Bernard Arnault, chairman and CEO of French luxury group LVMH, announced the group’s… [+] LVMH’s 2018 annual financial results presentation at its headquarters in Paris on January 29, 2019. (Photo: ERIC PIERMONT / AFP) (Photo: ERIC PIERMONT/AFP via Getty Images)
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Luxury brands have been using basic AI extensively for data analytics to support demand forecasting, supply chain management, and other operational uses, but the advent of generative AI (GenAI) has taken AI to a whole new level, maximizing both opportunities and challenges.
Basic AI is programmed to analyze data, identify patterns, and make predictions. It is limited in scope and narrow in reach. GenAI has no such limitations. It is programmatically trained to analyze data inputs from multiple sources and create new content and information in a variety of formats, including text, photos, videos, and audio.
GenAI mimics human creativity but lacks human cognitive and contextual understanding. It has the potential to expand human limits and accomplishments, but it lacks a moral compass. As retail industry analyst Robin Lewis puts it, “It offers no wisdom, no insight, no context. It has no soul.”
For example, Senator Richard Blumenthal opened a congressional hearing on the dangers of AI by playing a recorded message that sounded like he was speaking words he did not write. His voice and delivery style were created by GenAI, but given the power of GenAI, they could have just as easily done it on video.
Luxury brands design products that reflect the highest level of human creative achievement. Brands thrive in the marketplace through authenticity and human connection. Rather than enhancing these qualities, irresponsible use of GenAI could threaten them.
As a leader in the luxury goods market, LVMH stands to gain the most from AI if it’s used effectively, and to lose the most if it’s deployed improperly. And given its size, LVMH has unparalleled resources to discover AI’s potential, which is why the company is bringing together the best minds to explore the uncharted territory of artificial intelligence.
The company recently hosted the three-day LVMH Data AI Summit in Paris, bringing together students and practitioners to explore innovative AI applications, and partnered with Stanford University’s Human-Centered Artificial Intelligence Institute (Stanford HAI), which is at the forefront of research into AI safety, human-centered design and human-computer interaction in retail.
“Recent advances in generative AI present new opportunities for great innovation and efficiency gains, but also challenges and risks. LVMH will accelerate its efforts to learn and experience how AI can benefit our business,” the company said in a statement.
Risk and reward
Human creativity is the lifeblood of LVMH’s 75 brands, known as Maisons, and the entire luxury market. Luxury brands stand to gain the most from investing in GenAI capabilities if GenAI can enhance that creativity. A Deloitte survey found that 20% of retailers plan to use GenAI to enhance their creative process.
LVMH recognizes GenAI’s creative power in the luxury market: “While these technologies offer incredible creative power and make it possible to create bespoke designs and personalized experiences, they also raise questions about authenticity and responsibility,” the company said.
At the same time, luxury brands like LVMH have long recognized that the human element in the retail environment plays a key role – the human connection. This is a key reason why luxury brands have been slow to adopt e-commerce.
This is where partnering with Stanford HAI comes in. “Stanford HAI’s mission is focused on well-designing and building human-centered AI that has a positive human impact,” James Landay, associate director of research at Stanford HAI, said in a statement.
The statement added, “LVMH Luxury Group will continue to work with faculty and students to better understand current advances in this technology and how it can augment, without replacing, employees.”
“Stanford HAI is committed to providing the best possible service to our customers,” explained Panos Madamopoulos-Moralis, managing director of industry programs and partnerships at Stanford HAI.
“We are poised to lead the evolution of AI in the creative and consumer industries, a relatively underexplored area compared to enterprise applications. Working with our first European member, LVMH, we aim to empower creative minds, enable the safe development of large-scale models of luxury goods and translate artificial intelligence into practical impact to shape industries that touch people’s lives around the world.”
Luxury is more than a transaction; it’s a customer experience
“In luxury retail, customer experience has always been top of mind,” Deloitte explained in a report released at the World Retail Congress titled “Reimagining Retail: Using Data-Driven Insights to Create Luxury Customer Experiences.”
Deloitte’s report seeks to answer the question of how GenAI can improve customer experience in an authentic way, rather than making customers feel like they are cogs in a machine manipulated by technological forces they cannot understand or control.
