GUESS? NO WAY Armed with big data, fashion COO knows what customers want
With the growth of big data, social media, and location-based services tied to shoppers’ smartphones, the retail industry is facing an IT upheaval. For a peek into the future, Compass talked to perennial retail IT innovator Michael Relich, COO of the fashion-forward Guess brand.
The Apple iPad was just three months old in July 2010 when Michael Relich, who at the time was executive vice president and chief information officer (CIO) of Los Angeles- based apparel powerhouse Guess Inc., attended a microstrategy conference in France. As the keynote speaker speculated about the tablet’s potential impact on society, Relich shot an email to a Guess product manager in the USA, instructing him to purchase three of the devices.
Relich envisioned using the iPad to apply analytics to rich data accumulated across the business, enabling Guess buyers to make faster, more precise merchandising decisions. One immediate advantage: Unlike the company’s spreadsheets, the iPad could show product images, not just product numbers. The tablets were an instant hit.
“Mike is a visionary in maximizing value from business analytics.”Principal research scientist, MIT Sloan Center for Information Systems Research
In a follow-up move, Guess placed iPads in stores, giving the company’s buyers near real-time information on individual store sales. Shoppers also embraced the tablets, using them to track loyalty-program points and quickly determine if fashions they wanted were in stock online or at other stores. The project, well ahead of its time, won Guess a 2010 award from the Data Warehouse Institute (WTI) for Best Practices in Business Intelligence.For Relich, a 30-year IT veteran, such innovations are only worthwhile if they boost sales, however. “iPads are cool, but for businesses it’s all about leveraging information and assets to drive value,” he said.
Leveraging IT to drive business value is the hallmark of Relich’s career, a commitment recognized with his recent promotion to chief operating officer (COO). In announcing the promotion, Guess cited Relich’s increasingly global responsibilities and leadership of not just IT, but also distribution/logistics, e-commerce and strategic planning. “I believe, more than ever, that the integration of technology, speed and brand synergy is vital for our success,” Guess co-founder and CEO Paul Marciano said. “Michael’s proven experience in these areas makes him a great fit as our new chief operating officer.”
Barbara Wixom, a best-practices judge for WTI and principal research scientist at the Massachusetts Institute of Technology’s (MIT) Sloan Center for Information Systems Research, has followed Relich’s career for years. “Mike is a visionary in maximizing value from business analytics,” she said. “What impresses me more, however, is his ability to bring ideas to fruition.”
“The technology-driven changes taking place are like a freight train and they are revolutionary.”Guess COO
In addition to recognizing Guess with its best-practices award, WTI presented the company with its Emerging Technologies and Methods award. Retail Info Systems (RIS) News spotlighted Relich himself, naming him its 2011 RIS Retail CIO of the Year in the “Strategic Impact” category.
Noting that Guess had tripled sales during the 2008-2011 recession, while many of its competitors struggled, RIS lauded Relich for his 2007 rollout of a Product Lifecycle Management (PLM) system. The system enabled Guess to speed products to market and streamline workflows. It was later expanded to improve vendor collaboration, manage complex costing and sourcing, and deliver access personalized for each user’s role.
All these accolades might suggest that Relich, 52, lives and breathes computer science. On the contrary; his interest in business came first. As a result, he has always treated IT as a way to drive profitable growth, versus a goal unto itself.
As a freshman at the University of Maryland’s South Korean campus (his parents were living in Korea at the time), he majored in anthropology. After taking a single computer class he wrote his first program, using a Commodore 64 to help a local liquor store owner track inventory. Later, as a class project, he wrote a computerized blackjack game. When informed that programmers were actually paid for such work, he switched his major to business information systems and transferred to California State University.
Relich got his introduction to retail at Carter Hawley Hale Stores. Starting as a trainee, he worked his way up to senior programmer and then technology specialist, writing programs for such customer-facing initiatives as tracking spending behaviors and logging customer loyalty points.
By the time he joined Guess in 2004 as CIO and senior vice president, Relich was adept at employing IT to improve both operating efficiency and customer service. His first order of business, however, was more basic. The retail and wholesale portions of the company, which shared warehouse space, were continually at odds over who owned which inventory. Relich created an inventory-tracking system that solved the problem and enabled both halves of the business to focus on growth. Next, he turned his attention to automating and integrating IT tools across the operation to boost business performance.
