-only store concept, dubbed Nike Live, which debuted in Melrose, Los Angeles. Far from a generic promotion, the store is an attempt to create products based on data from a given geography and dish it back to the members in that locale. It also does a good deal to make members feel like they’re part of an exclusive program — a store just for them.

Learnings from that store are already being applied to some of Nike’s flagships, and the offerings piloted by these retailers are likely a sign of what’s to come for loyalty programs at large, Warner said.

“It won’t just be points or coupons or emails. It will be value-added services, it will be free shipping, it’ll be invitations to exclusive events, it’ll be information and content that’s targeted and relevant,” she said. “I think that the range of value-added services — we’ve just started to scratch the surface of what those will be and I think that will be the biggest thing that marketers will be scratching their heads to figure out.”

Susz agrees that experiential rewards are going to be a bigger part of loyalty programs, but he also noted that the way retailers handle loyalty will likely change as the economy does. When things are good, experiential rewards will be top of mind, but when things are rough, monetary incentives will likely come swinging around again.

As the type of rewards shift, the channels for cashing them in are too. Mobile is becoming a more important part of programs than in the past, with nearly a third of consumers saying it’s their favorite way to show membership in stores, according to L2. Victoria’s Secret’s Pink refreshed its mobile app and loyalty in September, Target has further integrated its app loyalty and the entire Nike Live concept (and its new New York flagship) is structured around the app.

That being said, the convenience isn’t quite there yet. Per L2’s report, 84% of retailers integrate their loyalty programs into a branded app, but only 22% allow users to track their rewards on the home screen. That lack of convenience can pose problems for retailers, especially if they’re not providing a win-win service to the customer, Amit Bivas, vice president of marketing at Optimove, told Retail Dive in an interview. And it’s essential that they’re giving the customer value.

“I think that a lot of brands have understood that the acquisition game will only get them so far and they’re now trying different things in order to make sure they’re — I don’t want to say monetizing their customer base — but that’s the truth,” Bivas said.

Over three fourths (79%) of customers surveyed by BRP said the ability to get personalized service from a store associate is a significant factor in helping them decide where to shop, but just 53% of retailers surveyed described personalization as a top priority for them in 2019, according to a BRP report.

Being able to identify customers can help enable more personalized service, and 64% of consumers surveyed said they are comfortable with retailers identifying them via their mobile phones while they are in stores, provided that it translates to a personalized experience.

However, 63% of retailers surveyed said they were not able to identify their customers before they checked out, and 20% said they either were not able to identify them until after checkout, or not able to identify them at all, the report stated.

There has been some disconnect over the years between shoppers’ desire for more personalized experiences and their willingness to share the personal data that would enable retailers to create such experiences. For example, a Retail Dive Consumer Survey in 2017 found that just 43% of consumers surveyed were willing to share personal information with their favorite retailers.

BRP’s report indicated some consumers might be getting more comfortable with that notion, or at least with the prospect of a retailer identifying them via mobile phone when they step inside a store. BRP, in its own assessment of the survey results, suggested that many consumers have the same expectations when they walk into physical stores as they do when they shop online. That means they expect personalized recommendations refined by the fact that the retailer has data on who they are, their shopping history and patterns.

Shoppers are also coming to expect personalized rewards through loyalty programs, according to the report. Well over half (68%) of consumers surveyed by BRP said they are likely to shop at stores that offer personalized rewards based on customer loyalty. However, only 48% of retailer respondents said they offer such rewards, although another 30% said they plan to offer them within two years.

While the survey results point toward greater interest in personalization among customers, they also suggest retailers are not well positioned to deliver personalized service. Store associates can be conduits to enabling personalized experiences, but if they don’t have the capabilities to identify customers before they check out those rewards can’t be offered. If retailers don’t see personalization as a priority they could face challenges in meeting customers’ wants.

