Carol Spieckerman: Brick and mortar retail is clearly at an inflection point. What’s your take on where things are going?
Nadia Shouraboura: I think we’re hitting a wave of reinvention and the most exciting revolution in retail. Over the last 10 to 15 years, retailers have gone about building the entirely new concept of online shopping, which is a great concept that has created a brand new customer experience. Twenty years ago, nobody would think about shopping online and now everybody does, and it works really well for items where you don’t need to experience the product. For example, if you're going to buy a printer cartridge, you don’t want to experience it, you just want to click and have it on your doorstep. At the same time, there are so many other products for which the plain screen experience is simply not satisfying, because it doesn’t let you touch and feel the product. So in the next 10 years, we’ll see a total reversal, where in-store retail will be powered by technology, but will leverage the theater of retail. Stores will be powered by technology and all the creative people in retail will be redesigning rich, three-dimensional in-store experiences for customers.
Spieckerman: What role does Hointer play?
Shouraboura: What Hointer is doing is looking at what’s not pleasant about the in-store experience, in terms of what’s unnecessary and causes friction for customers, and then taking it away by using technology. What we keep and enhance are the best parts, which are the beauty of the store and the innovation of the displays. We live in a three-dimensional world and have five senses, which means that the in-store experience can be reinvented with so much vigor. That’s where we’re going to go.
Spieckerman: While many other retailers are also trying to go there, you seem to be at an advantage because you’ve essentially started from scratch, rather than trying to make things happen through existing platforms.
Shouraboura: Exactly. I think other retailers are going after small pieces of experience. To me, we need to revamp the overall experience holistically.
Spieckerman: It’s a revolution, not an evolution.
Shouraboura: Yes. Exactly.
Spieckerman: One of many things that you’ve cracked the code on, which has been elusive for traditional retailers, is maintaining enterprise-wide inventory visibility and making it actionable. To me, getting the right products to the right customers at the right time, regardless of the specific inventory at a particular location, is a very exciting development. Why has that been so difficult for traditional retailers to accomplish?
Shouraboura: In the last 15 years, every retailer has put a lot of effort into technology and developing the online experience. They’ve invested heavily in their e-commerce infrastructures and mobile shopping but haven’t focused on technology within the store. In-store technology is the most important thing, because for many product categories, that’s still where customers want to shop. That’s particularly true for items like apparel or jewelry, or things that you want to play with, like electronics. For those things, the in-store experience is actually better. Online, a $1 ring looks exactly like a $10,000 ring, so for jewelry and many other categories, you have to touch things. I'm lucky that these categories are very broad. I see an opportunity for retailers to focus on reinventing the in-store experience through technology the same way that we have with e-commerce.
Spieckerman: Have retailers shifted over to e-commerce too strongly, instead of integrating some of that technology into their store environments?
Shouraboura: There’s no doubt that it was important to educate customers on how to shop online and how to shop mobile. Now, customers are completely ready to adopt a very similar experience within a store, so there’s no barrier. Our customers at Hointer are so used to shopping online and using their mobile devices that it’s completely natural to them.
Spieckerman: So the online environment has primed them for looking at physical retail in a new way?
Shouraboura: Completely. I remember my early days at Amazon, when it was hard to convince customers to give their credit card numbers online or use the technology. Now, the customers who come into my store are completely ready for that. They all pull out their mobile devices. They all know how to download apps. They all know how to tap items. They all know how to check out. It’s just so natural to them.
Spieckerman: Is there a reason why denim is a core category for Hointer?
Shouraboura: To me, it’s not about denim; it’s about the in-store experience. I could replace denim with bras or groceries, because customers will shop those categories in a very similar way. Honestly, I originally wasn’t sure whether we would launch with denim, bras, or shoes. It was literally a flip of a coin. We’ve gone on to add tops and belts, and will add on shoes as well, just to show that the same way of shopping can apply to a large number of categories.
Spieckerman: Are you hinting at major category expansion?
Shouraboura: Absolutely. Just this morning I was talking to a premiere grocery store in the United Kingdom.
Spieckerman: Compared to an average department store, the Hointer environment is quite stripped down. What are your thoughts on the trade-off between ambiance and efficiency?
