Opinion / How artificial intelligence could jump-start the luxury sector – with China’s help
Western brands such as Hermès and Louis Vuitton are looking to China to boost their sales as it recovers from the coronavirus outbreak, but many are considering how artificial intelligence can help them increase revenue
Last year in April, I had the privilege of leading a panel on artificial intelligence in luxury at the Sotheby’s x Jing Daily Future of Luxury Conference in Hong Kong. Around 100 luxury brand leaders across Asia came together to discuss digital disruption in the luxury industry. One of the questions raised was whether I thought technology – and, in particular, artificial intelligence – would replace creativity. In other words, will fashion designers and luxury brands become less creative as advanced technologies emerge?
Why would luxury brands use artificial intelligence?
At first glance, it may sound strange to connect luxury with artificial intelligence. After all, many people think of luxury as craftsmanship. In its extreme form, luxury is seen as a handmade piece of art. For centuries, luxury brands were known for mastering the most delicate artisan tasks, such as building and perfecting a tourbillon movement in a mechanical watch or designing and finishing fine porcelain. In haute couture, designers and their teams meticulously combined incredibly rare fabrics artistically. Many luxury cars became collectors’ items. It’s not by chance that many museums feature luxury items in their exhibitions. So why the emergence of artificial intelligence?
Luxury is younger than many expect and more female
Our world is changing rapidly, and the speed of change is accelerating at ever-increasing rates. Even before the coronavirus, I spent most of my projects and masterclasses on supporting luxury brands in coping with change. Take luxury cars as an example. A few years ago, the typical buyer was in his or her 50s or 60s, and he or she would sometimes would take years to decide before pulling the trigger on a purchase. Now many brands struggle to connect with young millennials and the emerging Generation Z. Those young, digitally-savvy consumers are more demanding than previous generations, and they expect brands to define the zeitgeist.
Particularly in China, now fewer than 20 per cent of luxury goods are bought by consumers older than 40. Instead, the sweet spot for luxury purchases in China is between 25 and 35 years. To the surprise of many luxury managers, luxury is female. Women do more than 75 per cent of purchases. Men do a significant part of their luxury purchases as gifts to their spouses and partners. Interestingly, many luxury brands ignore that and target older men instead.
This creates a gap between brands that make assumptions and brands that know. artificial intelligence is a tool that brands are increasingly using to generate faster, more precise consumer insights. They need to know who their customers are, what they think, how their perception and sentiment changes over time, and what they expect. With the speed of change, only real-time insights are relevant. The insights are generated by processing and analysing millions of conversations that people have about brands and topics across social networks and blogs. The sheer amount of data and its interconnection makes it necessary to use advanced data analytics tools, including AI based data intelligence systems, to make sense of what is happening.