Luxury brands are widely aware of the potential of GenAI to improve the return on their marketing investments. For example, GenAI can be used to create original content designed for each individual customer, personalizing messaging and ensuring that they only receive content that resonates with them – a huge benefit for consumers with inboxes and text messages overloaded.
The International Data Corporation predicts that GenAI will increase the productivity of companies’ marketing efforts by more than 40% over the next five years.
Beyond marketing applications, an Nvidia survey of 400 retail professionals found that an overwhelming 86% believe GenAI’s greatest potential is in improving the customer experience – specifically, using it to assist with product recommendations, virtual shopping and try-ons, a technology that LVMH has used most effectively at Sephora and has also been tested at Dior.
It can also be used to provide sales staff with the tools to enhance their personal in-store shopping experience – an especially valuable application in labor-intensive luxury retail environments.
Caution Required
The problem gets more complicated as GenAI moves beyond internal tasks like forecasting demand and improving operational efficiency into more consumer-facing applications.
Nvidia reports that retailers are generally taking a cautious approach, citing concerns about data privacy and security. The Federal Trade Commission has echoed these concerns, along with potential bias and inaccuracies that can result from machine learning rather than human interaction.
“The introduction of AI creates new uncertainties and risks. The technology is transforming market conditions, and companies are moving to provide and leverage critical inputs to AI systems, creating opportunities for companies to gain significant power in this technology sector,” wrote the FTC’s Simon Fondry Teitler and Amrita Jayanti.
A Forbes Advisor survey of 2,000 Americans conducted by OnePoll found that the majority of consumers are concerned that they could be deceived or manipulated by companies that use AI.
For example, 70% of consumers are concerned about AI being used to describe products, and 60% are concerned about AI being used to review products. Nearly two-thirds (64%) are concerned about personalized ads, 58% find chatbots problematic at answering questions, and 76% are concerned that AI could lead to misinformation on company websites.
Meanwhile, consumers are less keen on companies using a range of personal data to strengthen customer relationships: 48% are in favour of tracking past purchase history and behaviour, and 55% have little problem with retailers tracking social media usage and engagement, but only a minority are comfortable with AI analyzing their text messages (33%) and phone conversations (21%).
LVMH takes the lead
Over the years, LVMH has strategically implemented AI in inventory management and demand forecasting across its diverse brands operating in five different luxury sectors: wines and spirits, fashion and leather goods, fragrances and cosmetics, watches and jewelry, and specialty retail such as Sephora and Le Bon Marché.
This poses a great challenge when dealing with vast amounts of data: we cannot rely on a one-size-fits-all approach to AI, but instead it needs to be customised for each Maison and the sector in which it operates.
Some data and learnings cross each Maison’s boundaries, while others are brand-specific, and value is realised by leveraging it all strategically, maximising synergies between brands and regions whilst recognising the uniqueness of each.
But most importantly, LVMH needs to use AI responsibly. “At LVMH, we have been promoting human creativity and craftsmanship for decades,” Anca Marola, LVMH’s chief data officer, said in a statement. “In recent years, artificial intelligence has become a powerful assistant that enhances our efficiency.”
“It’s important that we embrace and leverage these groundbreaking technologies, but we need to do it in the right way that benefits businesses, people and the future of society.”
The connection between humans and technology
LVMH’s collaboration with Stanford HAI will focus on new applications of AI in areas such as customer experience, product design, marketing content and communications, manufacturing, and supply chain management.
Antonio Belloni, managing director of the LVMH Group, added: “Artificial intelligence is a powerful technology. We recognize the value it brings, as it supports and complements the human talent, emotion and creativity that are at the heart of our Maisons.”
LVMH’s goal is to enhance its talent, resources and operations through AI to better serve its customers. Bridging the gap between humans and technology is both its biggest challenge and its biggest opportunity.
But the successful adoption of AI in luxury requires collaboration not with behind-the-scenes technologists, but with forward-thinking executives and staff across creative, marketing and customer service disciplines.
“Luxury is about people. AI is a tool that can shape and improve certain marketing efforts. It doesn’t replace the personal aspect of business, and full-scale luxury AI experiences don’t exist yet,” said Chandler Mount, a luxury market research specialist at my company, Affluent Consumer Research Company.
A fully-fledged luxury AI experience may not be possible just yet, but LVMH will make it happen.
