Author
Edouard de Mézerac is Artefact’s Managing Partner, Global Lead of Luxury & Beauty and Global Lead of Industry Practices. He has spent much of his career in Asia, from Shanghai to Singapore, developing deep expertise in the region’s AI-driven luxury ecosystems. Significantly different from Western systems, China’s AI is defined by an abundance of data from its large population, and one-stop social media platforms like WeChat that differ from more decentralized Western models. Edouard and the Artefact teams have collaborated with many major luxury groups across China, the US, and Europe, giving a holistic view of the luxury industry.
The luxury market is navigating a period of profound change, marked by shifting consumer behaviors, technological innovation, and economic fluctuations. In 2024, the Chinese luxury market declined by 20%, inciting luxury buyers to purchase luxury goods abroad. Countries such as Japan have benefited from currency fluctuations, which have encouraged Chinese tourists to shop there at lower prices. Although China has historically been the primary growth driver for luxury brands, the U.S. is emerging as a major market force. This shift underscores a more diversified global luxury landscape, as brands adapt to varying regional dynamics.
Data maturity: A critical accelerator for luxury brands
Luxury brands have a significant advantage when it comes to data utilization. Unlike consumer packaged goods (CPG) companies that rely on intermediaries, luxury brands operate largely on a direct-to-consumer model. This gives them access to detailed customer insights, enabling them to refine their marketing, sales, and personalization strategies.
However, despite their access to valuable data, many luxury brands struggle with fragmented systems. Obstacles like disconnected CRM platforms, siloed retail data, and disparate digital touchpoints prevent them from obtaining a unified view of their customers.
Brands that successfully integrate these sources will have a competitive edge in delivering personalized, data-driven experiences.
How AI and data combine to improve customer engagement
Data and AI are powerful tools that can enhance the customer experience, drive conversions, and optimize operations. Some key use cases include:
- Optimizing personalization and the customer journey: AI enables brands to create a 360-degree view of the customer by integrating data from online and offline touchpoints. Studies show that 50% of in-store luxury purchases begin with online research, yet many brands fail to capitalize on this finding.
- Driving repeat purchases and cross-category exploration: Many luxury customers enter a brand through a single product category, such as beauty or accessories, but neglect to explore the brand’s full range. AI-driven recommendations can help introduce them to new categories, increasing customer lifetime value.
- Tailoring digital experiences: Unlike mainstream digital platforms such as Instagram and YouTube which provide highly personalized experiences, luxury brands still offer relatively generic online experiences. AI can bridge this gap by delivering hyper-personalized content tailored to individual consumer preferences.
- Addressing sustainability issues: Sustainability is becoming an increasingly important factor in how customers choose luxury brands. AI can help identify traceability and potential counterfeiting issues. In addition, AI-enabled forecasting can improve supply chain visibility, reduce environmental impact, minimize dependence on ground and air transportation, and move products more efficiently.
The role of AI in luxury retail and sales optimization
AI-driven data strategies can also facilitate and enhance the role of sales advisors in luxury boutiques. Traditionally, luxury sales rely on strong personal relationships between advisors and VIP clients. AI can provide advisors with deeper insights into customer behavior, enabling them to deliver more personalized interactions.
“Luxury brands often rely heavily on a small group of high-value customers who are loyal to them. Using data to anticipate their needs, personalize interactions, and ensure seamless service can be a game-changer.”assures Edouard de Mézerac
Key areas of impact include:
- Unified sales tools: Most luxury brands recognize the importance of well-trained sales advisors who have access to customer insights. However, they often burden their sales teams with multiple, disconnected digital tools for training, inventory, and client management. Streamlining these into a single interface can significantly improve efficiency.
- Clienteling and AI-powered outreach: AI can analyze purchase history and recommend proactive outreach to high-value clients. For example, during low-traffic periods, AI can prompt advisors to reconnect with past customers through automatically-generated personalized messages, increasing engagement and loyalty.
- Inventory and assortment management: Predictive analytics help ensure the right products are available in the right stores at the right time. Luxury brands with decentralized decision-making can use AI to support store managers with smarter, data-driven inventory recommendations.
“Ensuring the right product is available in the right store, in the right quantity, at the right time, and predicting demand for specific products, colors and locations are critical to succeeding in the luxury business.”insists Edouard de Mézerac
Onsite search: a critical element in luxury e-commerce
One of the most overlooked yet crucial elements of the luxury digital experience is onsite search. A well-optimized search function ensures that customers can easily find relevant products, content, and recommendations, creating a seamless and intuitive shopping journey.
“Half of customers who make in-store purchases research the product online before buying. Yet many luxury brands fail to leverage this insight, missing opportunities to guide potential customers from digital engagement to in-store conversion.”emphasizes Edouard de Mézerac
The benefits of optimized onsite search:
- Improved product discovery: AI-driven search helps customers find exactly what they’re looking for, even with vague or imprecise queries.
- Hyper-personalization: By analyzing browsing behavior, onsite search can tailor results to individual customers, enhancing engagement and conversion rates.
- Omnichannel integration: A robust search experience bridges the gap between online and in-store interactions, ensuring consistency across all customer touchpoints.
- Enhanced customer satisfaction: Frustrating search experiences lead to high bounce rates. A sophisticated, AI-powered search function improves retention and brand perception.
Luxury brands that fail to invest in onsite search risk losing customers to competitors offering superior digital experiences. Integrating AI-powered search solutions can drive higher engagement, conversion, and long-term loyalty.
What’s next: Future innovations in AI and luxury retail
Looking ahead, AI will continue to revolutionize luxury marketing and operations. Emerging trends include:
- AI Agents: AI agents are intelligent systems capable of performing tasks, analyzing information, and autonomously determining next logical steps. Ideally, they could run advertising campaigns unassisted, optimizing audience targeting and content selection in real time. This would free marketing teams to focus on strategy and creativity rather than execution.
- AI data governance: Given the importance of trust and exclusivity in luxury, brands must define their own AI principles, ensuring that consumers, employees, and investors understand the ethical boundaries of AI applications. Customers will demand this transparency, and corporate boards will also expect brands to have a clear stance on AI ethics. Ethical data policies will become a key differentiator in the luxury sector.
- AI-driven creativity: AI is already being used to generate personalized marketing content, such as short-form videos. Another interesting area is AI-driven fragrance development. While these technologies are still in early stages, they will play an increasingly important role in luxury brand storytelling.
- Industry consolidation: The gap between data-savvy luxury brands and those lagging behind will continue to widen. Smaller luxury brands that lack the resources to invest in AI and digital transformation may struggle to compete, leading to further consolidation within the industry.
“As AI and data-driven strategies continue to shape the future of luxury retail, brands that embrace innovation and digital transformation will gain a competitive edge, while those that hesitate risk falling behind in an increasingly dynamic market.”says Edouard de Mézerac
Watch Edouard’s The Bridge interview
