Shoppers once spent hours browsing the rails to find the perfect dress, but M&S believes computers will soon take that task off your hands.
The department store has acquired tech start-up Thread, an online retailer that uses AI to choose and recommend clothing for shoppers.
The thread was acquired as part of a pre-pack administration, an arrangement where assets are sold before insolvency. M&S will hire 30 employees from Thread, as well as assume its intellectual property and artificial intelligence know-how.
Having historically struggled to compete online against rivals including tech giant Amazon and stalwart John Lewis, M&S has been pouring money into digital deals and tech hiring in recent years.
Thread, founded by Kieran O’Neill and Ben Phillips in 2012, developed an app that asked customers to fill out questions about the type of suits and dresses they typically preferred. She would then pull items from a range of brands to feature suggested purchasable looks, saving customers the hassle of surfing the web for the right items.
The technology was launched as an aid for those who are low on confidence in their fashion sense or have too little time to assemble the perfect wardrobe.
M&S believes Thread’s technology can help it boost online sales by £100m a year by improving personalisation.
But will letting bots act as personal shoppers really help M&S lead its digital breakthrough when the idea proved insufficient to support Thread as a standalone business?
Katie Bickerstaffe, co-CEO of M&S who has been tasked with transforming the retailer’s clothing offering, is confident: “We already know the incremental value that personalization can bring and we expect personalization to generate over 100 million pounds of annualized incremental revenue for the business.”
M&S was one of the first British retailers to launch a website, in 1999, but over the years it has lost ground to rivals such as Next and aggressive ‘fast fashion’ brands aimed at younger consumers, such as Asos and Boohoo.
Bickerstaffe has been tasked with transforming its online fortunes as older shoppers, traditionally M&S’ core market, also switch to digital.
In recent years M&S has invested more than £200m to transform its M&S app and Sparks rewards programme, helping active mobile users quadruple to 4m people.
An increasing portion of its sales is expected to come from smarter recommendations, with M&S saying in its latest findings that 20-25% of all its app interactions will be “personalized” in the near future. The introduction of ‘often bought together’ recommendations has already increased sales by £20m.
Bickerstaffe says the Thread deal will help M&S move faster, describing it as a “buy-not-build” approach that will advance customization efforts by three years.
Jeremy Pee, Head of Digital and Data at M&S, says: “Our customers expect a really high level of trust and understanding from us. So this whole agenda behind relevance is really important to building our relationship with our customers.”
Recent findings suggest that Bickerstaffe’s online push has paid off. Online sales increased 4.9% in the first half of the year and accounted for 32% of total apparel and home sales.
Clive Black, retail analyst at Shore Capital, says the Thread deal appears to be “opportunistic” but “highly complementary to M&S’ strategy.”
Earlier this week, Thread insisted it was experiencing a “technical problem with our checkout,” before admitting it would go out of business on Wednesday.
The founders described the sale to M&S as “bittersweet” in a note to customers. Thread will stop trading independently and customers who have already placed orders will not receive their items or be able to get refunds, although they may be able to request a refund through their credit card provider. It is understood that around 30 employees will lose their jobs as part of the M&S takeover.
Interpath will lead administration, according to an email to customers, while Thread’s customer database will be pooled by M&S.
Thread could offer opportunities for M&S to attract younger shoppers, Black notes, while older shoppers who have become more digitally savvy during the pandemic could also benefit from the technology.
“M&S has a slightly older, more affluent buyer, but they’ve gotten a lot more digitized,” she says. “A key strategic ambition is to attract a younger buyer. M&S does not envisage 17 or 18 year olds, but people between 20 and 30, families, couples with children”.
M&S says its personalization software will help build closer relationships with its customers and will have broad appeal across generations.
Pee, of M&S, adds: “This is not just a product aimed at a young audience. We think this has broad appeal. The issue of setting up and making sure that what fits together is one that everyone has.
Joshua Kaiser, of Tovie AI, which develops virtual chat assistants for businesses, says M&S’ deal for Thread is “like giving every potential and existing customer their own personal shopper who understands their individual needs.”
Personalized online shopping is not a new idea. US online retailer Stitch Fix offers a similar online stylist service, where customers take a similar fashion quiz and even offer their own social media profiles.
The algorithms used by TikTok and Instagram have captivated younger internet users by presenting an endless stream of personalized content, with shopping served alongside it.
TikTok launched an in-app purchase feature in the US last month, allowing viewers to purchase an item while browsing its short videos, not unlike a QVC for Gen Z.
Thread offers a potential solution to this challenge but not everyone is convinced.
Tony Shiret, retail analyst at Panmure Gordon, said: “The thread looks somewhat disappointing.”
According to his company’s accounts, Thread has struggled to turn a profit in its ten-year existence. Its latest filings for the year ending December 2020 show a £5.7m loss, following a £7.8m loss a year earlier.
M&S hopes it can mimic the social shopping model that TikTok and Instagram have done so well. The challenge, says Kaiser, is to use the data to improve the shopping experience, rather than simply annoying consumers with poor recommendations.