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Web 3.0 and Online Fashion

Posted on Wednesday, Oct 1st 2014

Excerpt from my new book, From eCommerce To Web 3.0.

In 1999, long before fashion on the Internet actually took off, I started a company called Uuma. It was a traditional venture-backed personalized fashion startup that received an acquisition offer from Ralph Lauren before the company was caught in the first dotcom crash.

I am going to articulate the vision behind Uuma, particularly because that vision still remains unrealized. I hope that some entrepreneur, somewhere, will execute on it.

As you know, I define Web 3.0 as a verticalized, personalized user experience. The web is still utterly fragmented. You have to go to different places to find information about the same context. I have long had the vision of a personalized Saks Fifth Avenue. I want my store — my personal store — that carries merchandise that applies to me; that suits my hair color, eye color, skin tone, body shape and personal style. I want it to stock my favorite designers and more like those. And I want to see articles and community discussions that are specific to my interests.

I start from the notion of context and propose that all the contextual elements are made available within the same site or web service. That includes content, community, commerce, vertical search and personalization.

Every season, the merchandise will need to be entered into the inventory database according to the categorization. This is a complex system to build and to my knowledge, it hasn’t been built yet. At Uuma, this is what we had started to build. This was the central vision driving Uuma’s personalized store and personal shopper service.

Let’s talk about the Computer Science needed to power such a system. The entire expert system needs to have a data structure against which the merchandise gets categorized and a rules engine that does the matchmaking based on that characterization. In other words, all the parameters — user, mood, size, event, location, time — need to be clustered, categorized and tied to a rules engine that is the personal shopper. And, ideally, the system also learns. It learns about tastes and preferences, and becomes better at predicting what to merchandise a personal store with.

So far, the experience of a personal shopper has mostly been available to high end, luxury customers. My version of personalized shopping could be made available more broadly.

There are, of course, degrees of personalized experiences. A basic level of personalization can be achieved by mass brands using technology, especially intelligent agents. But luxury brands could layer in additional levels of personalization, including human personal shoppers who use technology to track your closet and your preferences and then offer additional judgment to augment the user experience and put together custom collections. My point is, the entire user experience can be massively enhanced to reach degrees of customization and personalization that we haven’t seen yet.

Finally, if you mine the data collecting in these online stores and pass some of that back to the designers, they can create custom collections based on specific types and styles of customers and be able to sell them effectively, knowing exactly what retail interfaces the customers are hanging out at. These are incredibly exciting possibilities for the business of fashion to become more personalized on the one hand — and also more scientific on the other. The fashion industry could become more financially successful by utilizing personal data: analyzing it and designing and merchandising accordingly.

Now, one objection to this kind of personalized recommendation system could be: “What about my individuality? I don’t want someone telling me what I should wear!”

No, but you do want to walk (or browse) into a store and find thinks that you will like, rather than random merchandise that has no synergy with your taste, size, style.

A personalized store is not in conflict with personalized style. More personalization data in the hands of designers would mean a higher degree of precision in custom designing for different types / styles of consumers … and yes, a personalized store would make it easier to find things that you like.

The other reality is something I learned a long time back by interviewing personal shoppers at different luxury fashion stores. A large percentage of their customers do NOT know what looks good on them. The personal shoppers often act as stylists, educating them on how to accentuate their advantages, and de-emphasize the drawbacks of their body.

By creating a higher degree of personalization around specific body types, this process of education can be delivered much more widely. Fashion is a HUGE industry. The global women’s clothing industry, just a piece of it, is expected to exceed $621 billion in 2014. How many industries do you know of that scale?

Yet, online, fashion has still relatively a small presence.

If I synthesize what I see is the core issue with online fashion, it is that entrepreneurs are thinking of the industry as a distribution channel a la Amazon, with price being the core differentiator. This is a gigantic mistake. Flash sales sites like Vente-Privee and Gilt Groupe focus squarely on price.

Other experiments are in social media. Polyvore is a Pinterest like social media site where people put outfits together. It’s a toy, although, their bet is that they will make affiliate commissions in the range of 10-15% from the overall online fashion e-commerce industry, which isn’t a bad bet. It has brought them investment from Benchmark.

The closest to what I would like to see, although it has no visual merchandising, is also a Benchmark company called Stitch Fix that sends a personalized selection of items to people’s homes. Customers can pay for what they keep, and return the rest. I don’t like this one, because I don’t want things to be sent over that I have not had a chance to see online first. The logistics of return, to me, are not attractive.

To give you a flavor of what could be, a high-end consumer of women’s fashion has a very big annual budget for clothes and accessories. The actual number can be well above $10,000. It is not price that drives this consumer segment. It is design, style, fit, the experience of shopping, discovering interesting new designers, and regularly checking the works of their favorite designers. A personal shopping/store site that can create a compelling user experience for this category could win, say, 20% of the wallet share of this consumer. At $2000 annual spending level, the site would only need 100,000 customers to reach $200 million in revenue. There are very few consumer industries that have the potential of that level of growth with that few customers, which makes it a venture scale opportunity.

So what is the secret of such a site? Why doesn’t it exist yet?

In my opinion, to achieve the full potential of such a site, we need an entrepreneur team who understands Fashion at sufficient depth, as well as Computer Science at sufficient depth. Understanding Fashion means understanding design, merchandising, and marketing of fashion. Understanding Computer Science means understanding expert systems and machine learning to be able to create a software engine that can really get to know each customer, and merchandise to that taste, dynamically create a well designed personal store that showcases that merchandise, and consistently buy products from designers who cater to that taste.

Further, this basic concept could also be applied to a specific designer who designs and markets a new line with some of the same principles as above. Instead of a personalized SAKS that carries multiple designers, we could also look at the opportunities to develop a personalized Ralph Lauren or Donna Karan. This would mean, Silicon Valley will need to start funding new design houses, which it has absolutely no clue how to do.

We could conclude that New York has an edge in this industry. To some extent, that is true. So do London, Paris, and Milan. On the design, marketing, merchandising aspects, yes, there is a basic understanding. However, how to translate that understanding into technology is serious Computer Science. That knowledge doesn’t exist anywhere else to that extent except in Silicon Valley.

And that tells me, it is time for the Valley to wake up, and start exploring these opportunities. There’s not one, not two, not five, but hundreds of very large global companies to be built in online fashion.

And we haven’t even started!

Needless to say, online fashion remains a special interest area of mine. If you are an entrepreneur working in the field, I would very much like to hear from you.

Excerpt from my new book, From eCommerce To Web 3.0.

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