Shouraboura: A store has to be efficient. Whether it’s filled with expensive, beautiful décor or is a simple pop-up location, the efficiency has to be there. I think stores that have great ambiance should keep it in place but leverage technology to get rid of things that are inefficient. For example, you have beautiful apparel stores within malls but you have to lug your items to the fitting rooms. If you need a larger size when you're standing in the fitting room, you either have to scream for help or you need to leave the fitting room and get dressed and find an item. That needs to be fixed in order for the store to be efficient.
Spieckerman: Is there a “Hointer customer?”
Shouraboura: Hointer is for anyone who wears clothes. We have very expensive jeans and very cheap jeans and young and old people shop with us. It’s just a much more pleasant way to shop.
Spieckerman: Tell me more about your micro-warehouse concept and your plans to offer the solution to other retailers. It seems particularly relevant as retailers forge more partnerships with one another and as they continue to focus on rolling out smaller format stores.
Shouraboura: There are several advantages. 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. I'm very passionate about that, because there’s a lot of selection online and stores need to offer customers a wider selection in order to compete. For example, our store in Palo Alto was very small but we were able to offer hundreds of different jeans to customers. 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.
Spieckerman: Is part of the premise also that the micro-warehouse itself is run so efficiently that you're able to house more inventory and have ready access to it?
Shouraboura: Yes. It’s a much better model than maintaining large warehouses, because you have the inventory much closer to the customer and, in my stores, that inventory is working and customers are trying it out. Customers are also going to walk away with quite a bit of it, so I don’t have to ship it at all. The same holds true online. Why keep inventory in online warehouses when you can put it in a small store and let customers walk away with significant percentage of it?
Spieckerman: What are some of the key advantages to your micro-warehouses versus a traditional back room?
Shouraboura: The key difference is that a customer doesn’t want to wait for an item for several minutes while he’s sitting in a fitting room. He wants them instantaneously. The maximum tolerance is 30 seconds, and that’s how quickly we get products to a dressing room in a Hointer store. In a traditional stock room, that 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 it 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.
Spieckerman: Is it powered primarily by robotics or is manpower involved as well?
Shouraboura: That’s very important to ask. We currently offer a range of solutions, from the very manual to the almost fully automated. This is important because if you’re opening a pop-up store, for example, you want to be able to open it within a few hours, run it well, and then close it within a few more hours. Hointer can open and close down a pop-up store in an hour. For a larger store with less traffic, a manual solution may be more appropriate, because you don’t want to invest in any hardware, but the more traffic increases, the more you need automation.
Spieckerman: So the ability to customize is a big part of your value proposition to other retailers?
Shouraboura: Exactly. What’s important to me is being able to do pilots with retailers which cost almost nothing, and which are very light, easy, and fast.
Spieckerman: Are you in the discussion phase now or have you already forged some partnerships?
Shouraboura: We’re talking to quite a few retailers and working on prototypes for them.
Spieckerman: Are you layering your solutions into their existing stores and operations or creating dedicated spaces?
Shouraboura: We’re working with existing spaces and, to me, that’s much more interesting.
Spieckerman: In these types of arrangements, do you see Hointer as a branded solution or are you comfortable doing it white label and behind the scenes?
Shouraboura: 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 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.
Spieckerman: Although you’ve said that the Hointer model is adaptable to multiple categories, apparel brings high margins, and that’s why so many different types of retailers have attempted to succeed in the apparel business. Many have been quite frustrated by it. What are your thoughts on how to change that?
Shouraboura: Apparel is the category I'm most excited about because it’s hard. There are so many different sizes and colors and so much inventory involved, and it’s difficult to keep inventory lean. Apparel is exciting to me because difficult categories can be made more efficient through technology.
Spieckerman: Having physical locations seems to be central to the Hointer premise, even though those locations are very minimalist in comparison to a lot of traditional stores. Do you have any plans for e-commerce or is it antithetical to what you're doing?
Shouraboura: It’s unbelievably easy for us to add e-commerce capabilities on top of our structure. In fact, our customers are shopping online with us when they shop in a store, so for us, the online component is already there. It has to be a holistic experience, but there is no question that we’ll be adding to the online component, and that it will be easy for us.
Spieckerman: Since your customers are already engaged with your app when they’re in your store, are you mitigating threats of price comparisons or showrooming by default?
