Luxury products have long held a timeless, classic energy in culture. But with the rise of artificial intelligence (AI), the luxury industry must also evolve. Futuristic, modern technologies are taking over. Luxury brands must follow to keep up with customer satisfaction.
AI technology can offer many benefits in terms of marketing and the customer experience. Not only can it allow business processes to run smoother, it can also take the guesswork out of marketing initiatives. It tracks exactly what customers shop for when browsing a business’s products. This helps to streamline marketing efforts and better control inventory. Learn more about how AI technology is changing the world of luxury retail.
How is AI used in luxury retail?
AI-powered technology has made headlines in recent news—and it’s not predicted to stop there. It has changed the way many industries work, including the luxury goods industry. Luxury shoppers need an amplified experience. That means businesses must keep up to meet their demands. AI technology can be an excellent tool for catering to those who shop in the luxury market. How? Let’s look at some examples.
How has AI improved the customer experience in luxury retail?
Luxury retail brands are already using AI in a variety of ways to improve the front-end customer journey.
More Personalized Experiences
Dior and Louis Vuitton are using AI-enabled chatbots to connect with customers at scale in a way that still looks like natural language, including the use of emojis. This means they can provide more personalized experiences across more customers with less manual effort.
L’Occitane is using machine learning to provide customers with personalized experiences, including personalized product recommendations. This not only provides customers with a highly curated experience, but also increases conversion rates and boosts sales.
Creative Campaigns that Connect
Brands like Moncler, Zegna, and Valentino have started using AI to create campaigns. Blending AI-generated content with human creativity to create the kind of new brand experiences that luxury customers crave.
Interactive Online Brand Experiences
Sephora uses Modiface AI technology to power their online Visual Artist. This virtual makeup experience lets customers upload a photo of themselves so they can “try on” makeup to see how different products will look on them. Not only does this offer customers a fun and interactive brand experience they’re likely to share with friends, it boosts online sales by removing the risk of buying a color you haven’t tried on in person.
Deeper Customer Insights
Prada Group is using AI to gain deeper insights into their customers. These insights enable them to deliver high-quality content faster across a range of multi-channel communications. Once again, driving increased sales.
But the benefits of AI are not limited to front-end customer experiences.
How can AI improve operational efficiencies in luxury retail?
There are several ways in which AI can drive operational efficiencies.
Burberry is using AI for image analysis to identify counterfeit products. They use machine learning to analyze millions of images and identify subtle irregularities and inconsistencies in product properties (like size, shape, color, texture, and angles) so they can identify which products are genuine and which are fake.
Ralph Lauren is using AI across many different business functions for tasks like copy editing, graphics, and code generation.
Improved Demand Forecasting
Some ecommerce search engines, like Constructor, now provide AI-driven product attribute enrichment tools. Why are they important? These tools help improve product discovery and the relevance of search results. They can also be used to enable AI-generated product descriptions. While these AI-generated descriptions may need to be edited for a luxury audience, using AI can reduce the effort required, thereby increasing the efficiency of product information managers.
What’s more, having a lot of defined product attributes for each item you sell has another benefit: Improving demand forecast accuracy. Especially for predicting demand for products without any historical sales data—which is often the case for seasonal items.
Traditionally, very large sets of product attributes have only been created for commoditized products that don’t change often due to the effort involved. But now, AI tools easily enable the creation of product attributes, making AI-driven demand forecast accuracy a more viable approach, even for seasonal items. Brands that invest in attribute enhancement will be in the best position to take full advantage of AI-driven demand forecasting solutions, like Relex and Toolsgroup. What other data can be used to increase AI-driven demand forecast accuracy?
Digital demand signals. For example, the number of times a customer checks if an item variant (e.g., in a particular size / color combination) is in stock vs. the number of orders for that item. Which is quite interesting—especially in luxury. Because it turns out: These ratios can vary wildly.
While a commoditized white t-shirt may have a ratio of 3 to 1—meaning customers check if it’s in stock an average of three times for every sale—a high-end luxury jacket could have a 50 to 1 ratio. For another item, 700 to 1. This ratio can have predictive value when forecasting demand. However, to track this data, you need to be surfacing inventory availability as live API calls rather than data cached in a commerce platform.
How does a modern enterprise inventory availability solution help?
In a modern enterprise inventory availability solution (like the one provided by Fluent Order Management), typically, each stock check would be stored as an event. A demand forecasting solution can then consume these events, which takes some processing power.
Luckily, Fluent Order Management has been proven to hit that scale. Easily handling 7.6 million live inventory availability calls per day (based on real-time sourcing decisions, not cached data) for a single customer. What else can an enterprise inventory availability solution like Fluent Order Management provide to increase AI-driven demand forecast accuracy?
Granular inventory movements. Unlike bulk, reconciled inventory data sent once a day from an ERP to a demand forecasting solution, granular, intra-day changes in inventory availability can have a lot of predictive value. Especially in faster-moving categories like cosmetics.
The Importance of Accurate, Real-Time Data
So, when you think about all the ways AI can benefit luxury brands, it’s important to remember that it’s not just the AI tools themselves. It’s also the data you need to provide those tools so you get maximum value from them. However, to be able to send your demand forecasting solution all the inventory changes that happen throughout the day, you need to apply AI to another part of the data journey—inventory update processing. Why?
Many legacy ERPs can only send batch updates. They can’t send delta feeds—or just the records that have changed. And then, you need to add streaming Point of Sale (POS) transactions. However, Fluent Order Management has applied machine learning to this problem and can optimize the processing of large volumes of inventory updates. This provides two key benefits. Not only do you have a good data set to send to your demand forecasting solution, you can also surface accurate inventory availability to all your digital channels faster…at scale.
The future of luxury retail with AI technology
AI technology continues to improve and inspire new benefits for many industries. This is not projected to slow down any time soon. But as a trendsetting, cutting-edge industry, it’s even more relevant to luxury retail to embrace AI early.
According to Zipdo, the use of AI in fashion marketing is expected to reach $4.39 billion, growing at a 38.2% CAGR (compound annual growth rate). This means brands must continue adopting AI technology to get ahead in the luxury sector.
How AI is Enabling Us to Optimize Business Models
The application of AI technology can be daunting to navigate, but it doesn’t have to be. There are lots of vendors offering great tools. So whether you’re looking to enhance your customer experience with AI-driven chatbots and personalized product recommendations, or optimize business operations by enhancing product attribute data, inventory availability processing, and demand forecast accuracy, AI can help.
The potential for business optimization using AI is monumental. But the first step is getting your data right based on the problem you’re trying to solve. And it’s essential to start now.
Why? Because your ‘data tech debt’ is growing every day. Think about how much data you generate in a year. The later you start, the bigger the data problem to solve.
To learn more about how Fluent Order Management can help increase your inventory availability accuracy and provide the data you need to increase your demand forecast accuracy, contact us today.
