12.03.2015 By: Tulip Retail

Bricks-and-mortar retailers steal a page from online merchants

As seen on The Globe and Mail by Peter Nowak for the Change Agents series.

There was a time you could walk into a store and buy something without anyone there knowing the first thing about you. In the near future, there may not even be a point to shops existing unless they do the opposite. They’re going to have to intimately know you and the things you like.

“A lot of our customers go into our stores with their girlfriends,” says Ethan Song, chief executive and co-founder of men’s clothing retailer Frank and Oak. “Our role is to be our customers’ girlfriends – a trusted adviser to help them look good.”

Retailers are increasingly relying on customer data to augment their role as “trusted adviser,” since many feel it’s their best way to compete against cheaper and expedient online alternatives such as Amazon. People do still want to shop in actual stores, but e-commerce websites have made consumers expect more personalized service – like Amazon’s recommendations – which requires data. And where there’s data, there are opportunities for startups.

Despite the fact that its stores sells clothes, Montreal-based Frank and Oak is among those companies that considers itself a data-driven startup. Started in 2012 as a strictly online operation, the company in some ways bears more of a resemblance to a social network or dating website than a traditional retailer.

New customers fill out an online profile where they list their sizes, preferred styles and colours. Algorithms, coupled with human style advisers, suggest purchases, which are then shipped to the customer. The more a person buys, the more bespoke their future recommendations. It’s similar to how Netflix suggestions improve the more you watch.

Last year, Frank and Oak began opening physical stores to grow its brand and to provide even more personalized service, Mr. Song says. The company now has nine outlets in Canada and two in the United States, with each new location based on actual user data. A new store is more likely to open where existing customers live, rather than just in trendy shopping locations.

The company’s growth is attracting venture capital money and defying the financial arc of clothing retailers such as Target and Jacob, which recently shut down operations in Canada. Frank and Oak last year raised $15-million (U.S.) in Series B funding, led by Goodwater Capital.

Customization and personalization are the key. Customers can make store appointments on their phones, then have associates ready with recommendations in the proper sizes as they arrive.

“You literally have someone helping you out for half an hour. It’s highly personal,” Mr. Song says. “You can’t just sell a product anymore. Experience is one way that retail can innovate.”

Ali Asaria, founder and chief executive of Toronto-based Tulip Retail, says that “experience” is verging into the theatrical. Buying music in a store, for example, is dead, but going to concerts is alive and well. Retailers are having to create a similar experience.

Read the entire article at The Globe and Mail.

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