This is one of a two-part series. In this article, AlixPartners shares a framework and approach to get on track with Generative AI and drive value for retailers and brands. The next article looks at the implementation process.
Just about a year after going mainstream, generative AI remains red hot. Users are creating vacation itineraries, the perfect email, and even personalized bedtime stories for their toddlers. In fashion apparel and retail, companies are already using generative AI (or "GenAI" – today's buzzword for just one form of AI) to develop, source, market and sell products. For the brands and retailers who can make the investment, the value payoff can be big and include higher conversions, greater efficiencies, and higher customer acquisition rates. But if it is not used the right way, the investment isn't worth it.
For retailers and brands in the market who are not on the path to GenAI adoption, the clock is ticking as competitors tee up key investments.
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At Saks, the luxury ecommerce platform's Chief Operating Officer, RJ Cilley, said the company is making AI investments as part of a carefully constructed strategy, noting Saks 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."
Saks tested and learned with the new technologies before introducing them into the customer experience. The key takeaways from this are "helping us navigate how we can apply AI solutions moving forward," he added.
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 technologies such as GenAI, management consultant firm AlixPartners has created a pragmatic framework to drive value through AI called the "AI Value-Unlock Framework." This process requires companies to take an honest look at what they want to achieve with AI then prioritize as needed based on value creation potential.
Sonia Lapinsky, partner and managing director out of AlixPartners' New York office, said GenAI adoption in the fashion apparel and retail industry can be challenging. She noted retailers and brands have struggled with the tech, which isn't surprising, as fashion has often lagged other industries in leveraging technology.
As a result, retailers fall into "tech debt," or end up with old and archaic systems because there's a perception that they must replace the whole system. Lapinsky said tech debt is "the overhang where the C-suite knows that they've got these major investments they must make. And if they don't make them, it can really start impacting business negatively. But they don't have the cash or capital to make these investments."
Cilley noted that Saks is using AI "to enhance how products are shown and described on Saks.com. In our service centers, we are leveraging an AI tool to analyze customer sentiment in real-time and provide our representatives with recommendations to improve customers' experiences." He explained that the luxury experience "will always require a personal, human touch," but quickly noted it is important "to explore and evaluate available prospects to enhance site offerings, data analysis, customer service and beyond."
Regarding the process of implementation, Saks is evaluating AI solutions carefully. "As the premier digital platform for luxury fashion, our customer relationships are extremely important, and it's critical that our interactions remain authentic, personal and high touch," the COO added.
Cilley added that the luxury retailer is being thoughtful about how they are using AI and other emerging technologies before incorporating them into the customer-facing experience.
Saks' "thoughtfulness" theme is spot on. To deliver measurable results, Lapinsky noted that companies need to be thoughtful about where investments are made. "You need to assess whether you are harnessing AI to drive productivity, optimize costs or provide an uplift to revenue, whatever the goal is, it needs to be measurable and deliver a meaningful return, as there's only so much capital to go around to invest in technology."
The first step is understanding where the business will get the biggest value impact.
To drive that value, Saks is piloting several new solutions "with the goals of improving our productivity and scaling our initiatives," added Cilley. "Another area where these efforts are focused is website attributions, working to optimize the process of adding shopping filters throughout the experience on Saks.com."
There are also implementation costs to consider. "If it's a tech investment that's going to completely turn upside down how you do marketing or engage with the consumer, it might be huge value, but it might have a big impact in terms of how teams are structured or other measures," Lapinsky noted.
Download: The GenAI Wave: Don't Get Left Behind – WWD
Originally published in WWD
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