Deloitte: AI to drive 'hyper-personalization' in luxury retail

Luxury fashion retailers are deploying artificial intelligence (AI) to personalize customers shopping experiences.

More than half (52%) of retailers surveyed intend to use Generative AI (GenAI) within the next year for content creation in publications and reports and 25% aim to utilize it for brand campaigns and marketing, according to Deloitte Global’s "Retail Reimagined: Creating luxury customer experiences using data-driven insights" study.  The report coincides with a recent survey from Algolia that found four-in-10 (44%) respondents believe AI can enhance their fashion sense.

“Consumers expect brands to understand their individual preferences and provide tailored interactions across all touches,” said Ida Palombella, partner, IP & IT fashion & luxury co-leader, Deloitte Italy, “These discerning shoppers seek seamless experiences that imbue a sense of exclusivity and importance across physical and digital realms. From styling to AI-augmented chatbots and beyond, the possibilities that GenAI poses are decidedly endless.”

Deloitte Global cites multiple examples of luxury fashion retailers utilizing AI. In March 2023, The Prada Group partnered with Adobe to enhance online and in-store customer experience through real-time personalization powered by data analytics. And during London Fashion Week in February 2023, Moncler Genius launched its first entirely GenAI-created commercial campaign, while Valentino launched a campaign for Maison Valentino Essentials, a collection with a new take on traditional men’s clothing, also created using GenAI.

The report found the issue of unstructured data as one of the primary obstacles for the wider adaptation and utilization of GenAI by fashion brands, which often contains sensitive personally identifiable information (PII) and raises concerns surrounding consumer trust and data security.

To cultivate trust with consumers, Deloitte says luxury retailers should base the design, deployment, and communication of AI tools on four "fundamental" pillars: human connection, transparency, capability and reliability.

“Retailers are racing to enhance the customer experience, from virtual shopping lounges to personalized recommendations and beyond,” said Ian McGarrigle, chairman of World Retail Congress. “The luxury retail sector has always led the way in terms of understanding its customer base and now has a much broader range of tools at its disposal – the key will be learning to separate valuable data from the redundant and obsolete.”