After exploring the world of Art and AI, we're now taking a look at the impact of the technology on the luxury sector. Andrew Shirley - the editor of Art, AI and the Future of Creativity - asks the experts how AI could revolutionise client engagement and what luxury brands need to know before using the technology.
The global market for luxury goods, including experiences and hospitality, was worth a staggering €1.5 trillion in 2023 - 10% up on the previous year - according to the latest annual Luxury Study, released by Bain & Company and Fondazione Altagamma.
Growth is set to continue, but there will be challenges for brands to navigate, including China’s ongoing economic slowdown, the shift towards online shopping, growing concerns about the environmental footprint of luxury goods, and the changing demands of a new generation of younger consumers.
Used correctly, our contributors believe that AI offers luxury brands the opportunity to overcome some of these challenges and grow their share of the market by increasing personalisation, becoming more efficient, combating waste and boosting transparency.
Data-driven
“Those looking to stay ahead of the pack will need to harness the power of data to make the biggest impact,” advises Sian Rodway, COO of tech consultancy MDRx, who points out that most luxury brands already have a vast amount of data on their clients, but often fail to use it. “Data enables luxury retailers to anticipate consumer needs, optimise their operations and enhance the shopping experience.
Artbrain, an AI tool designed specifically for auction houses, is already helping businesses to personalise their communication strategy. “Traditionally, auction houses reached out to some of their customers personally, but the majority were left with generic messages,” points out the firm’s CEO Adar Glusman.
“One template can now be used to send 5,000 unique, tailored emails based on AI analysis of bidding behaviours. This has seen the reactivation of inactive customers, improved sell-through rates, and an increased number of bidders per lot,” claims Glusman.
Customers are looking for a tailored shopping experience at every stage of the buyer journey, particularly when paying for high-value goods such as designer goods, points out Rodway. “By embracing data science to improve upon this journey luxury brands are seeing an increase in brand loyalty and ultimately a boost to their top line,” she explains.
“AI unlocks opportunities to more effectively personalise the luxury buying experience with machine learning-based recommendation systems highlighting the most relevant products for buyers making highly considered purchases,” agrees Ryan Beauchamp, Chief Product Officer at First Dibs, a luxury e-commerce business.
“Data-driven insights offer unique value that sets the digital experience apart in compelling ways.”
Other sectors of the luxury world are also tapping into AI’s potential. “We are excited about the opportunities that will result in a better customer experience,” says Marriott International’s, Helen Leighton, Vice President, Luxury Brands & Communication EMEA.
“We use AI behind the scenes in various areas of the business to aid decision-making and to solve customer and operational pain points. But our approach is to always leverage technology that complements and enhances, not replaces, the human interactions between our guests and associates.”
Human touch
AI should never be used to replace the human story, concurs Lucy Cleland, Editorial Director of Country & Townhouse. “Customers should know and feel like there is always a human touch at the heart of the brand – human imperfection will become the new “perfect” as many brands will use AI to iron out the kinks or idiosyncrasies that can actually make something so wonderfully unique.”
However, that’s not to say that AI can’t be a valuable creative partner, says at IBM. “In luxury some things are eternal. The desire for craft, for beautifully executed experiences, and for the personal touch does not change. What is new is that the essential elements of a luxury brand can now be augmented by AI through the design and delivery of brilliant experiences.
“Think about AI as augmenting human intelligence to produce creative work that would not be possible if either were working alone.” A good example, says Dr Nicola Hodson, IBM UK and Ireland Chief Executive, is the work that IBM has done with the fragrance team at Symrise, a major producer of flavours and fragrances, to develop an AI tool called Philyra.
Philyra uses constant feedback from Symrise’s perfumers to refine its fragrance knowledge and help them discover and explore innovative new olfactive territories they may not have considered before using its 3.5 million legacy formulas.
AI can also allow gallery and exhibition curators to tell richer, multi-sensory stories, adds Dr Hodson. “AI and spatial computing tools are being used to enable art audiences to literally step into famous artworks and interact with them or see the world through a particular artist’s eyes.”
Sustainability
Another benefit of AI is its potential to enhance luxury brands’ sustainability by improving transparency and efficiency, says Juliette Vartikar, Director of Sustainable Investing at UBS Asset Management and Founder of ArtSustainability.
“In terms of materials sourcing, AI can ensure that materials are ethically sourced and meet environmental standards, enabling brands to focus on materials with a lower environmental impact such as organic or recycled fibres.”
AI can also help reduce waste by optimising the use of resources without compromising quality or authenticity, adds Vartikar. “It can identify areas where production may be streamlined, such as reducing offcuts, to improve efficiency and minimise waste.”
Integrated with blockchain technology, AI can additionally provide brands with real-time insights into their global supply chains by tracking the journey of raw materials from farms to workshops.
“It can monitor payments and working hours, ensuring that artisans are paid fairly and not exploited. This supports the continuity of artisan heritage and reduces the risk of economic displacement,” she says.
Despite all the benefits AI can potentially offer luxury brands and businesses, those using it need to be aware of the baggage it comes with, warns Lucy Cleland. “The elephant in the room that we all have to confront is that although we may be singing the ethical and waste-saving virtues of AI, the carbon footprint of the system can be thousands or even millions of times larger than a single search query. This is something that businesses on the road to net zero will have to weigh up carefully.”
Governance
Aside from environmental concerns, governance is the biggest issue users of AI need to get their heads around.
In a complex and evolving regulatory landscape, IBM’s Dr Nicola Hodson, says it is vital brands stay true to their core tenets when using AI. “Always consider your position from an ethical standpoint, especially in terms of the datasets you are using to train AI, and ensure you have the rights to any data used in innovation, design and production processes.”
With the online sale of luxury goods set to hit €70 billion by 2025, the security of client data used in AI-driven marketing strategies is of paramount importance, points out Sian Rodway. “This is particularly relevant to the luxury retail industry where reputation and consumer trust are crucial.
“Many luxury brands are renowned throughout the world, and with a customer base of millions they have vast amounts of data at their disposal. Having a skilled team to ensure the data is handled correctly is where they may fall short.”
It is equally important that AI does not accidentally leak any brand IP to the outside world, says IBM’s Dr Nicola Hodson.
Strategy
With such rewards on offer, it would be tempting to jump straight in, but creating an AI strategy for your brand and fully understanding the technology will be crucial to help avoid the pitfalls that potentially lie in wait for the unprepared.
