This Vogue Business Index article is part of our Vogue Business Membership package. To enjoy unlimited access to Member-only reporting and insights, our NFT Tracker, Beauty Trend Tracker and TikTok Trend Tracker, weekly Technology, Beauty and Sustainability Edits and exclusive event invitations, sign up for Membership here.
Key takeaways:
- AI changes the stakes: The impact of generative artificial intelligence on the fashion sector is likely to be profound, although nobody is yet quite sure what those developments will look like. Many brands are already integrating AI solutions to improve their operations and backend technology — those not investing are likely to be left behind.
- Think about the physical: The majority of luxury consumers see digital assets as an “add-on” rather than a core reason for purchasing from a brand. While the rules may differ in environments like Fortnite or Roblox, where digital engagement is at its highest, in most cases, luxury brands still need to prioritise delivering on goods and experiences that consumers can touch, feel and see.
- Leave a trace: Smart brands are not abandoning blockchain entirely. Relative to other innovations asked about as part of the Vogue Business Index, anything that increases visibility of a brand’s supply chain is an exciting development for luxury consumers. Whether it is blockchain, NFC, RFIDs or a combination, brands should listen to consumers and roll out the sought-after tech.
A blended metaverse
In spite of minimal changes to the Innovation rankings since the Summer edition, brand approaches to the metaverse and mixed reality are maturing. The physical and digital are now often part of a blended reality that reflects the consumer desire to own a physical product along with any digital buy. Metaverse launches are now arriving with real-world add-ons, whether that is a paired item, free gift or invite to an exclusive launch.
Gucci retains its top spot with its enthusiasm for Web3 seemingly undiminished, despite the many changes in leadership at the Italian brand. New creative director Sabato De Sarno’s first Milan show inspired virtual depictions in Roblox and Zepeto — both taking inspiration from the Brera area (the show’s initial location prior to weather disruption).
The fashion house has also digitised its Gucci Cosmos exhibition, which ran last year in London. Luxury leaders in innovation have set a clear example of underpinning virtual showcases with brand heritage, whether that is Prada utilising archival fabric in product-linked NFT drops or Ralph Lauren reviving decades-old designs in Fortnite.
Many digital launches now come either with a physical pair or some form of add-on. Gucci NFT holders were recently rewarded with an exclusive wallet or bag. Meanwhile, buyers of selected Balenciaga hoodies and sweatshirts are gaining access to an exclusive song by scanning the near-field communication (NFC) chip.
A key reason for this blended approach is the continued enticement of physical products for core luxury shoppers. Consumers are considerably more excited about innovations intertwined with the physical world, such as resale (54.1 per cent), category expansion (52.2 per cent express enthusiasm) or product collaborations (47.6 per cent) than they are about brands’ efforts in virtual worlds (28.4 per cent).
AR and VR lean into the physical
One of the biggest movers since the Summer edition of the Vogue Business Index is French brand Balmain, which owes its growth in innovation to increased experimentation with virtual fit.
The brand recently announced a partnership with tech firm Bods to create a virtual fitting room that’s supported by gaming and AI tech. AI is opening up many new possibilities for virtual styling and fit, with Google’s recent offering of simulated fitting technology for retailers through its Google Merchant Center as an example. Additionally, AI has the potential to boost spend when leveraged against the key values and priorities of luxury consumers.
At the same time, AI’s rapid growth may be taking some of the business case away for augmented reality solutions, such as try-ons through phone filters, as industry observers believe the differentiation that tech firms can achieve is being eroded because of AI’s development rate. This could be one reason for the shutdown of Snap Inc.’s software-as-a-service (SaaS) solution after years of courting the fashion industry. Yet Snap’s partnerships in the B2C campaign space remain resilient, especially in beauty.
Again, the answer may lie more obviously in the physical realm. Virtual try-on can often work well when on a larger scale than phones or laptops, hence why several brands, including Coach, Nike, Tiffany and Tommy Hilfiger, have all used smart mirrors at stores or during special events.
Brands considering shunning the tech might also be wise to consider the prevailing hardware trends that support a blended reality. Both Meta and Amazon have doubled down on smart glasses in recent months, launching products with AI assistants available to wearers.
Meta and Amazon’s efforts will not yet involve frames that allow digital imagery to be superimposed (like Google Glass or Snapchat Spectacles), although it’s widely believed to be on the trajectory. Also in support of mixed reality is Apple: the imminent launch of the Vision Pro headset plays into the consumer’s expanding appetite beyond AR try-on, highlighted in recent research by Vogue Business and Snap.
