Why should Luxury Brands invest in AI and Blockchain?
The luxury industry is well placed to benefit from AI and Blockchain innovation — but will it?
The fashion industry has become increasingly reliant on technology in recent years to remain competitive and successful. This trend was accelerated by the Covid-19 pandemic, leading to a rise in E-commerce adoption by consumers and further integration of digital tools into the industry’s daily operations. It is expected that investments in technology will significantly increase in the fashion industry in the coming years. Companies that embrace this shift towards technology will likely benefit, while those that do not risk becoming obsolete.
The growing “metaverse,” or overlap between the digital and physical worlds, is an area of significant interest. While currently, many ventures into the metaverse are primarily for marketing purposes, fashion companies have the potential to generate up to 5% (McKinsey & Company, 2022) of their income from activities in this space. Digital skins and non-fungible tokens (NFTs) are expected to be among the biggest money-makers in the metaverse. It is projected that spending on virtual goods will reach approximately $135 billion by 2024. (McKinsey & Company, 2022)
Another area that fashion brands and retailers should focus on is the role that technology can play in creating a more sustainable future, while also ensuring they provide the best possible customer experience. Fashion players need to focus their technological resources and investments on technologies that allow for traceability, such as blockchain, which can provide customers with greater transparency and peace of mind regarding the origin and supply chain of the products they purchase. This can help build trust and loyalty among customers and differentiates the brand from competitors.
As companies explore more digital opportunities, they may focus on personalizing the customer experience to increase loyalty. Thanks to AI-powered services such as Netflix and Spotify, customers now expect hyper-personalized service. However, due to technology and talent limitations, the fashion industry has thus far been unable to provide anything beyond basic segmentation. With investment in Artificial Intelligence modelling and Big Data, it is possible that personalized one-to-one shopping experiences may emerge, leading to increased sales and customer acquisition rates.
The integration of technology in luxury stores is becoming more and more common as retailers seek to improve the customer experience and stay ahead of the competition. For instance, Burberry uses RFID (Radio Frequency Identification) tagging and blockchain technology to increase transparency and traceability in its supply chain, allowing customers to verify the authenticity of products. They also use augmented reality to allow customers to see how products would look in different settings, and AI-powered virtual assistants to provide personalized recommendations and assistance. Additionally, Louis Vuitton has implemented self-checkout and digital payment methods in some of its stores, making the shopping experience more convenient for customers.
Brands, start-ups, and industry organizations should work together to create a common data standard and share information and insights through software platforms, open ledgers, and Big Data technology. Brands and retailers should focus on joining the tech revolution in fashion and better serve customers through personalized experiences, digital marketing, and connected stores.
Technology has the power to transform the fashion industry, but many companies have yet to fully leverage it. To stay competitive and meet the needs of modern consumers, fashion executives must prioritize tech and allocate resources to improve customer relationships, access new markets, and implement data-driven strategies.
What innovations do you think the luxury industry should be looking into? Do you think that this is an area that luxury should embrace or not? Let me know in the comments.
About this article
This article has been written by a student on the Grenoble Ecole de Management’s Advanced Masters in Digital Strategy Management. As part of a content creation assignment, students are given the task of writing articles based on their digital interests and disseminating the articles online. Articles are marked but we make minimal changes to the content. Thanks for reading! James Barisic, Programme Director, MS DSM.