Subscription services have exploded in the retail space in the past few years — from apparel services like J.C. Penney’s Big and Tall subscription, Under Armour’s ArmourBox and even Rent the Runway’s cheaper subscription model— to more obscure finds, like the Stage Gurl subscription box for “exotic dancers,” a paranormal-themed subscription service called Cryptid Crate, a coding box for kids and even a box for special effects makeup.

The future of subscription services is uncertain, though. A study by McKinsey and Co. found that nearly 40% of subscribers ultimately cancel their service, though others see a future for the model in the convenience and value-focused millennial demographic. But that hasn’t stopped retailers from jumping aboard the train — at least for now.

Here are five retailers experimenting with subscription services.

1. Amazon

   

   When Amazon introduced its fashion box Prime Wardrobe in beta form, the stock of some major apparel retailers took a hit. Since then, plenty have speculated on the competitive threat it posed to Stitch Fix, a major try-before-you-buy fashion box pioneer.

   Amazon opened up Wardrobe to all Prime Members after expanding its beta test. The service allows customers to order three items or more with no upfront charge, and take a week to decide and pay for those they’d like to keep. Unlike box services such as Stitch Fix and Boxed, which offer periodic boxes among their menu of options, Wardrobe is not a monthly subscription, nor is it recurring. More broadly, it fits snugly into Amazon’s strategy in capturing online clothing sales. According to a note from Morgan Stanley earlier this year, Prime customers are twice as likely as non-Prime shoppers to buy clothing on Amazon, which took another 1.5% of U.S. apparel market share last year.

   Amazon also tested a children’s book box and then expanded it to all Prime members. The subscription delivers curated children’s books every one, two or three months at $22.99 per box, which Amazon said reflects discounts of up to 35% off list prices, and can be geared to children 0 to 12. Amazon’s portrayed the children’s book box as a fun, Christmas Day-like experience for kids that fosters reading and family time. With both Prime Wardrobe and its book box, Amazon can apply its trove of consumer data and logistics network to increase its convenience proposition as well as the offerings tied to its $119-a-year Prime membership.

2. Target

   

   Target boxed up its Cat & Jack private label baby apparel for quarterly subscriptions and single orders.

   Each box is priced at $40 and filled with six to seven apparel items — rompers, bodysuits, leggings and more, plus a rotating gift from the retailer — before they debut in stores. The Cat & Jack box adds to the company’s existing beauty box service and a strategy that banks on the thought that customers “love convenience and discovery.” On the convenience front, customers can return online or in store.

   As Target continues to make significant physical and digital investments, CEO Brian Cornell told CNBC on Squawk Box near the time of the box’s release, “The winning retailers of the future are going to combine great physical assets with the ease that comes along with that digital interaction,” he said.

3. Boxed

   

   Online wholesaler Boxed looked to reward bigger spenders through a premium service dubbed Boxed Up that offers a slew of membership perks and exclusives for $49 per year.

   Members get free priority shipping on orders over $20, which a spokesperson told Retail Dive at the program’s launch was its biggest differentiator, along with 2% rewards, exclusive deals and gifts, and “VIP customer service.”

   Jim Fosina, CEO of Fosina Marketing Group, told Retail Dive that “[t]he success of the Boxed Up effort is contingent on the company keeping the offering vital, exciting and engaging with their customers,” including through a steady supply of value-based, subscription-based goodies regularly streaming to members. He added that, rather than snatch customers from competitors such as Amazon Prime, Boxed was likely working “to build a much stronger and sustaining base of their current customers, focused on moving ‘trial’ customers to subscribers, which is critically important to their overall business model.

4. Gap

   

   Gap Inc. built on previous investments in the space. The company announced an addition to its BabyGap Outfit subscription box that would focus on sleepwear for kids and costs $49 a box. Dubbed BedtimeBox, the latest effort came in addition to an Old Navy subscription box also geared toward kids, which was released just a month after the BabyGap Outfit box was announced.

