The hope is that these invisible AI improvements will increase sales — no more waiting a week for your size to come back in stock, or being treated like a stranger on your bi-monthly trip to a brand flagship, so the promise goes. While for a long time, the accepted wisdom within luxury retail has been that advanced tech features have little place in physical stores — as reinforced by the boom and bust of Web3 hype ideas like VR headsets — experts say this time, it’s different, because the tech is solving real retail pain points.
Those working at the frontier of experiential retail say AI is also leveling up what they call “empathetic” retail design, from store concepts where the lights change color or the music shifts in step with a customer’s breathing tempo, to AI-written poetry hand-delivered to a customer in seconds, based on how they look and what they’re wearing. In luxury retail’s AI era, a core focus on the humanity of every experience is the common thread.
“Customers now have high expectations of luxury retailers — they expect them to already know a lot about them, their services, what they’ve bought, what they might like,” says Andrew Hill, creative technology director at Random Studio. “But in the visual presence of offline and online store environments, there will be less and less visible technology. AI is this virtual, invisible layer beneath everything that makes the store a more magical, interesting place.”
Digital twins
Behind the scenes, brands are currently laying the groundwork so they can deliver this human, AI-assisted hyper-personalization at scale. “One of the most interesting use cases of AI that we’re seeing across luxury today is within the customer relationship management [CRM] and consumer marketing functions, where teams are building ‘digital twins’ of their customer base in a digital environment,” says Andrea Steiner, associate partner at Bain, who focuses on luxury retail and fashion. Brands are uploading all the information they have on details like what customers have bought in the past, how they’re engaging with the brand website, and how frequently they shop, then segmenting their customer base to find patterns and personas. Unlike traditional static CRM personas, AI enables brands to create dynamic virtual representations of individuals that simulate their behaviors and preferences in real time, continuously updated by data from several sources — hence the term “digital twins”.
Critics say this new data feedback loop could come with a darker side: certain fast fashion brands began making headlines last year due to industry speculation that they were following the aviation industry’s lead and experimenting with AI for dynamic pricing, in response to factors like demand, inventory levels, scarcity, and currency fluctuations. But historically, luxury brands have been more hesitant to avoid volatile or transactional pricing.
