Fluid’s Watson-Powered Shopping App Will Debut Next Year

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Internationl Business Machines Corp.'s 'Watson' computing system stands at a press conference to highlight the Man vs. Machine "Jeopardy!" competition, January 13, 2011. Close

Internationl Business Machines Corp.'s 'Watson' computing system stands at a press... Read More

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Photographer: Ben Hider/Getty Images

Internationl Business Machines Corp.'s 'Watson' computing system stands at a press conference to highlight the Man vs. Machine "Jeopardy!" competition, January 13, 2011.

Fluid Inc., an Internet startup that helps shoppers create custom Brooks Brothers suits and Reebok sneakers, will introduce its first app powered by International Business Machines Corp. (IBM)’s Watson system by mid-2014, pushing the technology into the consumer market for the first time.

The Fluid Expert Personal Shopper will take advantage of Watson’s ability to answer questions in plain English and learn from the responses, said Fluid Chief Executive Officer Kent Deverell. The application will be able to have conversations with customers and then recommend clothing based on their tastes -- say, a winter coat with just the right fit. A prototype version has been built for VF Corp. (VFC)’s North Face brand, he said.

The new app will serve as a test for both Fluid and Watson itself, which hasn’t proved whether it can interact directly with consumers. Watson and its artificial-intelligence system, best known for beating humans on the “Jeopardy!” game show, has been used to crunch medical and financial data behind the scenes. Dealing with impatient shoppers -- who can click away to another app or website at any moment -- will show whether the technology can be engaging and entice purchases.

“It’s still very early, so we need to walk before we can run,” Deverell said in an interview. “We are pretty impressed with what Watson can do so far. Because it’s a learning system, the more it gets used, the smarter it gets.”

Jacket Shopping

Fluid’s prototype app for North Face will act like an experienced in-store salesperson helping find the right jacket or hiking equipment for a customer, Deverell said. Shoppers can tell the app their preferences, such as needing a coat for New York winter weather or not liking how down jackets can bunch up, and they will be directed to a product that fits their tastes, he said.

Until now, San Francisco-based Fluid has focused on helping shoppers create custom products using a Web interface. Customers use Fluid software to order monogrammed dress shirts from Brooks Brothers Inc. or add special graphics to Adidas AG (ADS)’s Reebok-brand shoes.

The company, which has about 150 employees, began working with Watson as IBM prepared to open up the technology to application developers online. The move, announced Nov. 14, is part of IBM’s effort to offer more cloud-based services, which are delivered over the Internet. The 102-year-old computing giant is looking to the cloud to help offset a drop in hardware sales.

Sales Slump

IBM shares tumbled last month after the Armonk, New York-based company posted its sixth straight quarterly revenue decline. A shift to higher-margin software and services hasn’t made up for a slump in demand for servers and other hardware. Still, revenue from cloud products and services reached more than $1 billion last quarter, the first period in which IBM disclosed a sales figure for the category.

Stan Druckenmiller, who boasts one of the best track records in the hedge-fund industry over the past three decades, is betting against shares of IBM.

“IBM is old technology being replaced by cloud technology,” Druckenmiller, 60, said in an interview with Bloomberg TV’s Stephanie Ruhle last week. “It’s one of the more higher-probability shorts I have seen in years.”

IBM shares slid 1.3 percent to $178.94 at the close in New York. The stock is down 6.6 percent this year.

It’s hard to tell how much Watson will help boost sales. App developers won’t pay any upfront cost for access to the technology, Stephen Gold, IBM’s vice president of Watson Solutions, said in an interview. Partners who use the service in their apps will be charged on a metered usage model, he said.

Revenue Sharing

Fluid is still working out the pricing model for its app, which could involve splitting some of the revenue made from purchases, Deverell said.

In February 2012, Fluid received $24 million in funding from the asset management arm of Goldman Sachs Group Inc. (GS) The company may try to raise more if there’s a need to do so, particularly for its new Watson-powered venture, Deverell said.

Users will be able interact with the Watson app via voice or text commands. Already consumers are doing more of their shopping on smartphones, which are perfect for a conversational approach, Andrew Sirotnik, Fluid’s chief experience officer, said in an interview.

“That device -- it is naturally made for you to talk into,” he said. “If you could actually start speaking to a brand or a retailer and then things happen for you, that feels much more phone-like and much more what the consumer wants out of their smartphone.”

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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