   According to a company blog post written by Margaret Yang, senior director of buying for Gap Kids & Baby Online, the BabyGap Outfit Box has been seeing “high retention and low return rates,” which guided the company in launching the BedtimeBox extension this year. “The new BedtimeBox is another way for us to move closer to the customer, and fulfill their needs with sleepwear, which is a category we know parents need to restock constantly as their child grows,” Yang wrote at the time of the launch.

   For the time being, Gap Inc.’s efforts seem highly focused on the children’s side of the market, a space that is becoming increasingly popular for apparel retailers trying to get into the subscription game, ostensibly because there’s more need for parents to replace clothing as their kids grow up.

5. Stitch Fix

   

   Stitch Fix, the company widely credited with popularizing the subscription model, has continued to make moves in the space.

   In addition to the company’s regular offerings, Stitch Fix announced an expansion of its men’s business and the launch of Stitch Fix Kids, as well as the introduction of Stitch Fix Extras for women — a feature that allows customers to add on essentials like bras, underwear, socks and tights to their regular shipment.

   The moves show that the company isn’t holding back on new markets, despite a disappointing first quarter report as a public company. The somewhat shaky start after the company’s IPO filing got slightly better in the second quarter. The company did miss profits, but its client base also grew by 30%, and these latest efforts will likely help those numbers.

Private labels. Localization. Home delivery. Knowledge about the customer. Personalization and customization. Most of the innovations that are fueling today’s most successful retail startups have less to do with avant-garde tech like AI and robots and more to do with wowing the customer with the right merchandise, an appealing store environment and a high level of service.

Department stores, which have seen their market share relentlessly depleted in recent years, aren’t generally at retail’s cutting edge. That was ceded to Amazon, mass merchants like Walmart and Target and a slew of digital natives that sought out market chinks and vulnerabilities to disrupt.

Yet that’s exactly what department stores represented in the mid-20th century. What’s more, the amenities they offered during their heyday align with the attributes analysts believe retailers must have now to grab and keep consumer attention.

“What was destroyed was everything we need now, it’s all in their DNA,” retail analyst and consultant Sanford Stein, author of “Retail Schmetail,” told Retail Dive in an interview. “And the fix is really going back to what they were. There’s never been a better time, a more meaningful time, for the kind of choice and the kind of service and the kind of differentiated offering that department stores had 60 or 75 years ago and what customers want now.”

The marvelous

As a retail innovation, department stores were mostly a 19th century phenomenon that reached a high point in the mid-20th. Located mostly downtown in U.S. cities of all sizes, many were architectural wonders built to recall the grand buildings of Europe. Part of the appeal was convenience, in the form of one-stop shopping.

Early department stores offered a wide merchandise assortment that, depending on the store, included departments that sold wine, pewter, rugs, electronics, photo printing and studio services, auto parts and services, jewelry, imported goods, tailoring, beauty items, music and musical instruments, eyewear, toys and, of course, apparel, according to architect Bruce Kopytek, who writes about the history of department stores. Many of them functioned as emporiums of wonder, capturing the kind of newness also found in the world expositions popular in the 19th century and beyond.

“There’s no doubt that department stores were once places that shoppers could spend the day at,” Doug Stephens, author of “Reengineering Retail: The Future of Selling in a Post-Digital World,” told Retail Dive in an email.

The attention to architecture was also inside: Interiors had cathedral ceilings and carefully appointed shopping areas. As the stores moved into the suburbs, retailers like Lord & Taylor brought in modern architects to design not just the buildings and spaces, but also furniture for consultations, Kopytek says.

Customers would dress up to dine at department stores’ tea rooms and restaurants. Women arriving with young children could entrust them to in-house babysitting services that allowed them to sit in peace with store associates. And those associates worked as stylists to find items that suited the women’s taste for themselves and their homes. Relationships developed, and a customer might get a call if a dress came in that seemed just right for her — in some cases styles the buyers had commissioned from French designers for the store’s private label. Clothing was likely kept behind interior walls, to be brought out for customers to try on instead of displayed in racks on the floor. Shoppers could have their purchases delivered to their home.

