Dr. Nadia Shouraboura may not be a household name…yet. Nor was Jeff Bezos in the early days of Amazon. And among those who do know her, she may be considered audacious by some, but not by moi. She was quoted in a recent article about her technologically disruptive, no, potentially nuclear-level disruptive, logistics, distribution, consumer-delighting and personalized new retail model: “Soon, every item in the world will be sold like this. It will be bigger than Amazon.” No small vision here, and no small effort to make it happen. But in my opinion, you can take that declaration to the bank. And she’s got the creds to justify such a bold statement about her unique model which is described below. Also to pique your interest, Macy’s is nine weeks into a beta test of this unique model, seeing its potential.
What you are about to read is truly a quintessential example of the convergence of the art and science of retailing.
Shouraboura has a Ph.D. in computational geometry, which I’m told is the foundational discipline for robotics. That is the science of using a computer to move objects through space (read: the distribution of goods from one place to another, to get the right product and right amount to the right place at the right time, and quickly). She headed up global fulfillment technology and the complex supply chain for Amazon, spearheadeding one of the most powerful global distribution and logistics machines in the world. She has now created Hointer stores, a concept I conjectured a while ago that Bezos might be envisioning for the future of Amazon. If my prediction is correct, Shouraboura is ironically leapfrogging over her former boss.
And, by the way, let’s keep in mind that Amazon’s front-end website interface with consumers is just like any other e-commerce site. In fact, it’s rather utilitarian and not very compelling. The real genius of the model is in the back end, and all of the operations that Shouraboura headed up.
So What’s The Doctor’s Future Vision?
What is this breakthrough concept? It starts with Hointer (don’t ask), which is best described as a showroom, rather than a retail store, which was launched in Seattle in 2012 as a men’s denim shop. Initially, the mission was to help men find the perfect pair of jeans for every occasion. Certainly, one of Shouraboura’s learnings from her Amazon stint was that while shopping online was quick and convenient, there were many product categories like apparel that needed to be touched, felt and tried on (I believe the online apparel return rate for poor fit is still somewhere north of 40%). But what she quickly learned in the physical world with Hointer was the loss of the speed and convenience of shopping online (sorting through piles and racks of stuff, standing naked in dressing rooms waiting for help, long checkout lines, and for many, having to put up with cranky and clueless associates).
So the Dr. is no slouch when it comes to computational geometry, and she gets a vision: “I wanted to bring the efficiency of online shopping into the physical store,” said Shouraboura, essentially, combining the best of both worlds. As she was quoted, “There’s a very beautiful part of retail, the beauty of the store and the fun that people have when they go to the store, but there is a part that’s really old and hasn’t changed much. It could be a great experience if they added great technology to it.”
Without getting into the weeds of the Doctor’s technology wizardry, she and her team created an end-to-end software platform that enables the following showroom model and great new shopping experience.
The showroom consists of one sample of as many styles of jeans, shirts, and tops as Hointer wants to market. The shopper sees a style he likes and he simply downloads the Hointer app and scans the e-tag on the product. It triggers a visual of the garment on a celebrity on the mobile device, then allows the shopper to tap on a size and color choices. The shopper is immersed in a digital experience immediately. But the big aha moment that leapfrogs even Amazon’s one or same-day delivery, is that the selected item(s) will arrive via a chute into the shopper’s designated dressing room in under the 30-second customer-tolerance level. The goods are “beamed” (so to speak) into the dressing room from an uber-efficient “micro-warehouse,” as Shouraboura calls it, (a fraction of the size of traditional DC’s), sitting behind Hointer’s showroom. Her “secret sauce” is a combination of micro-robotics and human-powered logistics processes.
Shouraboura was quoted in another article, “In a traditional stock room, the customer is going to have to wait five minutes for somebody to fetch the item. At Hointer, everything is powered by technology, from how the micro-warehouse is organized to how its items are packed. The technology knows all of the items and how to retrieve them and it prioritizes tasks. It’s a very efficient, very compact warehouse that has the ability to respond to a customer request very quickly.”