NFTs out, traceability in
Despite the efforts of metaverse boosters like Gucci and Louis Vuitton, NFT hype has significantly diminished as of late. The share of brands launching NFTs in 2023 declined to 18 per cent from 25 per cent the previous year.
Dior’s move up four spots in the Innovation pillar correlates with its first major Web3 drop, despite the brand being notably quiet about the NFC-adorned, NFT-linked B33 sneaker release. All future versions of the B33 will use the same tech, for now, but the emphasis is less on the abstract value of NFTs and more on the added layer of authentication that comes along with it.
Another upward mover in the rankings is Stella McCartney, which recently partnered with blockchain-traceable merino wool supplier Nativa on a recent collection. In short, a more practical attitude towards blockchain initiatives is taking hold, with traceability and functionality as the primary drivers.
This reflects consumer attitudes: close to a quarter (23.4 per cent) of luxury shoppers say they are excited about NFTs, but nearly half (45.9 per cent) feel the same about brands launching new methods for traceability. Resale is the only other innovation metric tracked by the Vogue Business Index that creates the same level of excitement.
It is not all bad news for digital assets. Brands are still targeting well-established communities where virtual replications of a brand’s collection are obvious commodities. Recent examples include Ralph Lauren’s launch on Fortnite, Valentino selling Bitmoji versions of its dresses and Gucci bolstering its presence on Roblox and Zepeto.
Economic headwinds and AI growth sharpen minds
As the slowdown in luxury spending affects high fashion businesses and the buzz around digital assets, it is unsurprising that many brands are choosing to zoom in on their core businesses. Tommy Hilfiger recently sold its digital showroom technology, Stitch, while Ralph Lauren shuttered its unique clothing rental service.
An additional reason for brands to reflect on their current strategies is the rapid development of AI and its potential for operational improvement. Brands in the LVMH stable and Hugo Boss are among those expanding investments in robotic warehouse technology. When paired with other tech, like radio frequency identification (RFID), this offers brands full visibility on inventory levels and the possibility of reducing headcount in warehouses.
Generative AI is already being deployed by fashion retailers, with Bally reaping the benefits across online browsing through rapid A/B (comparative web page) testing and high street retailer Mango’s internal equivalent to ChatGPT that answers complex queries by staff, not to mention the many businesses including Kering and Zegna already using customer-facing chatbots.
Integrating AI into the design process is another stop-off for brands. Revolve recently launched its first drop of products developed through a generative AI design competition (albeit with some alterations from the original concepts), while smaller operators are exploring the possibilities for tech-driven customised products. The potential benefits are palpable; recent research by Vogue Business and Google highlighted that 75 per cent of luxury fashion consumers are willing to pay more for designs improved by the use of AI.
Notably, none of the winning designs for the Revolve competition were submitted by trained fashion producers, possibly setting a template for future collaboration between fashion brands and other makers without a formal education in fashion. In an industry that is quickly adapting to new technology, talent recruitment is increasingly reaching beyond traditional spaces.
Case study: Ralph Lauren, rental and resale
Some advocates for circular business models will be disappointed to note the shutdown of the only brand-operated rental service on the market, The Lauren Look. First launched in 2021, Ralph Lauren is joining the ranks of other brands happy to leave this (relatively) new approach to fashion to third-party rental operators like Rent the Runway.
Rental has always been a challenging model for brands to sign up to, based on consumers not having a permanent stake in the clothes they are wearing. The added logistical complexity around the processing of returned products, such as washing and reviewing returns, also makes it a daunting prospect.
Partnerships with Rent the Runway and other services like Hurr and My Wardrobe HQ continue to grow steadily (42 per cent of brands are involved, compared to 37 per cent last year). Over a fifth of brands (21.7 per cent) operate their own resale by contrast, with a further 11.7 per cent working with a partner like The RealReal. In November, Net-a-Porter debuted a partnership with British P2P rental app By Rotation.
Brands are often more trusting of rental providers than resale ones. The rental business model often makes less obvious sense for brands who typically sell products instead of loaning them, yet it steers clear of concerns around the counterfeiting and professional resellers (grey market) that some associate with pre-owned fashion; despite efforts by resale providers like Vestiaire Collective to banish fast fashion and burnish their luxury credentials.
The rental model is clearly workable for some businesses. Nuuly, the rental service owned by Urban Outfitters parent firm Urbn, recently announced it has reached profitability, something that has so far eluded Rent the Runway.
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
