With its new high-tech, interactive fitting rooms powered by technology from Oak Labs, Ralph Lauren is attempting to create value that has been lost in retail to date. More specifically, using data gleaned from a customer’s in-store behavior, Ralph Lauren is making sales that it previously would have lost due to customer frustration. In an article in Women’s Wear Daily, the CEO of Oak Labs, Healey Cypher, quotes several telling statistics: “if someone likes something but the exact size and color aren’t in front of them, there is a 65 percent chance that they will not ask for help. If a shopper does find an item they want to buy but the line is over seven minutes long, there is a 79 percent chance that they will abandon that purchase.” Cypher is describing a destruction of value, plain and simple, that his company Oak Labs (along with customers like Ralph Lauren and Rebecca Minkoff) hope to transform into value creation through data gathered in the fitting room. When a customer enters one of these new fitting rooms, she can change the lighting, requests additional sizes and colors, and get advice on how to style a particular piece. She also can avoid the long lines at checkout by indicating via the touchscreen that she is ready to check out. This process creates a lot of value for the shopper who is more likely to leave with the right merchandise for her. Alternatively, if the customer chooses not to buy in store, she can receive a text immediately after her store visit with direct links to purchase what she tried on in the fitting room. RFID tags on all the merchandise enable this kind of tracking and personalization.
Ralph Lauren is different from its competitors who use only e-commerce as their primary source of customer data. Cypher was quotes in the same article as saying: “There is a common narrative, especially in retail, that online is a better place to collect data — but that’s only because they do it. I’d argue that the physical store is a much more interesting place to gather data. Online is black and white, and in-store is all the shades of gray — the nuanced data that actually makes the experience better.”
Retailers who embrace this in-store data gathering, like Ralph Lauren, will capture value because they know their customers better than their competitors do. Having data around what customers try on in stores, what they leave in fitting rooms, what language they speak, what items are most popular, etc. is like gold when trying to tailor design, merchandising, and selling efforts. Data is becoming a commodity, so having a strategic point of view regarding how to use it is what is becoming most highly valued. Traditional e-commerce provides droves of data, but through that noise it is more challenging to know what matters. Getting access to more “gray” data, as Cypher says, will set apart certain retailers like Ralph Lauren.
Ralph Lauren’s operating model drives its business model. Store associates are a crucial element of a shopper’s in-store experience and ultimate decision to purchase. Oak Labs, which argues that its fitting room technology “re-humanizes” rather than “de-humanizes” the shopping experience, made sure to design its technology with an interface that is very store associate-friendly. The company understands that the store associates are actually the primary users of the technology, and if they do not use it, it will create no value for the customer or for Ralph Lauren. “Innovation in stores normally fails because associates don’t adopt it. We’re building associate software as if it were consumer-facing because they are arguably the most important consumer of our technology,” Cypher said [WWD article].
So what could go wrong? Well the story of Prada in 2001 could tell such a tale. The retailer implemented similar technology in four “epicenter” stores in Manhattan just to be considered a failure. Technology was clunky and not embraced by store associates, while the buzz around it created a lot of tourist traffic in the stores (http://money.cnn.com/magazines/business2/business2_archive/2004/03/01/363574/). To ensure the new fitting room is not just a gimmick, Ralph Lauren will have to get feedback from both store associates and customers to iterate on the model and improve. In addition, the retailer should think about how to use the data they gather to create additional value once the shopper gets home (even beyond the text with links to purchase what was tried on in store). Having this new kind of big data can help retailers like Ralph Lauren better understand how their customers think and shop. This should result in increased value for all if the retailers know how to use it in the right way.
Video showing how the fitting room and store associate app work: