Startup Q&A: AJ Mak, CEO and Founder, Chain of Demand

RTIH: Tell us about Chain of Demand

AM: Chain of Demand is a predictive analytics company aimed at improving profitability and sustainability for the retail industry. Our proprietary AI algorithm Retaillect leverages Big Data to predict product demand, empowering retailers and brands to maximise profits, minimise markdowns and optimise inventory. 

We’re a team with 20 years of experience in the fashion industry and our data scientists, together, have over 30 years of experience across multiple industries. We’ve built custom predictive models for retailers and brands across fashion categories including apparel, footwear, and cosmetics to address the issue of markdowns and deadstock. 

Overstock is damaging the environment with inventory waste and also eroding profits for retailers and has created a $150 billion market for off-price channels and outlet shopping.

Besides profitability, we see there is a major social benefit to our technology, as it helps to promote sustainability through the reduction of inventory. Fashion is the second most polluting industry and we have to enact change and do better for our planet. 

RTIH: What was the inspiration behind setting the company up?

AM: When I was in college, I tried to donate some clothes from Zara but the store wouldn’t take them because they were fully stocked. I was shocked then but didn’t truly understand why. Fast forward ten years later after working in the apparel industry as a manufacturer, I’ve seen first-hand how brands will buy incorrect amounts and options of styles. 

This is detrimental to the brand, as it erodes profits and creates inventory waste. Knowing that markdowns act as the biggest killer of profits for retailers, and with this problem of over-inventory destroying brands - big and small - it acted as an inspiration to solve this pain point.

RTIH: What has been the industry reaction thus far? 

AM: The clients we’ve worked with have responded positively. They’ve realised how the industry is changing and there is far more data available now than five years ago. The question remains: where do they start on this digital transformation journey? 

To give some idea, of our piloted case studies we have demonstrated up to 87% prediction accuracy for a premium ladies brand with annual revenue of $150 million. We’ve also shown a predictive accuracy of up to 83% for a publicly listed lifestyle brand with annual revenue of $650 million.

RTIH: What has been your biggest challenge/setback?

AM: We’ve found that many retailers are intimidated by artificial intelligence due to the sense of unfamiliarity and lack of understanding of the technology as a whole. Based on an IBM report, they found that the top three factors that influenced successful deployment in AI tended to be obtaining the right skills and resources, creating a culture open to change and adaptation, and aligning the strategy with execution plans. People need to learn to be eased into understanding that AI is here to help, not replace us.

Another tough challenge is getting buy-in from the organisation. Age, length of experience all play into how much you believe in adapting technology. Buyers and merchandise planners worry about losing their jobs and think, I’ve been doing this for so many years - my gut and instinct is always correct. It’s difficult to shift this mentality quickly and rely completely on new emerging technology to do all the heavy lifting.

“The way we interact with our devices and find information for the things we want to purchase has drastically altered. The fashion industry, unfortunately, has been a bit behind in adopting new technology across its entire value chain”

RTIH: What are the biggest challenges facing the omnichannel retail sector right now?

AM: In Asia, we’ve been focused on what Jack Ma has coined ‘new retail’. Omnichannel requires lots of data but it’s challenging to gather all this data and make sense of it all. One of the biggest advantages China has had in reinventing itself in retail has been its highly tailored approach in focusing on the needs of the buyer. 

Through the use of analytics and technological innovation, the retail sector has been going through a revolution. Yet the main challenge that I’ve found retailers have been experiencing is overcoming the technological barriers. In fact, when it comes to integrating emerging technology such as AI into their organisation, resistance in adapting new capabilities remained one of the highest challenges (with integrating existing processes and systems right above). 

RTIH: What's the best question about your company or the market asked of you recently by an investor and a customer?

AM: From an investor, why are you doing this now? As many people already know, we are at the cusp of mass digital transformation, and in that change, consumer behaviour is no longer the same as it was just a few years ago. 

The way we interact with our devices and find information for the things we want to purchase has drastically altered. The fashion industry, unfortunately, has been a bit behind in adopting new technology across its entire value chain. With over a decade of being in the industry and witnessing the need for this change with my own eyes, I think now is the time to disrupt the way we have been doing things. 

From a customer, how do I know your models will work for my brands and products? This is a question we get a lot. Unsurprisingly, potential customers are naturally sceptical, especially when it comes to adopting new technologies such as artificial intelligence. 

The best way to see that our AI-driven recommendations can deliver is to be open enough to sit down, aligning our strategy with your execution plans and try a pilot. The proof will be in the numbers. 

RTIH: What can we expect to see from Chain of Demand over the next 12 months?

AM: We’re rolling out additional models and ultimately we want to be in every part of the supply chain.

We’re expanding our services to include a price-optimisation model and a capacity planning model for our users. An SMB version which is for smaller retailers will also be available in March.