“If they didn’t know what they wanted, the department store fulfilled the possibilities,” Kopytek said. That idea is captured in the Amazon Studios series“The Marvelous Mrs. Maisel,” when the title character lands a job at the makeup counter at B. Altman in New York City after she recommends a lipstick to a fellow customer who wants “to look like Leslie Caron in ‘Gigi.'”

“Red works great with pink, and it’s terrific with your complexion,” she says. “You have some natural rosiness. Just make sure to pick a tone that doesn’t augment that too much. Keep it subtle. … Try ‘Cherries in the Snow.’ That’ll get you close to Caron.”

The Maisel character sells the customer three tubes — after an exchange that today is more likely to be had at Sephora than at any department store.

“The idea was that if they go there, they were counting on that sales person to understand their needs and what would look good on them,” Kopytek said. “It would be store policy to never let the customer leave with something that didn’t look good on her. They were always on the pulse of what was new, not just the same thing that everyone else was offering.”

The ruin

When Lee Peterson, executive vice president of thought leadership and marketing at WD Partners, worked for The Limited in the 1980s, he would encounter local buyers for Columbus-based, Federated-owned department store Lazarus on the plane heading to the New York fashion shows, on the hunt for emerging styles for the customers back home whose tastes they knew so well.

Those trips ended with waves of department store consolidation. When the May Company merged with Federated (later renamed Macy’s), 491 May department stores combined with 450 Federated stores. The idea, backed by then-Macy’s CEO Terry Lundgren, was to achieve “scale, efficiencies and synergies,” Peterson said.

Instead, it ushered in sameness​.

Centralizing merchandising decisions may have been more efficient, but it eroded the close relationship between each retailer and its customers. “They kind of backed themselves into a corner,” he told Retail Dive in an interview. “They can’t go back to ‘Lazarus’ any more — they ruined themselves. It would also be really difficult to go back to the system that they had in terms of local purchase.”

The move to shopping centers exacerbated the problem of creeping homogeneity, as specialty stores stole share from each department and malls provided the experiences. “Couple that with the rise of outlet malls — and then they’re competing on price,” Michael Brown, partner in the consumer and retail practice of global strategy and management consultant A.T. Kearney, and author of the report “The Future of Shopping Centers,” told Retail Dive in an interview. “Most department stores are now just a destination where consumers go for a sale. Their best days are behind them.”

Perhaps department stores’ biggest mistake, however, was their lack of appreciation for their workforce. Not only did they yank the tasks of localization and customization from their workers, but also culled their ranks and cut their pay, experts say. The high-touch customer service once so central to their brands is now found at specialty retailers, or startups like Stitch Fix or Trunk Club (now owned by Nordstrom), which tout virtual styling services and employ data to curate assortments and personalize offers.

“Customer service and white glove service were extremely important to our culture, but it also became about abundance,” Thomai Serdari, a professor of luxury marketing and branding at New York University’s Stern School of Business, told Retail Dive in an interview. “They ultimately abandoned the white glove service to offer abundance, they focused on volume and variety, but in a way that has no soul. In any of the department stores that you walk into, including Lord and Taylor and Macy’s, you’re faced with that volume and mass of goods, but they have gotten rid of people.”

There’s much to gain if store workers are once again treated as professionals, according to Stein. “The part-time help with no benefits is nowhere,” he said. “Empower people to make decisions. It means a decent living wage. And it means that the store is less about storing and more about storytelling.”

The struggles are evident and in some cases department store retailers face extinction. Southern chain Belk hopes a new marketing campaign will give it a lift. Lord & Taylor, its Fifth Avenue Italianate flagship sold off, is now for sale. Hudson’s Bay Co., which runs that banner as well as its Canadian namesake and Saks, may go private. After last year’s bankruptcy, Bon-Ton is a shadow of its former self. Neiman Marcus is mired in crushing debt. It’s a partial list of retailers that have all too much in common, including disappointment at the holidays and again in the first quarter, an oversupply of space and an undersupply of customers.

