A Conversation with Michelle Lam, CEO, True&Co.
Perhaps the most talked-about concept in modern retailing is big data. Every brand is enchanted with the idea of using sophisticated analytics to improve its understanding of consumers and drive smarter decision making across all aspects of its business.
A noteworthy innovator in this trend is True&Co. The company uses big data to tackle a highly personal, and often frustrating, consumer experience: buying a bra.
Shoppers can go to the True&Co. website to take a detailed “fit quiz”to find the right bra, and more than five million women have to date. An algorithm precisely guides customers to the right products in the right sizes, while it helps inform new product development. Although True&Co. operates online, after the success of its Try-on Truck mobile tour, it has launched a series of offline initiatives, such as a print catalog and Try-on Tent pop-ups.
Michelle Lam co-founded True&Co. in 2012. Before that, she was an investment principal with Bain Capital Ventures, where she led deals for companies that included LinkedIn. Earlier, Michelle had successful stints with Microsoft and two management consultancies. She offers some fresh ideas on how to use data to transform the customer experience and the retail industry.
Diversifying Customer Needs
Michelle believes innovative startups like True&Co. can flourish because a huge gap has opened between what consumers want and the products currently available to them. Traditional large-scale production systems reduced costs and drove efficiencies through standardization. As a result, it can offer consumers countless choices, but cannot always be attuned to customers’ evolving needs.
“The physical supply chain has little incentive to be innovative. It favors scale, uniformity and cost,” Michelle says. “Most apparel brands will share a product concept with the factory, and then, based on their own grading system and their prior production runs, will make some variations of that. But are they right? Too often that model fails to give the customer what they really want, especially in a world where different customers want and need very different things. For example, the standard pushup bra that was popularized by Victoria’s Secret is not that popular with millennials. This generation has moved on. And we’ve found that for two-thirds of all women, the traditional bra cups that favor the full round breast shape do not work because their bodies are different.”
At True&Co., differentiated product improvement is guided by the “fit quiz” completed by consumers, which helps match products to consumers, and vice versa. This consumer-driven approach clearly works. True&Co.’s return rate is 50 percent less than the industry average. The quiz, which has since been borrowed by Amazon and Victoria’s Secret, was developed in Michelle’s living room.
“I bought 500 bras and invited as many women as I could find to take a pen-and -paper quiz and to try on bras while I did all the bra math based on their answers,” Michelle says. “With their feedback, I was able to find out what kind of questions women wanted to be asked—mainly the issues that they felt were important to communicate about their bodies—and this became True&Co.\’s fit quiz.”
True&Co.’s business model is predicated on using analytics to not only identify what consumers want, but also baking those insights into the product development process to ensure that the brand offers products that closely match consumers’ varied needs.
“Consumer data is granular, production is mass. It’s critical to get the supply chain involved early on, to delay commoditization as long as possible, and retain as much flexibility as you can,” Michelle says. “If you make a custom product, you can make sure it is best for each customer. But as you make products for larger groups of customers, the compromises inevitably compound. To drive efficiency, the factory will want to control the fabric, order sizes, and volumes. Too many operational concessions can stop you from delivering the product the customer actually wants. The solution is working collaboratively with partners in the supply chain to ease these restrictions. In our business model, we collect extensive feedback data from our customers, and we apply this data to focus the factory.”
Scaling the Business
The next hurdle is scaling the business. With an initial wave of early adopters and digital channels making it easy to spread the word, achieving critical mass with your branded innovation can be less of a challenge than is attracting the next wave of customers. Early adopters can only carry you so far. Success in cities such as San Francisco and New York does not necessarily translate quickly or easily to success elsewhere.
As Michelle notes, it certainly helps to be in a category that has structurally attractive characteristics.
“Lingerie has a high initial order value, loyal customers, and the ability to use data to help the customer get a better product,” she says. “Our goal is to increase our private label, unique product that is exactly matching the customer’s preferences. The rest will be brands that we know we can sell, and that closely meet the customer’s needs.”
Sharing the Future
How can large, established consumer companies and retailers bring more successful new products to market, make more creative use of data, innovate their business models, and attract more fresh-minded talent? Michelle sees opportunities for large companies to partner with the new wave of startups. Blending their respective strengths can help large companies meet customers’ rapidly rising demands for personalization, and small companies to reach more customers faster.
“True&Co. understands customers’ needs and we’re using that understanding to design new products, a new supply chain, and new go-to-market models,” Michelle said. “Ours is a startup story. But the future should also be about companies leveraging their existing assets to far greater effect.”True&Co. has shown that, in the right hands, new tools like advanced analytics have the profound power to remake old systems, such as the traditional supply chain. That benefits not just customers, but the industry as a whole. The success of Michelle and other visionary entrepreneurs highlights the potential to re-envision all of retail, guided by the ever more discriminating needs and preferences of the 21st century consumer.