Can Marks & Spencer convince you to let a computer pick your outfit?
1st December 2022
British retailer banks on AI to supercharge its online sales by £100m per year
Shoppers once spent hours browsing the rails to find the perfect outfit, but M&S believes computers will soon take this task out of your hands.
The department store has acquired technology start-up Thread, an online retailer that uses artificial intelligence to pick and recommend clothing for shoppers.
Thread has been snapped up as part of a pre-pack administration, an arrangement where assets are sold off ahead of insolvency. M&S will bring on 30 staff from Thread, as well as taking on its intellectual property and artificial intelligence know-how.
After historically struggling to compete online against rivals including tech giant Amazon and high street stalwart John Lewis, M&S has ploughed cash 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 in questions about the kind of outfits and clothing they typically liked. It would then pull items from a vast array of brands to present suggested shoppable looks, saving customers the hassle of browsing the web for the right items.
The technology was pitched as a helping hand for those with low confidence in their fashion sense or who are too time-poor to assemble the perfect closet.
M&S believes Thread’s technology can help it boost online sales by £100m per year by improving personalisation.
But will letting robots acting as personal shoppers really help M&S drive its digital turnaround when the idea proved not enough to support Thread as a standalone business?
Katie Bickerstaffe, M&S co-chief executive who has been tasked with transforming the retailer’s clothing offering, is confident: “We already know the incremental value personalisation can bring and we anticipate that personalisation will generate more than £100m of annualised incremental revenue for the business.”
M&S was one of the first British retailers to launch a website, back in 1999, but over the years it lost ground to rivals such as Next and aggressive “fast fashion” brands targeting younger consumers, such as Asos and Boohoo.
Bickerstaffe has been tasked with transforming its fortunes online as even older shoppers, traditionally M&S’s core market, go digital.
M&S has invested more than £200m in transforming its M&S App and Sparks reward programme in recent years, helping active mobile users quadrupled to 4m people.
A growing part of its sales are expected to come from smarter recommendations, with M&S saying in its last results that 20-25pc of all its app interactions would be “personalised” in the near future. The introduction of “frequently bought together” recommendations has already boosted 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 personalisation efforts by three years.
Jeremy Pee, M&S’s head of digital and data, says: “Our customers expect a really high level of trust and understanding from us. So the whole agenda behind relevance is really important to build our relationship with our customers.”
Recent results suggest Bickerstaffe’s online push has borne some early fruit. Online sales increased 4.9pc in the first half of the year and made up 32pc of total clothing and home sales.
Clive Black, a retail analyst at Shore Capital, says the Thread deal appears to be “opportunistic”, but “highly complementary to M&S’s strategy”.
Earlier this week, Thread insisted it was experiencing a “technical issue with our checkout”, before admitting it was going 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 claim back some money via their credit card provider. It is understood around 30 staff will lose their jobs as part of the takeover by M&S.
Interpath will lead on the administration, according to an email to customers, while Thread’s customer database will be scooped up by M&S.
Thread could provide opportunities for M&S to attract younger shoppers, Black notes, while older shoppers who have grown more digitally savvy during the pandemic could also benefit from the technology.
“M&S has a slightly older and more affluent shopper, but they have become much more digitised,” he says. “A key strategic ambition is to attract a younger shopper. M&S are not anticipating 17 or 18 year olds, but people in their 20s and 30s, families, couples with children.”
M&S says its personalisation software will help build closer relationships with its customers, and that it will have wide appeal across generations.
Pee, of M&S, adds: “This is not just a product oriented to young audiences. We think this has broad appeal. The problem around outfitting and the confidence of what looks good together is a problem everyone has.”
Joshua Kaiser, of Tovie AI, which develops virtual chat assistants for businesses, says M&S’s deal for Thread is “akin to giving every potential and existing customer their own personal shopper that understands their individual needs”.
Personalised online shopping is not a new idea. Stitch Fix, the US online retailer, offers a similar online stylist service, where customers take a similar fashion quiz and even offer up their social media profiles.
The algorithms used by TikTok and Instagram have hooked younger internet users by presenting an endless stream of personalised content, with shopping served up alongside it.
Last month TikTok launched an in-app shopping feature in the US, allowing viewers to buy an item while browsing its short-form videos, not unlike a QVC for Generation Z.
Thread offers a potential solution to this challenge but not everyone is convinced.
Tony Shiret, a retail analyst at Panmure Gordon, said: “Thread looks somewhat underwhelming.”
According to its company accounts, Thread struggled to make a profit in its ten-year existence. Its latest filings for the year ending in December 2020 show a £5.7m loss, following a £7.8m loss the year before.
M&S will be hoping it can mimic the social shopping model that TikTok and Instagram have done so well. The challenge, Kaiser says, is using data to improve the shopping experience, rather than simply annoy consumers with poor recommendations.
Author: Matthew Field, Senior Technology Reporter, The Telegraph
Managing Director, Research Analyst, Retail