“There are so many things that department stores did right for years and years, and so many of them didn’t respond to even basic Amazon pressure. Now they all are exactly the same and can’t afford to have so many doors,” Tyler Higgins, leader of the retail practice at global consultancy AArete, told Retail Dive in an interview. “They can do creative things in their flagship city stores and can have high-end restaurants, they’re trying all these ideas. But the fundamental problem is they have too many square feet to fill up.”

The revival?

Thanks in part to their rich history and past strengths, some department stores are taking steps to revive their fortunes.

“You need only look at something like Nordstrom’s Local as an example of one of the few remaining viable department store retailers understanding what the next chapter looks like,” Stein said.

It’s an approach that, while couched by co-president Erik Nordstrom at Shoptalk this spring as a way to serve customers in an omnichannel era, harkens back to the previous department store era approaches of keeping inventory in back rooms and offering tailoring and home delivery.

“We’ve learned that if it’s a smaller store where there’s not merchandise to display, it’s easier to communicate all the services we have and engage with customers,” he said, noting that while alterations represent one of the company’s oldest services and that “we have the most tailors of any company in North America,” Nordstrom has only recently highlighted that at its Local stores, to its benefit.

E-commerce has mostly taken over the convenience and price plays, so shoppers need more reason to go to a store, experts told Retail Dive. Macy’s and others have shaken up beauty sales, freeing employees to be brand-agnostic and developing exclusives, to defend against Sephora and Ulta. That needs to happen across the board, according to Brown.

“To be successful, department stores really have to work on their ability to incubate new and exciting brands, and have a curated assortment and experiences that drive traffic to the store,” he said. “If it’s all about price, the consumer will stay at home and shop online. If it’s about experience and emotional attachment, then consumers will be loyal to that. How Bloomingdales curated their assortments with exclusive events — it wasn’t only about the everyday assortment but how do we rotate excitement through the store to make people come back. Once you do that, the consumer says, ‘I need to look for that at Bloomingdales.'”

After shuttering 100 of the stores that it acquired several years ago, Macy’s has turned to partnerships with retail concepts b8ta and Story (acquiring the latter and hiring its founder outright) to bring in customers with revolving assortments in categories beyond apparel. But, with Story in just 35 locations in 15 states, it’s too early to call those brand-redefining moves. Stephens, who advised Macy’s to invest in that concept, believes it should be applied more widely, while other observers warn that Macy’s must also shutter yet more space.

Stephens singles out startup Neighborhood Goods, which calls itself a new kind of department store, as a model with “food and social events as the centrifuge of their store.” But Brown, Stein and Higgins all point to Target, a discount banner that sprang from former Minneapolis department store Dayton’s. “You walk into the new Target store and it’s as good as these department stores might want to be,” Stein said. “They’re doing all the right things — they’ve curated the private label brands, they’ve created spaces that are open and well lit.”

Department stores abroad are ahead, with better layouts and customer service, according to Stephens. “Most [in North America] are just a sea of mediocre products and discount banners, while new creative companies are re-establishing department stores as entertainment centres,” he said. “In Tokyo, a store called Tsutaya Electrics uses books as a navigation tool to every element of a consumer’s life. They are a bookstore that sells appliances, salon treatments, furniture, electronics and more. And Muji has just opened a flagship store in Ginza that features restaurants, grocery and a hotel!”

There’s no one blueprint, nor should there be, according to Higgins. “There’s just so many ways that a department store can shift or transform,” he said. “What I hope is that they all shift in different ways. Hopefully they’ll migrate away from being all the same.”

Katie Rosen KitchensCo-founder and Editor-in-Chief of FabFitFun

Experience

Prior to founding FabFitFun, Rosen Kitchens was a freelance writer for publications such as the Los Angeles Times, Art and Living, Women’s Life and Dining Out. She also worked in events and marketing at Out of the Box Events.

FabFitFun doesn’t want to tell you how you should look, how you should dress or how you should feel. FabFitFun just wants to be your best friend. The best friend, that is, “that just happened to know everything about beauty, fashion and fitness.”

