Guess? Launches New Mobile App To Strengthen Its Omni-Channel Platform

by Trefis Team
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Specialty retailer¬†Guess (NYSE:GES) recently unveiled a new mobile app for iOS and Android devices aimed at providing a seamless shopping experience across its stores and online channel (commonly known as omni-channel or multichannel retailing). The app, powered by MicroStrategy Alert, a leading worldwide provider of enterprise software platforms, is expected to strengthen the retailer’s customer-company interactions. [1] Even before the launch of this app, Guess had taken several measures to ensure the effective development of its omni-channel platform.

Due to the proliferation of smartphones and tablets and increasing popularity of online shopping, several U.S. retailers are adopting omni-channel retailing to attract customers irrespective of the shopping channel they prefer. Reports suggest that multichannel customers have a tendency to spend more than regular customers. Response to this concept has been so strong that retailers are actually struggling to fulfill customer demand.

Therefore, we believe that developing its omni-channel platform should be among Guess’ top priorities. With its aggressive push towards this concept, the company can leverage its vast store presence to take advantage of the boom in the online retail market.

Our price estimate for Guess stands at $35, implying a premium of 20% to the market price.

See our complete analysis for Guess

Apparel Market Is Moving Towards Omni-Channel Retailing

The U.S. apparel market is highly saturated with a number of established chains and private label players sparring over prices, quality, fashion trends, and other aspects of the business. Such a competitive environment has limited the room for growth for apparel players, which has forced them to focus on alternate channels such as e-commerce. However, despite the retailers’ efforts and the surge in online retail sales, e-commerce hasn’t grown into a big business for several players such as Gap Inc (NYSE:GPS), American Eagle Outfitters (NYSE:AEO) and Guess. The direct-to-consumer business accounts for just 12% of Gap’s revenues and 13% of American Eagle’s revenues. Though Guess does not report the dollar amount of its e-commerce revenues, we believe that it does not contribute much to the company’s sales. In Q3 fiscal 2014, Guess’ comparable sales in North America declined by 5% despite a 33% rise in e-commerce sales.

As a result, retailers are now looking to leverage customers’ online shopping interest to enhance store sales. According to a survey conducted by Retail Systems Research (RSR) in June 2013, around 84% of the retailers polled worldwide believed that creating a consistent customer experience across channels was very important. [2] Moreover, multichannel shoppers have a tendency to spend more than regular shoppers as they have access to a wider product range and additional discounts. Therefore, investing in omni-channel retailing is quite essential for U.S. retailers. An Edgell Knowledge Network survey suggested that a majority of retailers in North America are planning to ramp up their consumer mobile initiatives over the next two years. [3]

However, the current landscape of omni-channel retailing is not well developed in the U.S. According to eMarketer, retailers have been inefficient in coping up with multichannel shoppers’ demands. The RSR survey found that less than one in five respondents reported full synchronization in the 13 most important aspects of omni-channel strategy. [2] This provides a big opportunity for Guess to completely develop its omni-channel platform before its peers and gain a competitive advantage. We believe that the retailer is capable of accomplishing this goal given its aggressive push towards the multichannel platform.

Guess’ Aggressive Push

Over the past one year, Guess has worked hard to integrate its e-commerce business with its stores channel, mobile and social media. During the second quarter of fiscal 2014, the retailer began the fulfillment of its online orders through store inventory. [4] By the end of the third quarter, more than 100 of its stores were fulfilling e-commerce orders. [5] Additionally, Guess has deployed various multichannel initiatives such as “reserve online, pick in store” service, iPad kiosks in select stores, mobile optimized sites, etc. Alongside, it has upgraded its point-of-sales system, enhanced its product lifecycle management system, and increased the efficiency of its supply chain. [6]

Recently, it launched a state-of-the-art mobile app intended to augment customer service, fashion promotion and provide a seamless multichannel shopping experience. This app offers a new loyalty program where customers serve as brand ambassadors by promoting the products within their peer group through various social media websites. In return, they are awarded additional discounts and rewards that can be redeemed at stores. The company believes that this app will create high visibility and bring customers a lot closer to the company by engaging them in a highly interactive and personalized manner. [1]

While Guess has enjoyed strong growth in its e-commerce business over the past several quarters, its store business has struggled due to missed fashion calls. We believe that by strengthening its omni-channel platform, the company will be able to garner significant customer attention over the Internet, and subsequently divert its web traffic towards its stores. Over time, this can help the company improve its store sales and better anticipate customers’ tastes. Moreover, with almost all the retailers moving towards this retailing concept, it will allow Guess to remain competitive.

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Notes:
  1. Fashion Retailer Guess Rolls Out State-Of-The-Art Mobile App For Customers, Powered By MicroStrategy Alert, 4-Traders, Jan 13 2014 [] []
  2. Retailers Lag Behind Consumers’ Omnichannel Desires, eMarketer, Dec 18 2013 [] []
  3. Omnichannel Is The Key For the 2013 Holiday Shopping Season, eMarketer, Sep 10 2013 []
  4. Guess’ Q2 fiscal 2014 earnings transcript, Aug 28 2013 []
  5. Guess’ Q3 fiscal 2014 earnings transcript, Dec 4 2013 []
  6. Guess’ SEC filings []
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