Selling a Dream: How AI Could Redefine Luxury Retail

Using artificial intelligence, luxury retailers can deliver a stellar online customer experience that both preserves brand integrity and is personalized to each customer.

Kate Somerville had a problem. While her luxury skin care clinic in Hollywood attracted big names, all of the pampering and unparalleled customer service simply didn’t translate online. In her clinic, Kate could personalize every interaction — from how she spoke to each customer to customizing skincare regimens and treatments for each individual.

E-commerce, though, was a different story. In the digital world, the sense of luxury and personal touch tied to Kate’s brand seemed to disappear, and she was left with a ho-hum website that did little to communicate “luxe,” let alone engage new customers. If anything, her off-brand site muddied the waters and seemed completely counter to the A-list persona she carefully crafted over 25 years.

Why luxury retailers tread lightly in the digital space

Kate is not alone. Luxury retailers and service providers have watched from the sidelines as online retail revolutionized the greater industry. Luxury brands — 40 percent of them — have steered clear of e-commerce.

Despite the overwhelming majority of retail brands diving into e-commerce and, more recently, this seismic digital transformation, the luxury landscape is nuanced and complicated, not always lending itself to a simple e-commerce conversion.

“Luxury retailing is based on a simple, personal interaction between a customer and a highly attentive sales associate,” says Arthur Zaczkiewicz, executive editor at Women’s Wear Daily. “What technology do you really need in that model?” This, he notes, has been part of the luxury retail culture — and it’s in step with Kate’s experience.

Many retailers see digital and e-commerce as a watered down version of their desired customer journey — and that’s a problem. “Luxury retailers have gone to extreme lengths to protect the margin and caché of the brand, and they need to preserve that exclusivity,” says Michael Klein, head of industry strategy for retail at Adobe. “This usually means only an in-store, personalized shopping concierge service.”

Catering to the millennials market

By avoiding e-commerce, though, many luxury retailers have missed out on growth opportunities. Many now are course correcting. “There had been an overall avoidance of deploying various technologies in the luxury sector,” Arthur explains, “which is now changing.”

This change comes just in time. Millennials and Gen Z customers are driving 85 percent of the global luxury sales growth and represent over 30 percent of all luxury spending. By 2025, millennials and Gen Z will make up 45 percent of global luxury buyers — and they shop online.

“For the companies that are slow to embrace digital, the loss comes in not meeting consumer demand,” Arthur says. “Clienteling is evolving rapidly, and there’s plenty of evidence and case studies that show how various in-store and online solutions can drive conversions, average transaction value, and traffic, while increasing the lifetime customer value.”

Artificial intelligence redefines luxury retail

That said, appealing to today’s omnichannel customer involves much more than just building a basic e-commerce site — and luxury brands seem to understand. Now, more than ever, these once-reticent brands are accelerating their digital presence, leveraging not just the basics, but leapfrogging into cutting-edge technology — in particular, artificial intelligence (AI).

“AI can elevate the entire shopping experience for the luxury consumer by creating an even more personalized interaction between a brand or retailer and the consumer — whether she shops online through a smartphone or in a store,” Arthur says.

This proved to be the game-changing digital step for Kate. Her e-commerce site was overhauled using Magento Commerce, an Adobe company. With these machine-learning integrations, each customer is now presented with the brand’s high-end look and recommendations that change in real time based on the customer’s behavior, shopping cart, and browsing habits.

Using this data artificial intelligence kicks in, “learning” a more complete profile of each customer. From here, recommendations are self-corrected and refined over time. Stitch Fix, a popular fashion styling subscription service, uses a similar method, learning what the customer likes over time and delivering more relevant clothing with each shipment.

And that’s just the beginning. AI can also help luxury retailers in store. “Data and AI-driven tools and analytics can also help brands target specific demographic cohorts and segments to help inform product offerings, store locations, and merchandising,” Arthur says.

Technology around the corner

The benefits to luxury retailers are clear — and it’s clear AI and other technologies are slowly making inroads with these brands. “AI is the holy grail of luxury retailing today,” says Arthur, “as it experiences the convergence between digital and in store.”

Several brands are already diving in to applying technology equally across digital and physical experiences. Burberry and Tommy Hilfiger are using chatbots to interact with newer cohorts of customers. Augmented reality-powered virtual dressing rooms and “magic” mirrors are becoming commonplace, enabling customers to try on clothes and makeup from anywhere, then click to buy. And Neiman Marcus’s smart digital mirrors offer in-store customers a 360-degree view so they can see how they look from all angles, recording their favorite outfits and comparing them side by side.

For brands that are diverse in their technology and their delivery, these powerful interactions come down to one thing: experiences. Now, though, that doesn’t mean sacrificing a luxury retailer’s exclusive look, feel, and overall experience. Instead, technology is being used to enhance experiences that speak to your brand, while treating customers to a compelling, personalized retail journey across a variety of platforms.

“Data suggests all demographics are investing in experiences,” Michael says. “This is another reason luxury retailers should embrace these technologies.”

Read the Brick and Click collection on the Adobe Blog to learn more about AI and the retail experience.