Artificial Intelligence & Luxury: Unlikely match made in heaven?

Prominent players in the luxury industry have historically been reluctant to adapt to new technologies, concerned with diluting the perception and definition of luxury. However, it has become increasingly clear that artificial intelligence (AI) can prove itself extremely useful in boosting profits and innovation for businesses – so how can luxury brands, so reliant on personalization, craftsmanship, and human touch, harness this technology to their advantage?

The Chinese consumer market might be a good starting point for this analysis, given its openness to technology and paramount importance for the luxury industry. Though highly acclimated to online sale channels, when it comes to luxury, 92% still keep their shopping offline – to them, experience and service plays a large role in the process of luxury shopping, mainly due to the presence of sales associates and the possibility of seeing and trying on the products. McKinsey’s 2019 China Luxury Report report suggests that a combination of digital aspects with the intimate and personalized experience in store could be a way to boost online sales, with curated recommendations powered by AI coupled with fast and personalized service. However, yet another reason Chinese consumers prefer shopping in stores is related to a problem of a different nature – the counterfeit market.

Gone are the days when counterfeits were immediately identifiable through laughably poor quality. Nowadays, even seasoned consumers are liable to falling victims to scams – with even intricate details replicated exactly, they have become a huge problem to luxury brands, whose exclusivity is diluted by the readily available, more affordable counterfeits. AI has been the latest in a list of solutions for this problem, with American company Entrupy using it to run an authentication service for luxury products.

The allure of luxury products and experiences is partly grounded on heritage and know-how – craftsmen carry a wealth of knowledge and traditions that are imbued into each product, as human touch makes every experience personalized and unique. The LVMH group, leader of Deloitte’s global luxury ranking since 2013, has already demonstrated concern with displaying these elements to the public. The conglomerate launched the Journées Particulières initiative in 2011; offering guided tours, interactive events and demonstrations of artisanal skills in several European countries. These events drove home why this knowledge, passed down generation to generation, makes the group’s maisons special. One could argue that the nature of AI, by facilitating repetitive processes and tasks, heavily undermines this element if employed in the creative process.

With the evolution of tech, customer preferences have also undergone significant change – younger generations, having grown up digitally native, have a different approach to shopping than their predecessors. Consumers nowadays want newness, differentiation and remarkable experiences – however, this trend does not necessarily translate to every industry. Though expected to become more predominant in years to follow, online shopping only accounted for 23% of luxury transactions in 2020. But given that Millennials will make up 50% the luxury market in 2025, the needs of these consumers must be addressed. As brands learn to find the balance between brick-and-mortar and online shopping, it becomes more apparent that AI is only a part of the crossroads that many companies find themselves in. Many consider a finely tuned omnichannel experience as the way to go – could a similar attitude also be the answer regarding the application of AI?

Technological innovation should not be a selling point in this industry, but rather a facilitator for brands to foster innovation and find new ways of engaging consumers. It should not be used as a way of replacing human touch or cutting corners, but rather supporting brands in knowing where to focus their efforts. Translating this into real life examples, several individuals and companies have taken steps. Julien Fournié, a French haute couture designer, explains that his partnership with a 3D software company has allowed him more creative freedom. Instead of having to create several prototypes with real materials, he can save resources by directly experimenting with 3D modeling – according to him, this does not replace know-how, but helps it evolve by fostering creativity.

Similarly, AI can be helpful in better understanding customers’ needs and expectations; then allowing organizations to develop strategies better suited to them. LVMH, ahead of the game as usual, has partnered with Google’s parent company Alphabet Inc. to enhance their forecasting capabilities, inventory management and targeted recommendations. This partnership is geared towards a better understanding of consumers, starting with the top 15 houses of the group to then move on to wider implementation. Besides that, Louis Vuitton has already begun employing AI in supply chain management, finance, human resources, product development, marketing and merchandising. Bruno Guilbot, the brand’s Head of Data Services, quells fears of AI replacing humans as he finds it is most successful when linked to human expertise. Given that the extensive data collected must be interpreted according to knowledge of the market, products and of the brand; he considers there are many positions which are strengthened by the possibilities brought on by AI. The initial investment in innovation can come at prohibitive costs, but when employed correctly, it greatly accelerates transformation and growth. Despite the fact that the brand’s ROI calculations are confidential (and complicated to calculate within this scope), company representatives have clearly stated that this process has been very beneficial.

It is clear that AI can prove a valuable asset, but as with any tool, its effects vary upon the user. Obtaining the best results are chiefly a result of combining artificial intelligence with human expertise and obtaining the best of both worlds. Regarding the luxury industry, the possibilities are plentiful, but have generally proved most effective on the operations-facing side rather than in consumer interactions. As the public becomes acclimated to optimized operations in everyday life, they will expect the same from all organizations – thankfully, unlike their outlook in the past, it seems market leaders have begun embracing innovation earlier on, and more efficiently to boot.

By Sabrina Yang

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