Artificial Intelligence in Fashion and Retail

As an undergraduate business school student, my fellow classmates and I are always eager to read the newest article in the Wall Street Journal about artificial intelligence being used in classrooms in China. It is used as anything from a deterrent to human trafficking or to increase the efficiency of our favorite sports teams. However, the lecture hall is always something of a bubble and I find myself wondering how the actual business world thinks about artificial intelligence. Are investors as excited as I am? What, in particular, are venture capitalists and leading innovators hoping to use AI for? Recently, we were treated with some answers in the AI Index Report from the Human-Centered Artificial Institute at Stanford. Alongside the expected sectors of investment, like autonomous vehicles and chatbots, one of the most popular areas for investment around the globe, and in the US and Europe particularly, is for fashion and retail technology (HCAI 2019). This was particularly surprising for me – I had read about companies like Wayfair and Amazon pioneering the use of data, but would have never guessed that retail and fashion specifically was one of the hotspot for private investment in AI. What are these new technologies all about, and should we even care?

For one thing, a wide variety of AI implementations have been created to improve the customer experience. Retail is an industry that is dependent on healthy customer relationships and efficient operations at each touchpoint, both of which necessitate swift and intelligent responses to consumer needs. Thus, it is understandable that Natural Language Processing and Machine Learning have become a major focus for retailers, as the shift to e-commerce and digitized in-store experience call for changes in the nature of customer service (Insights). Lowe’s is a retailer that has embraced AI in multiple channels, most notably in-store with their LoweBot, a sort of kiosk that processes customer inquiries and is able to make intelligent requests, which of course grow stronger and more helpful as time goes on. The LoweBot can also track inventory over time, which complements Lowe’s other technology that identifies precisely where the store is running low based on shelf space (ibid). Thus, in supplementing the in-store experience, AI can be a great way to increase efficiency. But, it begs the question as to whether or not it is truly “the future” of retail. I mean, just consider the main functions that I described – helping out a customer with a complex and, at times, frustrating project, taking stock of what items you have on hand, and replacing those items which have sold out on the floor. These are all relatively small tasks that can still be accomplished by humans. Sure, it might be cooler to have computers as the backbone of your operations, and perhaps cut the cost of employing human beings, but in the long run can it truly make your business that much better than the competition? Or, for that matter, will not including it in the first place really have a huge negative impact on your business in comparison to the other stores right down the street?

Where AI might be of more use for both retail and fashion is in the practice of preparation, rather than strict call and response. In the holiday spirit, it makes a lot of sense to point to the struggles of retailers that do not use AI in times of uncertain customer traffic and heavy overall demand (Galkin). Of course, a lack of availability (products becoming sold out) is the major deterrent for consumers shopping on and offline, and AI can leverage consumer data to make more informed decisions, and free from human bias, about levels of inventory at given times (Booth). This, though nontrivial, is also pretty obvious, and AI is still incredibly valuable at other points in the value chain for businesses. First of all, not only are you less susceptible to stock outs, a business is equipped to meet customer demands with a lower amount of inventory on hand, as they will not have to overcompensate for unknown demand and overstock themselves. This has a lot of ripple effects in savings, from leaner staff schedules to less frequent deliveries. Furthermore, machine learning can truly empower and propel pricing optimization into the future. It is capable of processing ever-increasing levels of consumer insights, competitor information and countless simulations (Deep). All in all, AI has the power to greatly reduce overall logistics costs for businesses.

The young businessperson in me finds this interesting, but I am sure that the general audience reading this article was bored to tears with my discussion of overhead and logistics. Where is the pizzazz? Where is the pomp and circumstance? What exactly is so glamorous about this artificial intelligence? Fortunately, the fashion industry itself is heavily involved in artificial intelligence in predicting trends and making custom orders. This technology has really proliferated amongst top fashion firms, notably with Tommy Hilfiger, who has gone so far as to establish a partnership with IBM to evaluate macro-level fashion trends and customer insights in real time, feeding designers particular colors and patterns to include in their upcoming designs (Future of Fashion). Tommy Hilfiger shows how AI can enhance human interaction with clothing and the fashion world, but Stitch Fix, a Silicon Valley startup, goes a step further, wherein their robust algorithms can identify blindspots in current inventory, and can suggest and put together rough outlines of potential inclusions to appeal to the most customers (Marr). Thus, AI is not only useful in cutting costs for your local Walmart, it is also helpful in assuring that you will be able to be dressed as nicely as possible, and ensures that companies, both small and large understand their audience and are much more engaged with their customers going forward.

