Fashion design that hits the trends, cost reduction, and improved customer experiences. Smart use of AI is poised to become a crucial competitive factor in fashion retail. No serious player can say no to the new opportunities that are now unfolding.
By Elise M. Laupstad
Over the past decade, we've witnessed significant changes in retail, driven in part by rapid technological advancements and increasing customer demands for more personalized and relevant shopping experiences. There is a growing awareness of how technology can optimize and automate business processes to free up employees' time to focus on more value-added tasks while meeting customer expectations.
As most are aware, artificial intelligence (AI) is more popular than ever. The availability of the ChatGPT platform by Open AI has only heightened interest since late 2022.
How does this impact the fashion industry?
AI has the potential to revolutionize the fashion industry in several ways. Not only can AI automate and optimize business processes, but it can also provide a more personalized customer experience. AI and generative AI can be applied in various areas.
Let's take a look at three of perhaps the most exciting possibilities.
Can AI replace designers?
Probably not, at least not now, but AI can significantly enhance the design processes.
The role of designers in developing collections will remain crucial.
However, AI can be a valuable resource when it comes to trendspotting and the actual design process. AI can generate thousands of product design suggestions based on upcoming trends and the company's brand strategy. This helps streamline, simplify, and enhance the design processes, making them more accurate.
Several major fashion houses are already using this technology.
For example, Zara, the Spanish fashion giant, analyzes sales data and customer feedback using AI to identify trends and create collections that appeal to their customer base.
H&M and Zalando are other examples using AI to predict upcoming fashion trends and create new designs by analyzing social media, fashion blogs, and other relevant data sources.
Inventory optimization and forecasting
Another exciting area where AI can be of great help to retailers is demand forecasting.
AI can analyze sales trends to improve the quality of demand forecasts, thereby contributing to the optimization of production, supply, and inventory. The result is reduced unsold inventory, improved working capital, and fewer out-of-stock situations. This is not only beneficial for the business but also essential for the environment, which in turn builds the brand.
By using predictive analysis, AI can also optimize pricing strategies by identifying slow-selling items that should be activated through marketing and/or price adjustments. It can suggest alternative measures and predict how different price reductions will impact different customers. These actions can apply to all customers, specific customer segments, or simply just to increase visibility without adjusting prices. By combining this analysis with customer data, personalized pricing can be offered to build loyalty and maximize profits. Managing prices actively throughout the season avoids large end-of-season price reductions.
Today, most leading brands and fashion houses use AI and machine learning to some extent in their forecasting efforts. A significant amount of data is collected from various sources, including sales history, customer behavior, seasonality, weather conditions, and social media.
Early sales forecasts, made before a product is produced, often rely on historical data from similar products combined with trend data collected from various trend analyses, fashion shows from major fashion houses, influencers, and social media, providing the basis for production volumes. Continuous analysis, enabling dynamic pricing, ongoing marketing efforts, and production scaling, uses updated sales data, behavioral data, customer feedback, weather conditions, and social media.
Amazon is known for being at the forefront of dynamic pricing. They automatically adjust prices based on various factors, including competitors' prices for the product. AI algorithms allow Amazon to adapt its prices in real-time to attract more customers and maximize revenue. Zara is known for its "Just-in-time" production model, where they maintain a high level of replenishment to reduce inventory costs and minimize the risk of overproduction.
Enhanced customer experiences
The third area where AI can be of great help to the fashion industry is customer experience. AI can convert sketches and product information into 3D, enabling virtual fitting rooms for personalized avatars. This will reduce return rates, increase conversions for digital purchases, and boost sales per customer by using AI to style avatars in outfits that drive additional sales.
So far this has not been working very well, except for garments tailored personal fit, but there is no doubt that development will happen quickly. So ,it's essential to be open to possibilities and facilitate experimentation and testing.
Zalando has announced plans to launch a virtual fitting room with avatars of you, allowing you to see how jeans will fit your body exactly. Over 30,000 Zalando customers have already tested the first version. When a player succeeds in this, they will gain a significant competitive advantage (for a period) by offering customers a better experience and reducing costs associated with returns of ill-fitting clothing. This will also raise customer expectations for other retailers.
Writing informative and persuasive product and sales texts takes time. As we've seen with Open AI and Chat GPT, generative AI can help us generate many text suggestions at incredible speeds.
AI can assist in structuring, creating, enhancing, and personalizing digital product descriptions. This streamlines work, provides a better customer experience, and increases sales.
By identifying and predicting trends through AI, marketing can become more accurate and personalized by using unstructured data like customer sentiment, store behavior, and omnichannel data. AI can also be helpful in generating creative designs and texts, reducing a lot of manual work that currently takes time and will likely increase relevance for customers.
Stitch Fix, an online personal styling service, is one of several companies using generative AI models, combined with human expertise, to improve and streamline advertising campaigns on both Facebook and Instagram, as well as write effective product descriptions for their website.
Although chatbots have almost become a derogatory term, we believe that Generative AI can help reverse its poor reputation. AI agents can handle advanced inquiries such as multilingual support and assist in managing inquiries more efficiently. The technology will bring us significantly closer to the experience of talking to a human, as it can not only use personal data but also see and contextualize information and adapt the conversation tone naturally. However, we should never forget the value of having a real person available to serve our customers.
How to get started?
Overall, the potential for AI in retail is enormous and exciting.
From optimizing design to inventory management and enhancing customer experiences, AI can help retailers stay ahead and provide customers with the best possible experience while increasing both top-line and bottom-line performance, making the industry more environmentally friendly. There are many opportunities beyond what we've discussed here.
However, it's important to note that AI is a broad term encompassing a wide range of tools and platforms, requiring adaptation to your specific needs. Implementation requires careful consideration and planning. It's crucial to identify the specific areas where AI can provide the most value to your business and collaborate with experienced professionals to develop and implement effective AI strategies.
As AI technology continues to evolve and improve, we are likely to see more innovative use cases in retail.
The key to success will be continuous curiosity, staying updated on the latest developments, and having a plan for using AI as a tool for growth and success. That said, it's important to remember that AI is an aid, not a replacement, for human creativity and innovation.
At Columbus, we help you explore the possibilities of using AI for your business.
Feel free to contact us for a talk or more information.