We already know that generative AI helps fashion eCommerce brands deliver personalized experiences from search to the sale. In fact, not every implementation of AI has to be an extreme shift in a company’s customer engagement. For example, Levi Strauss uses AI to show customers a wider range of diverse models on its website and other channels. That said, as the retail sector explores how generative AI is changing operations and enhancing customer experiences, fashion eCommerce stands out as an area expected to undergo significant transformations.
Generative AI’s Greatest Impacts on Fashion eCommerce
Fashion Brands as Tech Trailblazers: When it comes to adopting new technologies, major fashion brands have always been at the forefront. They actively embrace emerging concepts and tools such as Web3, the metaverse, augmented reality (AR), and non-fungible tokens (NFTs). Generative AI, including technologies like ChatGPT, finds itself fitting seamlessly into this culture of innovation within the fashion industry.
eCommerce Dominance in Fashion Retail: The fashion retail landscape heavily relies on eCommerce, making it an ideal space for generative AI advancements. In the United States, apparel and accessories constitute the largest single category for online sales, accounting for 18.7% of all digital sales. In 2023 alone, this segment is estimated to be worth nearly $215 billion. Furthermore, around 36% of US apparel and accessories sales will be conducted online this year, with this share projected to exceed 46% by 2027.
Addressing the Returns Dilemma: One of the most pressing challenges faced by fashion brands in the ecommerce space is the issue of returns. Buying clothes online often leads to problems related to fit and sizing, resulting in nearly a quarter of US apparel and accessories retail sales being returned in 2022, as per our forecast. To cope with this, consumers have resorted to bracketing, a practice involving ordering multiple sizes and returning the items that don’t fit. However, the costs associated with this practice have become unsustainable for many retailers.
The Promise of Generative AI: According to McKinsey, the adoption of generative AI has the potential to significantly impact the fashion industry’s operating profits. Their estimates suggest that within the next three to five years, generative AI could contribute between $150 billion and $275 billion in additional operating profits to the industry. This technology has the power to streamline processes such as virtual try-ons, personalized styling recommendations, and optimizing inventory management, ultimately reducing returns and enhancing customer satisfaction.
Fashion eCommerce is on the cusp of a transformation fueled by generative AI. The early adoption of new technologies by major fashion brands, coupled with the dominance of eCommerce in the industry and the pressing need to address the returns problem, sets the stage for significant advancements. As generative AI continues to evolve, the fashion industry stands to benefit from increased profitability and improved customer experiences. By harnessing the potential of generative AI, fashion brands can revolutionize the way they operate and further solidify their position in the digital landscape.
With its ability to create personalized experiences and enhance various customer-facing aspects, generative AI is proving to be a powerful tool in the fashion industry.
How AI Enhances Customer Interactions
Product Search and Discovery: Generative AI tools offer exciting possibilities for enhancing product search and discovery. By leveraging machine learning algorithms and direct feedback, brands can create hyper-personalized experiences. Conversational search functions and personalized recommendations enable shoppers to find exactly what they’re looking for. As generative AI tools learn more about individual preferences, interactions can resemble those with a personal stylist or shopper. Klarna’s collaboration with OpenAI’s ChatGPT plugin is a prime example of using generative AI to offer curated product recommendations and a seamless purchase experience. However, brands must ensure data security and maintain high-quality data to support relevant recommendations.
Product Description and Information: Generative AI tools can transform product description pages, providing richer and more personalized content. By generating images from text and vice versa, brands can highlight information that is most relevant to individual consumers. Shopify’s OpenAI-powered tool and Stitch Fix’s generative AI model showcase how brands are already benefiting from enhanced product descriptions. However, it is crucial to exercise transparency and quality control to address concerns related to personal data collection and the role of virtual models. Brands should disclose the use of AI in customer-facing functions, ensuring accuracy and addressing bias in content.
Product Customization and Co-Creation: Generative AI tools offer an opportunity for brands to engage customers in co-creating products. By leveraging these tools, brands can tap into the creative potential of their customers. Events like Metaverse Fashion Week and AI Fashion Week demonstrate how brands are embracing generative AI to involve customers in the design process. Customization options and suggestions from customers can enhance the overall shopping experience. Moreover, generative AI can support the rise of micro-brands and facilitate made-to-order production, reducing waste and inventory risk. However, brands must address intellectual property issues and define their approach to sharing design control with consumers.
Generative AI is reshaping customer-facing interactions in the fashion industry. By leveraging its capabilities in product search and discovery, product description and information, and product customization and co-creation, brands can elevate customer experiences to new heights. While harnessing the power of generative AI, brands must prioritize data security, transparency, quality control, and intellectual property concerns. As fashion brands continue to explore the possibilities offered by generative AI, we can expect more exciting innovations and advancements that enhance customer satisfaction and redefine the industry as a whole.
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