Smart technology helps Wet Seal CIO Jon Kubo keep pace with his customers.
by Aaron Lazenby, February 2011
According to Jon Kubo, senior vice president of e-commerce and CIO for the Wet Seal, Inc., customers are increasingly empowered to make immediate demands for the products they want—and at a price they want to pay. Those are difficult forces for an apparel retailer with two brands targeting young women: Wet Seal (for teenage girls) and Arden B (for women between 25 and 35). That difficulty is magnified by an increasingly tech-savvy consumer who can go online and order from sellers all over the world.
But Kubo sees technology as more than a force that disrupts the traditional retail model. “The same technology that enables consumers with better information and the ability to network among themselves is also available for the retailer,” says the veteran technologist, who has worked with e-commerce and bricks-and-mortar businesses. “Retail technologies have significantly changed from traditional back-end retail merchandising and point-of-sale and allocation systems to allow us to do things that we have not done before.”
Kubo has embraced the evolution of retail enterprise technology, championing new point-of-sale and merchandising systems and promoting the use of mobile and social technologies among his customers—everything from iPad apps to Facebook communities. Profit spoke to Kubo about the dynamic world of retail IT and harnessing the energy of the empowered consumer.
Profit: What role does corporate IT play for a company that has more than 500 retail stores all over the U.S.?
Kubo: I start off by looking at what customers want from their relationships with the businesses they frequent—they want transparency and they want information similar to what they demand from their social relationships. That, coupled with the recession, has led consumers to be a bit bolder about what they demand from a retailer. So business models are changing drastically.
A key for Wet Seal is to support localization for stores that are clustered and behave the same, or even for individual stores. And when I say localization, I mean the ability to look at what people are buying locally, give them the correct pricing, give them the correct sizing, and give them the correct merchandise assortment. All those things affect the entire retail technology stack.
But earlier merchandising systems were not localized. We didn’t have the right types of analytics to do these things. And as a specialty retailer, we don’t have the field staff to do things a big-box retailer can do—to localize pricing, promotion, and assortment.
So we have to totally rely on corporate systems to do these things.
Profit: How does centralized corporate IT make that happen for the local stores?
Kubo: When you start looking at an optimized price or a localized price, that starts to run into your entire IT stack. And so now, instead of simple price schemes of 10 percent off of a single item or 10 percent off of a department, we’re looking at, “Buy one of these in this department and get one of these free in the other department.” When you start running complex promotions that cross departments and have thousands of combinations, we’re talking about billions of combinations the pricing system has to look at to really understand if a promotion is meeting some minimum margin requirement.
All of this is starting to tax retail systems like never before. We have 500 stores and maybe 10,000 SKUs in the store. If you multiply that out, there’s no way that you could support typical manual types of business intelligence.
Profit: How is Oracle helping you address these issues?
Kubo: We have three main Oracle systems we’ve invested in over the last three years: Oracle Retail Markdown Optimization, Oracle Retail Merchandising System, and Oracle Retail Point-of-Sale. We also have, obviously, all the Oracle technology stacks to support them—but the three primary systems have really been a central piece to the back-end strategy.
Now we are looking to analytics that are optimized and, in a sense, far more automated than typical. So we run Oracle Retail Markdown Optimization, which does two things: it allows us to localize clearance price on an automated, higher-level business decision of how fast we want to get out of that product, and it allows us to do it at a store-cluster level.
The most important input to provide an accurate markdown recommendation is accurate selling data. In today’s retail environment, with the number and complexity of promotions, they have to be automated. If I don’t automate promotional pricing—and most complex pricing promotions today are not automated at the point of sale—you start to get price error that radically affects demand forecast for a product.
Profit: How important to demand forecasting is accurate, reliable feedback from the local stores?
Kubo: When we started doing markdown optimization, we saw the impact on various IT systems. Then we realized how much change had to be done in the entire stack.
So in the end, we’ve replaced our entire point-of-sale system with Oracle Retail Point-of-Sale. Now our complex promotions are automated and we can see sales and real-time inventory data that allows us to provide information to consumers so they know where they can get the products.
It also allows us to provide customized promotions at the point of sale. It allows us to implement very innovative loyalty programs. So all these things at the point of sale are trying to do this strategy of localization, transparency, and personalization.
We also saw that we had similar issues with size optimization, particularly in the way we structured our picking automation. So we had to implement a new system to allow us to pick individual sizes for each store, instead of prepacks—which is the industry standard, but less optimal for size choice. We also replaced our merchandising system with Oracle Retail Merchandising System, because of the effects of localized pricing and ability to optimize our buying process for fast fashion.
But also, “fast fashion” is sort of the buzzword in apparel because the consumer is demanding this speed. If you’re going to compete, you have to understand and react to that weekly—in promotion, in buy, in merchandise mix, in everything you do. So, the mantra at Wet Seal right now is speed. The ability to react and change our merchandise mix to be able to understand demand, to be able to do a promotion and evaluate it within 24 hours, is everything for us in retail.
So, many of the enhancements for the merchandising system were to increase speed. We want buyers to be able to go to market and choose directly what we’re going to buy, and we want the purchase order to be issued that day, not several weeks later.
Profit: What role does mobile technology play in keeping pace with customers?
Kubo: Customers are always demanding more information from us. They want information about the product. They want to know not only what their peers think about it, but how it can be used with other products. Mobile provides that ability to carry that information with them—not only when they’re away from their computers, but in the store itself.
Mobile is not just about conveniently selling on a mobile device; it’s about giving customers all the information they need while they’re in the store, and making it a better experience. If you can tie mobile efforts into social media, you can really provide customers the ability to give their opinions on products and brands, and this allows your passionate customers to provide “long-tail” engagement through the content they generate. As a retailer we cannot possibly provide long-tail content for all the different pieces of information our customers want.
Those are the two main things customers want from retail IT: product information and feedback from their peers.
Profit: What does long-tail content mean for Wet Seal?
Kubo: We allow our customers to design outfits on our Website using all of our product SKUs, which they can then publish to something we call “The Runway,” both on wetseal.com and on our iPad application. Then their peers rate those outfits. Right now, about 85 to 90 percent of our product has outfits associated.
So when I say long-tail, I mean you can go into the store, use our mobile app to scan any price ticket, and review the outfits your peers have put together and how they rate. There’s no way a retailer could put together all the combinations of our SKUs and make them relevant. It has some rating or indication of what people like or don’t like—that is long-tail content.
Most retailers will tell you that in apparel, people want to purchase things that are on mannequins, and they’re on trend. Typically, a retailer has maybe four or five mannequins in the window. But this takes it to a much deeper level; now in the palm of your hand you have the ability to see dozens of outfits for every single piece in the store.
Profit: How does social networking factor into Wet Seal’s customer interaction?
Kubo: We have two Facebook applications that allow customers to interact with merchandise and allow them to shop together socially with their friends on our site. We also have a Facebook game that allows them to run a virtual Wet Seal store and put their own product there and get it rated, and they make money.
So all these ways to interact and engage customers are, I think, our answer to how we have to change the way retailers normally engage customers. Wet Seal has to provide something engaging for customers in order for us to have this relationship. And that engaging feature would be the ability for them to socially shop with their friends, to be entertained, to have an input, and to let their friends see their fashion prowess.
Within the next year, Wet Seal will see significant changes in the way social data is used for understanding demand. The actual formalization of that, a social media feed into assortment planning, is probably not coming immediately. But we’re in the very beginning, and this data is the most useful to answer questions like, “Should I go deeper in a trend?” I’m going to use social media to go deeper well before that product even hits the stores.