Items that don’t fit or are not preferred can be deleted from the shopping cart and dropped into an outgoing chute that sends the stuff back to the warehouse. If the shopper wants to try on a different size while in the dressing room, he just taps on the app and the additional items will appear in the chute in seconds. The items are then purchased by swiping a credit or debit card. If shoppers so desire, they can enter, transact and leave without ever connecting with an associate.
On repeat visits, since the shopper’s credit card is already on file, he can exit the store without even swiping their card. The app knows what he left with and will automatically charge him.
“We want a zero-action purchase,” Shouraboura says. “It’s not ‘click and you’re done.’ We want no clicks.”
Talk about personalized shopping experiences being the future? Just as Amazon and other e-commerce sites are able to aggregate finite profiles of each customer and use them to personalize the online experience, Hointer is also getting similar information. Shouraboura was quoted in another interview, “We collect an enormous amount of data on what customers are doing, and the best part is that they don’t need to do anything special to give it to us. We simply collect what they’re doing in the store. When you shop at Hointer you’re not asked to complete surveys or give opinions. You just do what you do and we record everything. We record everything you try on, everything you discard, everything you touch. It’s the same for our associates. We record everything they’re doing and then we aggregate the data several ways. That really is a two-fold advantage. You’re not only driving personalization with your shoppers but you’re also making the skeleton crews in your stores much more efficient.”
So, for example, once the shopper is in the dressing room, Hointer can add suggested items to the chute that will complement the initial selection and will be liked by the shopper, based on his database profile. The now fewer associates are also better equipped with all of the personal data to help guide the shopper to items they know will be of most interest. In fact, associates will likely take on a new moniker of in-store stylists. And there are plans to enhance the app with Instagram videos of models wearing the products on a runway.
Indeed, it’s an online shopping experience 3.0, with the magic of an uncomplicated and entertaining real-time experience of high-tech and high-touch interactivity. Yes, it’s a co-created personalized experience, and this is the epitome of the convergence of the art and science of retail.
Let’s Check Off The Financial Benefits
As Hointer continues to test the model, they’ve learned that the overhead, operating costs, inventory and shrinkage are greatly reduced, and the sales lift is between 30% and 50% greater than traditional stores. Store footprints required, including the micro-warehouse space, is one-fifth that of traditional stores. The model requires roughly half the number of traditional staff and associates. Because of the unique in-store shopping activity data, the process optimizes inventory and assortment allocations, lowering inventory by an estimated two-thirds that of traditional stores. Based on digital inventory tracking and one sample per style in the showroom (vs. racks and shelves full of stuff), total inventory requirements decline and stockouts are almost non-existent. And shrinkage reduction is a whopping 90%. It also eliminates about 60% of in-store tasks such as refilling stock and housekeeping, thus, freeing up associates to focus on being in-store stylists and selling.
Hointer finds that customers who normally try on three to five items are trying on an average of 12 items because the process is so much faster. Their basket size increases by 50%. And there is no waiting in line for check-out. Finally, there are almost no returns.
Today Hointer, Tomorrow The World
While I’ve been talking about Hointer as a store, which might suggest the beginning of a chain of stores, Dr. Shouraboura’s vision is larger than being just another retailer with a differentiated model. She wants to change the entire industry. This is kind of reminiscent of Steve Jobs’ quote when trying to lure John Scully to Apple: “Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?”
Shouraboura envisions partnering with retailers and spreading her software platform throughout the industry, converging the science of her technology with the art of how each retail brand will create a compelling showroom environment and shopping experience. She was quoted, “I’m very comfortable with working behind the scenes. In the future, we’ll be working with many different brands and in-store experiences. The retailers will come up with the customer-engaging showroom solutions and the efficiency that we bring will come from the back, from our technology. I would much rather be in the back and allow retailers to innovate in the front. We’re not planning to be aggressive at our own stores at all. I would like to open a few and we’ll open some other locations in order to make it convenient for retailers to see how it works.”
