Analyze The Business Logic Of "Future Store"

According to the world clothing shoes and hat net, in the basement of a brick wall built in Hackney, Hackney, the Longmen shelf is full of Balenciaga developers, and the The Store of the Future is about to open. Right here, valuing US $one billion. fashion Unicorn Farfetch has been conducting a technology driven retail experience test. Later today, the company will announce the news at the FarfetchOS conference of the new design museum in London, announcing that they will further expand the platform to the field of physical stores.

The time of the press conference is critical for Farfetch, which is reportedly preparing for listing. According to the website analysis service provider Alexa, this network will be between consumers and selected buyer stores. brand The connected company is now the world's most expensive luxury business website, surpassing Yoox Net-a Porter and Neiman Marcus. Although Farfetch has not yet been profitable (market news indicates that it lost $40 million last year), its total sales in 2016 reached $800 million, an increase of 60% over 2015, and its annual revenue is expected to be around us $150 million. (allegedly, Farfetch earned 25% commission from its partners' net income. )

But "future stores" may prove to be one of the most important initiatives of the company. although Luxury goods The growth rate of e-commerce is very fast, but by 2025, the proportion of online purchases of personal luxury goods will increase from 7% to 25%, which means that in the foreseeable future, most of the consumption will still take place in physical stores, and still do not benefit from the digital revolution.

From the locker room equipped with photo kiosks to the stage with screens on the forehead, most of the so-called retail technology is a gimmick. Compared to the sales promotion, it brings more public relations effect in the short term. By contrast, the goal of Farfetch's "future store" is to greatly enhance retail productivity through valuable user data and enhanced interaction between consumers and sales.

This concept is also modular, which means that brands and boutique partners can choose and choose the most meaningful components for their business. Farfetch has developed the core operating system of "future store" operation, which is considered to be a platform, which means that most innovations will come from third parties eventually, and these third parties will establish new services between them.

At present, Farfetch has developed several key applications to show its strong platform: the general login account enables customers to identify the customer when they check out at the store; the racks that support RFID technology can track and detect which products the customers are browsing, automatically fill in the customer wishes list; the digital dressing mirror can see the wish list, and transfer products of different sizes and colors; the payment function of the existing mobile payment experience similar to the Apple store (Store Store); and naturally, the underlying data layer connecting the preceding service and the Farfetch platform is also essential.

The "future store" is still in the testing stage. But this autumn concept will be launched at Browns, a London department store boutique bought by Farfetch in 2015. Thom Browne will also join the Farfetch platform and install this technology in its flagship store in New York. The overall business deployment plan is scheduled for 2018, but the business model is not yet determined.

Before the official unveiling, reporters and Farfetch Jos and Neves, the founder and chief executive, met face-to-face to further understand the willingness and business logic behind this "future store", and to sneak a peek at this retail experience.

　　 Reporter: why do you definitely want to launch the "future store"?

JN: about two years ago, we began to think about this question: what will people buy fashion products after 5 or 10 years? Today, more than 90% of the transactions take place in the physical store, and this proportion will be around 80% before 2025, still representing 8/10 of sales. Although the Internet has affected most consumer behavior nowadays, attracting people's attention depends on digitalization and network. The Internet is the new generation of TV and paper publication, representing the whole future of the new generation. But when it comes to buying fashion products in real terms, online sales will be plain after reaching a certain height. You can't download fashion products from the Internet, which is very different from movies or music.

Therefore, we must understand the three key facts: first, the Internet is affecting consumer behavior completely, affecting the manufacture of desire completely; two, the growth rate of online is far beyond that of the offline; but the third point is still under the line -- and will be the place where most transactions happen. So what do you want to do to rationalize all this?

This is really creating the luxury shopping experience of the future. Starting from our first day, we are building a complete channel. Basically, we can connect entity inventory to digital platform from the very beginning. The first step is the single view of inventory, and then more full channel propositions are launched, such as the realization of delivery in the 10 cities, and the pick-up of goods under the wire. The next step is to "shop in the future" and use the physical store as a service point. This is "post-omnichannel" or "augmented retail".