Shouraboura: Yes, but it’s also not really interesting to showroom at Hointer, because our prices are lower. We also show our customers Amazon’s prices on our app. We could show other retailers’ prices, but for now, we’re just comparing to Amazon. Our system continuously looks at Amazon prices and we make sure that in the vast majority of cases, ours are lower. Since our costs are very low due to the efficiencies we drive, we can be cheaper than online retailers as well. When your fulfillment costs are high, you can’t give away money.
Spieckerman: In retail, data continues to be a huge focus, and it’s gone way beyond just collecting POS data. What role does data and data sharing with your partners play in your business and how do you see that working with your retail partnerships down the line?
Shouraboura: 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. We’ve just started helping our manufacturers through data sharing, but I think there is an enormous opportunity to help them figure out what they need to make much faster. They shouldn’t have to wait until the end of the season to get the POS data on what was sold. They should be able to see what people are trying on now, what are they seeing and not trying on, and what they are trying on and not buying. Through us, they can see that right away. This is also very useful for our associates because they can see everybody who’s shopping in the store on their tablets, as well as their purchase histories, how good of a customer they are, and even whether they like to talk to sales associates.
Spieckerman: So you’re taking in qualitative data as well?
Shouraboura: Yes. If you’re a customer who doesn’t like to talk to sales associates, and if you share that with one of our associates during a visit, anytime, anywhere, when you go to another Hointer store, nobody will bother you. If you like to talk and you like advice, the sales associates will see that and approach you. They’ll also see your brand preferences. For example, if you tried on True Religion jeans in the past then discarded them, they’re not going to focus on that brand.
Spieckerman: 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.
Shouraboura: Definitely more efficient. I work in our stores all the time and it makes me much smarter in terms of working with customers.
Spieckerman: With your data mining capabilities, Hointer really is a learning lab for brands. They’re probably getting better insight from you than they would in their flagship locations.
Shouraboura: Completely. I'm obsessed with data because data is so important. Retailers aren’t capturing the data that really matters. For example, nobody knows what people are trying in a store. Nobody knows which jeans people tried in a store before they bought and so on. We aggregate data but also maintain it at a granular level, so we can provide customer-specific data to our associates.
Spieckerman: It sounds like your mission isn’t to have Hointer take over the world, but perhaps to help your brand partners and future retail partners become more efficient.
Spieckerman: Given your dual business models, the retail premise and also providing solutions to others, where do you see things going in the next year or so? How many Hointer stores do you need to have in order to drive the other side of the business?
Shouraboura: 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.
Spieckerman: In essence, the stores are showrooms and labs? A living example of what is possible for others?
Shouraboura: Exactly. I want to have a lab in New York and one in Los Angeles or San Francisco where we can invite customers and retailers in so they can see exactly how it works and how it would apply to their brand. We’re not growing a retail chain but instead opening a few labs that help us develop better solutions. Through our small network of stores, we learn a lot, and if the technology doesn’t work, I’m the first to know about it. Since we opened our first store in Wallingford, we’ve also opened a pop-up location and a small store. I wanted to show that we can carry a large selection. At the same time, we opened a larger store in Pacific Place, which is a frequently-visited mall in downtown Seattle. It gets a lot of mall traffic so I wanted to experiment with mall traffic. I'm also looking at some locations on the East Coast, so that we can open a lab there.
Spieckerman: So you aren’t just testing out different geographies, you are testing out multiple retail scenarios.
Shouraboura: Exactly. Destination stores like our Wallingford stores stand alone. There are no other stores around it. Pacific Place, on the other hand, is a 4,000-square-foot store in the center of a big mall. Our store in Stanford mall in Palo Alto was 750 square feet. I'm also planning on adding shoes to the store, just to demonstrate how the concept works for shoes.
Spieckerman: What’s next?
Shouraboura: We’re going to see a lot of innovation, in terms of exploring a lot of very exciting solutions within the store. We’ll see many different product presentations and course, all of it will be omni-channel. You’ll have full access to the inventory, but it’ll be thrilling in three dimensions with five senses. Touch, smell, feel. It’s going to take a lot of people and innovation to figure out how to make the store really exciting, step by step. We want our children to go to the store and have fun. Not just shop. Fun.
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