The shift was well-timed, because Guess was transitioning from a wholesale manufacturer into a high-end fashion retailer. Between 2006 and 2007, the company opened more than 230 stores outside of the USA. Around the same time, Guess merged its US and Canadian businesses. To support so much growth in multiple channels, Guess needed to build a solid IT infra-
structure as quickly as possible.
In 2012, while other retailers struggled with the recession, Guess grew its fiscal earnings by 8%.
“This wasn’t about technology for technology’s sake,” Relich said of those years. “This was about doing everything we could to drive value and support the brand and our rapid expansion.”
That mission has become even more important as the Guess brand has expanded. In 2006, when the company launched its expansion outside the USA in earnest, annual revenues were US$1.19 billion. By the end of fiscal 2012, they had nearly tripled to US$2.7 billion. Fiscal 2012 earnings increased 8% over 2011, particularly impressive given that retail as a whole was struggling. Today the Guess brand is one of the most widely recognized in 85 countries, with more than 1,559 stores.
In addition to all of the retail and wholesale channels Guess uses to reach shoppers, the company markets its products through e-commerce in six languages and 26 countries.
Relich believes the trend of businesses and their customers becoming even more electronically linked than they are today has just begun. “As smartphones continue to get more capable, tablet computers are getting smaller,” he said. “The two are converging into a fully integrated, self-maintaining mobile device. Combined with the spread of social media, whole new avenues will open up for marketers and retailers to reach more people. We will experience one-to-one marketing with applications like you’ve never seen before.”
“We will experience one-to-one marketing with applications like you’ve never seen before.”Guess COO
Convergence is transforming the retail industry in two fundamental ways, Relich said. First, a growing number of customers want a more seamless shopping experience, and they look to retailers to deliver it. Second, retailers can “leverage stores to optimize inventory across brick-and-mortar,” as Relich puts it. “If merchandise is not moving fast enough at one location, store managers in near-real time can dynamically allocate product to more active shops elsewhere and ship apparel directly to where it is in demand.”
All of which leads to Relich’s latest innovation: Using sensors to track customer movements from one department to the other, with accuracies of less than a meter. Technology-equipped sales associates can instantly access information on each customer’s preferences and past purchases while they are in the store, helping them to direct shoppers to the merchandise that best matches their tastes. The insights are pulled from data collected through the Guess loyalty program, which has 500,000 active members.
It’s all about empowerment and data accessibility, Relich said. “On the fly, we can extend sales promotions based on what is selling on an almost minute-by-minute basis. Such flexibility is tailor-made for today’s young, digital-savvy consumers.”
The biggest challenge Relich sees for the industry is that new technology is evolving faster than retailers can absorb it. Most, he said, appear to be falling far behind technology’s potential. One reason may be that IT traditionally has been perceived in retailing as “a necessary evil, and to some, a threat,” Relich said. But he has a message for corporate leaders: “The technology-driven changes taking place are like a freight train — and they are revolutionary. Think of IT as a strategic asset and a core function of everything you do. It is an opportunity to do cutting-edge stuff and be truly innovative.”
Relich emphasizes that being innovative with IT doesn’t have to be expensive. Guess has a relatively small IT shop, spending less than 1% of sales on technology and staff. With such impressive returns on its IT investments, Guess will likely remain among the industry’s trendsetters, with Relich in the vanguard.
Guess Inc. was founded by Moroccan-born Georges and Maurice Marciano in 1981, when the brothers opened a clothing store in Beverly Hills, California (USA). The merchandise included a line
of stone-washed jeans, designed by Georges and named Guess, which were softer and featured lighter colors than traditional jeans, plus zippers at the ankles.
Georges persuaded Bloomingdale’s to display 30 pairs of his European-style jeans on consignment in its flagship New York City store. Despite their US$60 price tag, every pair sold within three hours. Business took off in spectacular fashion the following year, when brothers Armand and Paul joined the company. By 1984, Guess Inc. sales were a cool US$150 million.
Today, as Guess celebrates its 30th anniversary, the retailer has 1,559 Guess-branded stores worldwide, plus e-commerce, and licensing distribution in 26 countries and six languages.