The store will survive, and will continue to be at the center of the shopping scene, but it will not be like this. These "lost" shops (relative to "interconnected" stores) will disappear in the future. It's as simple as that. In fact, Farfetch itself is the best proof, because once we connect a boutique to our platform, we contribute about 45% of the sales volume to this store. We are like the OpenTable of the boutique industry. The location of the online reservation restaurant knows which restaurant has a vacancy, and we do understand which pair of shoes on each shelf is available. We know how fast the offline development is and how fast the online development is. As long as your actual inventory is available to the global audience all the time, you can greatly enhance your economic performance.

　　 Reporter: what kind of experience are you going to launch?

JN: stores in the future are built on three principles: first, humanization. If you walk into a store today, salesmen can do two things with computers, such as if they are looking for shoes in your background, or they ask you what your name is and look for it in the database. Does this make you feel more human? No, at all. Future stores can fundamentally liberate customers and shop assistants so that they can focus on human interaction. In the future, shops will give the shop staff the right not to become an inventory manager, but to become an influx of people in this store. But now they are stock managers.

The second principle is modularity. We never believe there is only one store in the future, but 1000 "future stores". Think about how brands will entrust interior designers to create different space, smell, experience and display merchandising. We do not want to see the experience of one size fits all. All of these modules are applicable to some brands, but not for other brands.

Third, open architecture. We don't think we can think of all the innovations. Our idea is to create a platform for "future stores", inviting start-ups and brands to build on their own.

　　 Reporter: are there any applications you developed on your own?

JN: the core data layer is ours, like glue gluing everything together. All these systems should be able to communicate with each other. This is also a big problem that you see today in the physical store technology: they are all broken together. Digital dressing mirror does not connect with the payment office, and does not exchange information with the network. But our own dressing mirror and hardware itself are built by another company, but we built the software that can directly extract data from the database. So if you buy Thom Browne stuff (one of the customers of Farfetch Black & White, which is owned by Farfetch), and you just added a single item to your Thom Browne's wish list, it will appear on our shop's dressing list.

No matter what kind of situation, data is necessary. The most important thing on this can be built by Farfetch or a cool start-up company or brand building. We are working with RFID related enterprises to cooperate with hologram company. We didn't plan to do all these things ourselves. It's kind of like an operating system in the store, and then you do the application.

One important component is what we call the The Shop Floor app, which is used by shop assistants. In this way, we hope that we can do everything internally, because this is what we use to deal with all aspects and all data.

　　 Reporter: what is the consumer side?

JN: on the customer side, we will provide a Farfetch application that will match the "future store". In the future, we will also create white label applications for the brand, or just provide the application interface (API) to integrate them into their own applications.

　　 Reporter: Yes, as Apple released the iPhone phone, no one imagined that all applications could be built on the iOS platform in the future. But what do you think people will build on this platform?

JN: it's really hard to imagine. Who knows that one day Shazam will recognize the music you are listening to, link you to iTunes Store, and who can imagine the emergence of online dating applications? We are going to demonstrate some of the functions that we think are very simple but powerful. For example, if you walk into a store, you will be recognized, whether it is through a network beacon like iBeacons or a Apple Apple wallet (Apple Wallet), as if you were boarding the plane to scan the boarding pass. Then we call it "offline Cookie", which does not scan anything, and automatically add these products to your app's wish list when you touch the store product.

　　 Reporter: How did this happen?

JN: basically it depends on radio frequency identification technology and mobile radio frequency. When you become the nearest product and the product starts to be moved, you will be detected. So as long as you move the product away from the rack, this will add to your wish list, and then you can try on your favorite product in the fitting room. Do you want to try clothes in 5 minutes? These clothes are all there. You can use these mirrors to request products of different colors and sizes. Then you can wear the clothes you want to try out. The last is payment, which is free to move in our shopping center, so you don't have to run to the cashier to pay. And by paying for your application, you can also receive a sales assistant from a store, so you can initiate dialogue with them and keep in touch. The WhatsApp with sales assistants in the store is very common now. Establishing contacts with customers is an important tool for shop assistants. But it used to be a little weird. You have to fill in some forms or something. But in the future, this is automatic.