She says, “Hointer is a technology incubator. We are a software startup, period.” Currently, Hointer is still in beta test mode with developers on the sales floor watching and responding to how customers shop, and pushing code in real time.”
The Doctor plans to expand into other product categories and hopes to launch a sister shop called Hointress (again, go figure on the name) for women.
Macy’s Out Front Again
Shouraboura seems to be off to a good start on her quest to change the (retail) world. And that would be with “amazing Macy’s,” recently cited in “The Robin Report” for being ahead of the pack in initiating the testing and adoption of innovative technology solutions. They are jointly beta testing the Hointer model with Shouraboura’s team at Macy’s Manhattan Beach, California store. It’s in the middle of a vibrant Millennial community where mobile shopping is embedded into their DNA.
The store footprint is 7000 square feet, of which about 15% was converted to a mini-warehouse. Before the beta test, the store offered a good selection of swim and activewear, but Macy’s wanted to expand the selection with many new hipper and cooler styles. With the Hointer model, it’s easy to increase selection without increasing the total footprint. As Shouraboura said, “In a micro-warehouse store, you can offer customers a lot more selection per square foot. So you can actually have a very small store with a massive selection. The second advantage is that, with a micro-warehouse, regardless of whether someone is shopping in your large store, your small store, or your pop-up store, he or she can see the inventory everywhere else. For example, they could try on a pair of jeans in a small store that doesn’t carry all of the colors but those colors could be represented in swatches or in samples. The customer could then order it instantaneously in any color they want. This massively enriches the experience in smaller stores, allowing customers to access the same selection as in large ones.”
Martine Riordan, CMO of Macy’s, recently presented the highlights of the project at the University of Arizona’s Global Retail Conference. She said, “This is one of our proudest moments, still in beta testing, called Macy’s Go.” Riordan went on to explain how the technology allows Macy’s to house all of the inventory in a stock room (or the micro-warehouse as Shouraboura calls it) just behind the shopping area, with the exception of select styles that are presented in the compelling live showroom. She said, “It gives (us) the opportunity to load up (the floor) with everything (we) own in, say, swimwear.” She explained that Macy’s can assort 600 styles on the floor vs 300 because they have so much stock. About the process, Riordan said, “A customer opens the app, checks off the styles, checks off the sizes, because she’s not sure whether she’s a small or medium, for example, and puts in a couple of colors. Immediately that goes into the stock room. We have someone back there who pulls it. The customer goes into the fitting room and receives all of her items down a chute. If she needs anything else, she just goes to her mobile device and adds it, and doesn’t even have to go back into the store. It just comes down the chute.”
Riordan added, “We’ve had it up and running in test for about nine weeks now, and it’s one of the most innovative things we’ve done.”
Amazon lost Nadia Shouraboura, and I believe this was a big loss for Mr.Bezos because I believe he has the same vision for Amazon as he aggressively builds out his distribution centers. And as I have written in several articles for this “Report,” I predicted his next move would be to open up small showrooms around those distribution hubs, with localized assortments of goods that Amazon’s big data identifies as preferred by consumers in those neighborhoods.
Well, he’s been outflanked by Shouraboura, the very genius that played a major role in building Amazon’s distribution phenomenon, in addition to running it. What irony!
Indeed, this is the Distribution Century, and I’ve been saying for years that the ultimate strategic weapon is in shrinking the distance, time and cost of distributing goods and/or services to consumers. In other words, the edge is in distribution points providing quicker and easier access to consumers and quicker and easier access for consumers.
Walmart disrupted traditional distribution methods in the middle of the last century. Amazon (with the Doctor) profoundly took it a step further. Now I believe Nadia Shouraboura is in the embryonic stage of changing the world. In her own words, “it will be bigger than Amazon.”
Sorry Jeff, your Amazon might be getting “bigger, faster” every day, but, the Doctor’s model is better. And if she scales it fast enough throughout the physical retail industry, by the time you copy it, the world will be yawning.