At least that’s how Katie Rosen Kitchens, co-founder of the subscription-based service and editor-in-chief of its media arm, describes it. In many ways, it sounds like a useful best friend to have — one that’s always digging up cool new products and sharing them with you — but that’s where the analogy falls short. Because most shoppers don’t pay $49.99 seasonally for the luxury of having a well-informed bestie.

In reality, FabFitFun isn’t asking customers to pay $50 for a best friend’s advice every season. Members are paying that much to receive $200 worth of products every three months, discounts on other items sold through its website and access to a whole community of FabFitFun lovers, as well as workout and cooking content.

“Our goal is really to be the most valuable membership in a person’s life,” Rosen Kitchens said in an interview with Retail Dive. “We believe with FabFitFun, you are never too busy to take care of yourself.”

Thinking outside the (subscription) box

There are subscriptions for just about everything, from apparel to beauty to food. FabFitFun falls somewhere in the middle of a few spaces, with a mix of apparel and accessories, home items and fitness products. In some ways, it’s aiming to be a lifestyle box the way that so many direct-to-consumer businesses are trying to become lifestyle brands.

The appeal of a lifestyle brand, at least to a consumer, is largely that it tracks with their own likes and dislikes across several tangentially related categories: a one-stop shop for that piece of their life. One needn’t look far to find examples of brands doing exactly that, including unicorns like Away and Casper, which have both expanded beyond a core product into adjacent categories, aiming to be the brand for travel or sleep, respectively.

With FabFitFun, that challenge is three-fold. Not only does the company have to stay relevant in the beauty space, curating cosmetics and haircare products that its members will (hopefully) love, but the same has to be done in fitness and home products, three spaces that are not all that similar. Whereas a lifestyle brand like Away wants to resonate with a specific travel lifestyle, FabFitFun is trying to harmonize with the individual lifestyles of over one million members, on at least three separate planes.

“If you think about what we do — members are paying us for something that they have no idea what it is,” Rosen Kitchens said of the difficulties in curation. “In order to make that work, in order for them to continue to give us $49.99 every quarter, they really have to trust us and we have to continue to deliver value, surprise, delight and really enrich their lives in a way that feels meaningful.”

That’s been a big shift from when the company first launched the subscription box in 2013. According to Rosen Kitchens, FabFitFun started off with around 2,000 members, all of whom were familiar with the brand through its written content.

“They all came from the website, they were very much my demo, and it was relatively easy for me to pick eight or nine products I liked and have it resonate with our members,” Rosen Kitchens said of the early days of the business, noting that the audience is much more diverse now. “What we know is that an 18-year-old in San Diego doesn’t want necessarily the same product as a 75-year-old in Kansas City, and both women exist in our membership.”

Combating that has meant proactively reaching out to shoppers for feedback on their most recent box and giving customers the option to hand pick some of the items that will come in their box, perhaps selecting a scarf over a haircare product.

Customers also play a key role in the selection process while the next box is being planned. Employees on FabFitFun’s consumer insights team survey customers about which brands they like, what trends they’re excited about and other preferences to get an idea of where they should go looking for their next batch of products.

An additional layer of quality control comes through a testing phase after products have been selected.

“Everyone on the team, from merch to operations to marketing to editorial, really get their hands dirty and try out these products to make sure that they are, one, as effective and wonderful as we believe them to be, and two, that they’re going to resonate with our incredibly diverse membership,” Rosen Kitchens said. “That they look good on all different skin tones and skin types, that they fit on different body types, etc.”

Keeping things fresh

The other challenge with running a subscription-based business, in addition to curating boxes well, is maintaining excitement around a product that comes on a regular basis. Challenges with retention vary depending on the source of the analysis, but one survey from last year found that almost 40% of subscribers end up canceling their services, and only 55% of consumers who consider a subscription actually end up signing up for it.

Other studies have taken a more positive look at the model as it gains momentum with younger demographics. A report by Magid found that renewal rates for subscription services were 85%, with club, fitness and food memberships being the most popular.

