Julie Bornstein has made a career at the intersection between digital and retail. In 2000, when e-commerce was in its infancy, she spearheaded the team that launched Nordstrom.com, followed by a stint as managing director of Urban Outfitters Direct, overseeing its catalog and Internet division. At Sephora, she broke down traditional silos, holding title as both chief marketing and chief digital officer, and establishing the global beauty retailer as an innovative digital leader. Under Bornstein, Sephora quadrupled its online business, was an early mobile pioneer, and launched one of the industry’s most successful loyalty programs.
Last year, after sitting on its board, Bornstein joined the data-fueled, online fashion start-up Stitch Fix as its chief operating officer. The fast growing e-tail styling service combines algorithms and personalized high-touch stylists to customize and ship a selection of fashion items, or “fix” to customers. We discussed the convergence of fashion and technology, the struggles of most retailers to tap the full potential of e-commerce, and why she thinks Stitch Fix holds the potential to disrupt the industry by making shopping more efficient through technology.
What first drew you to the retail industry?
Business and fashion were the two areas that continuously appealed to me and I always had all of these simmering ideas about the opportunities around them. Even as a teenager hanging out at the mall in the 1970s, I noticed how inefficient the consumer experience was; there was a lack of good choices and service, but also there was really no way to weigh in, share your feed back, and have it influence the outcome. It all finally clicked for me during the summer of 1996. When I was studying for my MBA at Harvard and working as an intern at a private equity firm, Amazon launched – and e-commerce became “a thing.” At that point, I became obsessed with all of the possibilities that e-commerce offered fashion, especially how much more efficient and intelligent you could make the experience. I knew that this was what I wanted to do. When I joined Nordstrom to launch their online platform, I had the opportunity to build what I had wanted as a consumer.
Since then how has e-commerce changed the retail industry?
The biggest fundamental shift over the past fifteen years is that people are not shopping in stores as much. With more consumers shopping online, retailers have had to think about what this means for their business model. To that end, technology has become a source of competitive advantage. The promise of e-commerce and bringing data into the retail environment is the ability to customize the product and customer experience. The problem is that it’s just very hard to do on an individual level in a way that is intelligent and makes sense. Moreover, if you don’t deliver on that promise, it is actually a worse experience than creating a one-size-fits-all offer, because if you’re claiming to do it and then you get it wrong, you look silly and risk turning away customers.
What then is the disconnect between the promise and reality of e-commerce?
Some retailers are further along than others, but most retailers’ core competencies are running stores, merchandising, giving great product, and in some cases running a website. To really exploit the potential of e-commerce requires fundamental change and that means paying better attention to data and bringing on more data scientists. It’s not an easy shift. It’s always hard to change the way you think once you’ve established your business, and for those businesses, there’s already such machinery around running a retail or e-commerce venture. Then again, some retailers have really risen to the occasion. They invested early and they have strong teams running the e-commerce side of their business that can compete with pure plays. But by-and-large most are just trying to collect the data of their store shoppers and there’s little, if any, visibility into that data. The majority of retailers are still a long way off from really understanding how to affect their entire business, including the supply chain, by using data. It will happen, but it is likely to happen slowly over time.
You played a significant role in propelling Sephora into a leading digital player, what motivated you to join Stitch Fix?
I was ready for my next personal career challenge. I had many opportunities, including taking over as CEO at many established brands, but I kept coming back to Stitch Fix. Katrina Lake, Stitch Fix’s founder was incredibly bright and bold. But what really excited me was the idea of combining data and fashion, it was something that I always wanted to do. I loved the consumer proposition. From the start, this business was built on data both big and small; customer and product data, it informs and serves as a platform for everything that we do. We use data to test all sorts of things whether it is how best to match a client with a stylist, how to best match a product to a consumer, how to predict what consumer is going to use our service and even how they will be a better customer in the future, but also how to predict future inventory buys and where to put our next warehouse. In my mind, the combination of the consumer experience that we’ve created and the technology that is fueling what we are doing is going to be one of the biggest disrupters to retail in this decade.
When I arrived, the company had already built a platform to collect extremely rich data. Eric Colson was brought on as Chief Analytics Officer, he was behind the algorithm at Netflix that helped consumers choose which films to watch based on their previous viewing habits, and he has attracted an enormous talent pool of data scientists. Our machine-learning algorithms sift and rank our inventory tailored to each customer – who also gives us a tremendous amount of feedback – and a human stylist takes these results…ensuring that customers receive the most personalized and pertinent merchandise, or “Fix.”
Going forward what do you see as the future opportunities for innovation at retail?
Investing in technologies and innovations that are going to actually enhance the customer experience. I’m talking about the kinds of things that increase customer purchases but also bring customers back repeatedly, as opposed to trends that sound sexy and buzzy but in the end are not actually changing the customer experience. That has always been a big focus for me in distinguishing what to invest in and what not to because you have to make choices. One of my favorite examples at Sephora was the introduction of Color IQ foundation matching. This really combined both the digital and physical retail space while adding value for the consumer in a truly novel way. Foundation is the single biggest category in the beauty business, but it’s extremely difficult to get an exact color match. Sephora developed a technology with Pantone that allowed a customer to come into the store and have their skin scanned, mapped out across 110 skin tones, and provided with a perfect match, based on over 2000 product SKUs. This information is saved in the customer’s Beauty Insider account online, letting them easily replenish the product at their convenience.
As demand for customization and personalization combined with digitalization increases, will we see a time when humans are no longer part of the retail experience?
Machines can do a lot. The learning capabilities of our machines have grown tremendously over the past five years, increasing our ability to take relevant data from a network and give it back to a consumer in a way that’s helpful and informative. In fact, what we’re doing is beyond probably anything out there in this space, but the reality is we believe there is a human element that is always going to be an important layer on top of the data, and that is where we have been able to really cater every “Fix” specifically to a client’s need.
In other words, technology will never be a substitute for the human touch. Providing personal service is invaluable to the consumer experience. I think what is going to be a huge differentiator for those retailers that are going to survive is the ability to create more loyalty with consumers. The important element here is being able to understand the value of training and educating in-store sales associates and then providing them with digital tools where it makes sense. It is something that many retailers are experimenting with now, and while this many sound or feel like a small detail, it is actually an enormous factor in the consumer experience.