How AI Is Changing The Luxury Sector And Why Brands Need To Invest In It

The luxury sector has historically been a human-to-human business, and luxury - on the whole - is one of the slowest sectors to pick up on the possibilities of technology. One piece of technology that is already present but greatly misunderstood is AI and this has clearly started to give significant advantages to those who take the time to understand its application.

SAS defines Artificial Intelligence, stating that ‘Artificial Intelligence makes it possible for machines to learn from experience, adjust to new inputs and perform human-like tasks. Most AI examples that you hear about today - from chess-playing computers to self-driving cars - rely heavily on deep learning and natural language processing. Using these technologies, computers can be trained to accomplish specific tasks by processing large amounts of data and recognising patterns in the data.’

AI is often described as a potential future threat to the human race. Such an idea is so far-fetched and seemingly decades away from being any form of possibility and we often mistake AI as being an invention of the future, but it is already here and prevalent in everyday life. Not only is it being utilised in modern life today, but it’s being used in the luxury sector to great effect. I'm going to look at the examples of brands utilising AI across customer service and experience and how you can implement it to improve your operations.

The first iterations of AI in luxury that were commonly used were chatbots. Chatbots are defined as ‘an artificial intelligence program that simulates interactive human conversation by using pre-calculated user phrases and auditory or text-based signals. They are often used in customer service. Tommy Hilfiger were one of the first brands to launch a chatbot at New York Fashion Week in 2016. The bot would interact with customers to help recommend product choices from its latest lines based on answers from pre-determined questions, helping create a personalised customer experience and drive traffic to their website. Shortly after, Burberry launched their iteration of a chatbot, initially giving customers a behind the scenes look at the brand and how customers could shop the latest lines, but over time Burberry rolled out further chatbot services from customer service, to product browsing, to store location, through to live chat with a Burberry consultant. As time goes on and consumers become more digitally savvy and comfortable interacting with AI, luxury brands are continuing to invest in chatbots.

Whilst chatbots are quite a basic implementation of AI, Burberry is taking things further with deep learning to improve their customer experience, utilising rewards and loyalty programs to encourage users to provide data. This helps them build up a brand history of the customer with the aim of then tying this up through an online/offline pairing by feeding this information into its store assistants so that when a recognised customer comes into a store, assistants can then make recommendations based on their history. One brand, whilst not claiming to be luxury, it’s high-end experience and service, through its use of AI, have given it all the hallmarks of a luxury brand - personal stylist startup, Stitch Fix. who use a customer input, AI and human combination to deliver customised wardrobes.

The AI, for example, will select products based on the customers preferences, working off an average 85 answer process, combined with popular products from shoppers with a similar body type and preference to the customer, and this is then fed into a human stylist to ensure that tailoring is to the individual needs as best as possible. Customers are presented these selections, accompanied by a personal note from their stylist.

As customers continue to use the service, the choices become more refined due to further information. Stitch Fix will be collecting an insane amount of data to help inform its decisions and refine its approach, giving it a huge edge when it comes to personalisation and experience.

The approach has paid huge dividends for Stitch Fix with revenues near $1bn, and nearly 3 million customers, with 86% making repeat orders, and their approach with AI that has given them a fantastic customer experience and a wealth of data, is something luxury brands can definitely learn from.[1]

There are currently three key ways that AI is being implemented across luxury - helping customers make decisions, personalisation and customer service, and luxury brands should be looking at how AI can help them improve in all three.

We’re in a world of a million decisions a day, and 40% of consumers say that they find making decisions difficult due to the wide range of choices, with 33% of people saying that most of the time they are happy for someone else to make decisions for them.[2] With stats like this, it’s clear how AI would be an asset to a consumer who is open to assistance whilst shopping.

Personalisation is an ever-growing trend in the industry, and AI can help brands curate product suggestions tailored to the customer based off real-time information, not only making customers feel special and cared for by a brand but enabling the brand to be hyper-relevant to individuals. With 74% of consumers more likely to buy a product that has been customised to their specifications, AI can be the tool that helps increase sales and bring the consumer closer to the brand.[3]

With 33% of millennials only willing to wait 1-3 minutes for a response from a brand, customer service is becoming more important than ever in the luxury service mix.[4] AI will undoubtedly be the future of customer service, allowing brands to instantly meet a customers communication needs, potentially in a better way than a human ever could.

The perceived cost of implementing AI in your brand is something that could put brands off, but simple AI such as chatbots can be installed at no cost and handle basic enquiries with quick learning.

With product and service innovation being considered as the biggest key trend impacting the luxury market, it’s clear that brands are investing more time and resources into future technologies to help give them an advantage with consumers, and AI can be the tool that is used to help give brands an edge in customer service and experience today.[5]

[1] - https://www.marketwatch.com/story/5-things-to-know-about-subscription-clothing-service-stitch-fixs-ipo-2017-10-20

[2], [3], [4] -

https://www.salmon.com/en/what-we-think/download/?file_url=/media/filer_public/4f/6b/4f6b2a2f-f1fe-47b9-a3f1-8772e8b095fa/wpp_ibm_ai_final.pdf

[5] -

https://www.luxurydaily.com/wp-content/uploads/2017/12/StateofLuxury2018.pdf