While subscription services are certainly catching on in retail, with Gap and Target even launching kids subscription boxes, the ability to retain customers is a constant concern from skeptics of the model. That pressure has arguably led to more flexibility in subscription services, with some offering the ability to skip a month or following a similar model to Stitch Fix, which offers a seasonal option and a one-time “fix” in addition to the monthly product it became famous for.

FabFitFun’s solution to the retention issue was to launch with a seasonal service rather than a monthly one, which Rosen Kitchens believes is a big driver of the brand’s user-generated content.

“What we found is this three months in between boxes really helped to build the anticipation and the excitement,” she said, noting that when the boxes finally arrive customers have “been waiting for it” and jump onto social media to share their favorite products.

Brand and product assortment also play a role in keeping the box fresh every season. Not only does the company try to balance the boxes with a variety of personal care, home, wellness, apparel and accessories products, but they also include a mix of established, well-loved brands with up-and-coming brands that their members might not have tried out yet.

The idea is to give customers some things they already know and love while also fostering a sense of discovery. It’s also left room for FabFitFun to launch its own private labels, which are tossed in with name brands in customer’s boxes and, according to Rosen Kitchens, are also being grown outside of the FabFitFun universe through retail partners like Urban Outfitters.

The brand’s private labels include ISH (I am Smoking Hot), a cosmetics brand; Summer and Rose, a beachy accessories line; Chic and Tonic, a home drinkware collection and two others launching over the summer and the fourth quarter respectively.

The company’s decision to move into private labels followed similar logic to Glamsquad, a service-based company that ultimately launched makeup and hair care products because of the overwhelming amount of data it received from customer feedback. Rosen Kitchens said it all started when contouring was the hip new trend in cosmetics and she struggled — hard — to find a product that made sense for members.

“All of these kits were super time intensive,” she explained. “The idea was, like, you cover your face in all this makeup that makes you look like a lion and then you rub it in. And the reality is: most of our members are working professionals, they’re moms. They don’t have an hour to spend in the mirror before they go to work.”

As it turned out, the solution to finding a product was to stop looking and start creating.

A better box

So far, the company’s efforts in the subscription space seem to be paying off. The retailer raised $80 million in a Series A funding round and has a valuation of $930 million, according to PitchBook. Not only that, but the retailer recently announced its expansion into the U.K. in part due to “thousands of in-bounds requesting FabFitFun” in the area, co-founders Michael and Daniel Broukhim told Retail Dive in an email.

Despite its success in the subscription space, Rosen Kitchens notes that she doesn’t compare FabFitFun to other subscription boxes, but likens it instead to memberships such as Amazon Prime, Spotify and Netflix, which are personalization-heavy services. Much like those platforms, Rosen Kitchens argues, FabFitFun is using customer data to provide a better, personalized experience.

The retailer’s efforts are by no means over. According to the Broukhims, the brand’s latest Summer Box had over 1,000 variations, but onboarding surveys, which gauge a customer’s interest in certain products, are only used to “curate overall boxes,” Rosen​ Kitchens said.

“So we know more of our members prefer silver over gold, we know what percentage of our members are going to find a super heavy scarf useful because of the percentage of members who live in a cold climate,” RosenKitchens said of the way personalization currently works at FabFitFun. “So that’s how we buy product and how we plan for overall box curation.”

Where’s the evidence that it’s working? At least on the business side, 95% of the brands the company sends out in boxes ask to partner with the company again, Rosen​ Kitchens said.

She admits that FabFitFun was slow to start in personalization and is now investing heavily to make sure customers are getting better boxes in the future — a quest to improve choices that, ultimately, her team is making for customers. And yet, that’s also part of the appeal of the box: not having to choose.

“We live in a world of just endless choice and we know that endless choice leads to stress, distress, unhappiness, right?” Rosen Kitchens said. “It’s that ‘paradox of choice’ that leaves us paralyzed. What we’re doing with this is we are curating choice.”