Navigating the AI Revolution: How Fashion Retailers Can Harness Generative AI for Strategic Advantage

While machine learning and artificial intelligence (AI) has been around for decades and used in a variety of ways by the military, in science and academia, and in the business sector, the past year has seen a mainstreaming of AI as generative tools such as ChatGPT took center stage.

But not all AI is the same. Moreover, as fashion apparel and footwear retailers and brands eye investments in the technology, they also must discern when and where to use it best.

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According to a recent report from IBM’s Data and AI Team, there are theoretical and functional forms of AI. The theoretical is like the fictionalized, but possible, ways AI can do, learn and think. The functional forms of AI include “Reactive Machine AI,” which are “systems with no memory and are designed to perform a very specific task,” the report’s authors said. “Since they can’t recollect previous outcomes or decisions, they only work with presently available data.” Types of reactive machine AI is IBM’s own computer chess wizard, Deep Blue.

The other functional form is “Limited Memory AI.” The IBM report said this form “can recall past events and outcomes and monitor specific objects or situations over time. Limited memory AI can use past- and present-moment data to decide on a course of action most likely to help achieve a desired outcome.”

But there are limitations. The IBM report said while limited memory AI can use past data for a specific amount of time, “it can’t retain that data in a library of past experiences to use over a long-term period. As it’s trained on more data over time, limited memory AI can improve in performance.”

Examples of limited memory AI include generative AI platforms such ChatGPT and Google’s Bard, among many others. Limited memory AI also includes virtual assistants and chatbots such as Siri, Alexa, Google Assistant, Cortana and IBM Watson Assistant. Self-driving cars are also in this category.

What put generative AI in the spotlight was its accessibility to everyday users. Consumers were using ChatGPT to create travel itineraries and write personal invitations, while marketers used the tool to draft SEO-friendly headlines and effective email subject lines.

For footwear and fashion brands, AI can be used in a variety of ways outside of just marketing. It can be part of a more comprehensive strategy aligned with larger corporate goals.

At Saks, for example, RJ Cilley, the luxury ecommerce platform’s chief operating officer, said the retailer is making AI investments as part of a carefully constructed strategy, and noted Saks is doing so because it is “committed to delivering the premier luxury shopping experience to our customers.”

“To that end, we are always looking for ways to further enhance the Saks experience, which led us to explore new and innovative AI solutions.” Cilley said Saks tested and learned with the new technologies before introducing them into the customer experience. The learnings helped Saks “navigate how we can apply AI solutions moving forward.”

Before launching, Saks focused on accuracy, speed, automation and building rapid feedback loops. “As we began to identify ways to advance these efforts, we uncovered opportunities to apply AI solutions within our back-of-house operations,” Cilley said.

To help retailers and brands assess, evaluate and implement AI technologies, management consultant firm AlixPartners created a “pragmatic framework” to drive value through AI called the “AI Value Unlock Framework.” It is a process that requires companies to take a close look at what they want to achieve with AI and then prioritize as needed based on value creation potential.

Sonia Lapinsky, partner and managing director out of AlixPartners’ New York office, said AI adoption in the fashion apparel and retail industry can be challenging for some companies. Lapinsky said retailers and brands sometimes struggle with making investments in technology and often lag other industries in adoption.

But the clock is ticking. AI can give retailers and brands a sharper competitive edge.

Recent research from Salesforce shows global online sales rising 4 percent to $1.19 trillion in the November and December period. In the U.S. market, online sales are pegged to rise just 1 percent to $273 billion. And researchers at the company said that amid slower growth, retailers are investing in AI to drive conversions. Salesforce said AI-powered product recommendations can affect $194 billion of online sales.

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