Of course, many are led to the question of “So what?” Just because my friends and I may be able to get our hands on some nicer clothes a little earlier, does not necessitate that the fashion industry should now be run by computers. The truth is that, when it comes to fashion, AI can actually add a lot of value in making the industry greener and more sustainable. For example, while on the surface “at-home try-on”, enabled through your phone or webcam, may seem like something that is more cool than substantive, it actually can reduce the amount of returns by 25%, and ultimately diminishes the overall emissions from deliveries and trips to the store in the fashion industry (Rabe). Also, on top of making supply chains more efficient (just as with retailers), the new ways that companies can use insights actually can change their entire business model for the better. Fashion companies are no longer reliant on “guess and check” work in their designs, wherein they make an educated guess as to what consumers may or may not like, and from their mass produce clothing to see if they will sell (Future of Fashion). Instead, they are much better equipped to know exactly what consumers will want when, drastically reducing the need for input materials, and conserving overall waste produced by the industry.

The excitement that I feel from artificial intelligence is still profound, though after my research, not in exactly the same way. I certainly think that enabling a power beyond the intelligence of humans to address the climate crisis is a great thing, and as someone who is interested in becoming a management consultant, I am excited at the prospect of bringing all of this new insight to the table for my clients. However, I do think that companies need to continue focusing on the practical rather than what is cool. Having the LoweBot is cool, but what does it give you beyond what you could get out of a troop of hard-working employees? I think that, when used intelligently, artificial intelligence can change the worlds of both fashion and retail as we know them, but without distinct market intelligence, we run the risk of getting hyped up over something that ends up dying out, missing on a potentially great opportunity.

Sources

Bayern, Macy. “How AI can save the Retail Industry.” Tech Republic, 13 Sep 2019. https://www.techrepublic.com/article/how-ai-can-save-the-retail-industry/ 

Booth, Adam. “The Potentials of AI are Endless for Demand Forecasting.” Essential Retail, 24 Sep 2019. https://www.essentialretail.com/comments/ai-demand-forecasting/

Deep, Akash. “Six Real-World Applications of AI in Retail.” HackerNoon, 25 Sep 2019. https://hackernoon.com/6-real-world-applications-of-ai-in-retail-c50736028efd

“The Future of Fashion: From Design to Merchandising, How Tech is Reshaping the Industry.” Research Briefs, 21 May 2019. https://www.cbinsights.com/research/fashion-tech-future-trends/

Forbes Insights Team. “Software for Hardware: How Artificial Intelligence is Helping Lowe’s Customers.” Forbes, 17 Jul 2018. https://www.forbes.com/sites/insights-intelai/2018/07/17/software-for-hardware-how-artificial-intelligence-is-helping-lowes-customers/#5876726a4286

Galkin, Alexandr. “AI: Evolve or Become Extinct.” Essential Retail. https://www.essentialretail.com/comments/evolve-or-become-extinct-ai/

Marr, Bernard. “Stitch Fix: The Amazing Use Case of Using Artificial Intelligence in Fashion Retail.” Forbes, 25 May 2018. https://www.forbes.com/sites/bernardmarr/2018/05/25/stitch-fix-the-amazing-use-case-of-using-artificial-intelligence-in-fashion-retail/#4027888e3292

Rabe, Lars. “The War on Waste: Why Artificial Intelligence is Making the Fashion Industry Greener.” Essential Retail, 12 Jul 2019. https://www.essentialretail.com/comments/the-war-on-waste/

Schmelzer, Ron. “The Fashion Industry is Getting More Intelligent with AI.” Forbes, 16 Jul 2019. https://www.forbes.com/sites/cognitiveworld/2019/07/16/the-fashion-industry-is-getting-more-intelligent-with-ai/#7d4f8e373c74

“The 2019 AI Index Report.” Human-Centered Artificial Institute at Stanford. Dec 2019. https://hai.stanford.edu/ai-index/2019?utm_source=morning_brew