This negotiation is completely "millennial" style: if it's good, I don't mind giving you my message. This is what we do every time we open Instagram and Facebook. We know that someone is collecting all these data, but the exchange of these data is useful. Data is like money, and I expect something in return. This should be something that "future stores" must do, but once you let consumers share their information, these things are equivalent to the golden powder that comes into your pocket. You have sent a request to the client, hoping that they will agree to use the Cookie of the website. What we do is like an entity's Cookie. You can get to know all the contents of it: how long the consumer has been in the store, what products he has picked up, what products he has tried on, what sizes are suitable, which are not suitable, what kind of payment method he likes to use, whether he wants to deliver goods to his home or hotel. Also, these Cookie will connect with Cookie on line. This creates a real single view of the customer.

With this data, you can provide customers with super personalized experience both online and offline, so that your company can run more efficiently. For example, in marketing, because you already know that a customer came to your store 5 hours ago and picked up a handbag, you can now aim at them at Instagram. Let us remember this: 90% of these things are already happening.

　　 Interviewer: how do you make money from all these functions?

JN: the business model has not yet been finalized. Achieving win-win is always the concept of Farfetch. Our platform is entirely revenue sharing mode. There is no minimum and no set-up costs; Black & White are mostly income sharing. Future stores will obviously involve physical hardware, which is related to initial construction and so on. But we will never only do hardware, nor will we only do software licensing business. We are upgrading the retail industry to become a positive force in the industry. If we do it, everyone can make money. So we finally decide how to divide the money, which will ensure that everyone can become a winner.

　　 Reporter's viewpoint: is it worth looking forward to?

The "future store" has been developed for about two years, during which Farfetch revealed details of its plan. However, this fashion "unicorn" in May last year, it completed the 1.1 billion F round of financing, valued at about 1 billion 500 million U.S. dollars, the company has been very capitalized, and invested a lot of resources to develop "future stores", Farfetch hired Harvey Nichols department's former multi-channel director Sandrine Devaux as managing director, led a dedicated department to implement the strategy, and also bought London's boutique Browns, as a similar store innovation experiment device. With such investment, it is very worthwhile to look forward to it.

　　 First impression?

Technology in retail stores is often perceived as a gimmick, cheap and disorderly retailing of luxury goods. The most notable of Farfetch's "future store" display is its simple and elegant customer experience. In particular, the digital mirror is very advanced and can be integrated seamlessly with the luxury flagship store.

　　 Maximum potential?

What Farfetch calls "offline Cookie" is of great value. But perhaps the most promising is the company's open architecture, inviting the third party to build applications on the "future store" platform. This allows them to take advantage of broader ideas and expertise rather than relying solely on effective internal development. It also helps to reduce the risk and cost of innovation. When the Apple Corp launched the iPhone app store in 2008, it could not predict what applications people would develop on the iOS platform. But now, a lot of innovative products have been born on it, far beyond the creativity that Apple Corp can achieve alone. Today, consumers use iOS applications to order taxis (Uber), listen to music (Spotify), share Instagram and go shopping. However, in order to achieve this effect, Farfetch will need an ecosystem to attract and nurture partners and ensure the implementation of incentives. Like Apple Corp, it also needs to strike an appropriate balance between openness and control, achieve innovation, and ensure seamless and high-quality experience.

　　 What are the disadvantages?

Today's consumers are used to sharing their personal information in exchange for services such as Facebook and Instagram. But trading must bring value to both sides. There is no doubt that data collected by future stores are very powerful for brands and retailers. But does it provide enough value for consumers? Of course, it remains to be seen what types of applications people will create. A loyalty program will give consumers additional motivation to consume and promote greater interaction and participation. It also allows more people to download Farfetch applications.

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