Fashion Briefing: AI, personalization and the fall of one-time leaders are transforming luxury e-commerce

For its part, before being acquired by South Korean online retailer Coupang in January, Farfetch reported a revenue decline of 1.3% year-over-year for the second quarter of 2023.

According to co-founders Tom and Ruth Chapman in a recent interview, Matches’ issues have related to the fact that it wasn’t profitable. “We weren’t charging the right prices, and we were taking too much risk on [product] stock,” said Ruth Chapman. The couple sold Matches to Apex private equity in 2017 in a deal valued at $1 billion.

Lucie Greene of Light Years consultancy said there there are new forces shaping the luxury market and changing the way customers shop, which are making it harder for retailers to thrive.

“It’s particularly polarizing in luxury,” she said. “Most of the richest people are controlling most of the luxury spending now. The upper tier has become focused on luxury mega brands, and these brands have elevated their e-commerce plays and made their physical retail experiences must-visit brand destinations.”

These brands are getting a leg up by hiring top service talent from the world’s most prestigious hospitality brands to enhance the retail experience they’re offering. “Luxury mega brands are trying to circumnavigate the multi-brand retailer as an intermediary,” Greene said. 

Meanwhile, consumers’ discretionary income levels have changed. “There have been huge cuts among the six-figure crowd and people working in big tech and at companies like L’Oréal,” she said. “This group is finding it harder to feel rich with the rising cost of living.” At the same time, fashion prices have increased “beyond what is reasonable, affecting consumers’ purchasing decisions,” she said.

Many customers are now treating shopping as a research activity, finding what they want before seeking it out a better price.

Greene said, to earn customers’ business, struggling multi-brand retailers can learn from the direct-to-consumer brands that have embraced size inclusivity and personalized shopping experiences, which customers demand. Greene said Farfetch’s curation was lacking, compared to brands with more technology integration and tighter product assortments. And the Chapmans mentioned that Matches’ product curation had declined, compared to when the retailer first started out.

For its part, global fashion search platform Lyst has 200 million shoppers and 17,000 brands on its platform. It uses AI to personalize the customer experience — based on a shopper’s behavior, taste and preferences — and to help brand partners grow their businesses, said CEO Emma McFerran.

“Our superpower is sitting on this wealth of customer behavioral information across a catalog of about 10 million in-stock products,” said McFerran. In its fiscal 2024, Lyst exceeded gross merchandise value of $600 million for the first time. Lyst primarily generates revenue through commissions on sales, referral fees from partner brands and retailers, advertising, promotional services, and data insights.

Lyst’s AI-driven personalization, based on both images and text, has improved customer engagement and satisfaction and led to a nearly 20% boost in conversion over the past year.

“Our customers have high standards and are extremely well informed,” McFerran said. “They pull information from many sources and appreciate a platform that allows them to engage deeply [by giving them access to a vast range of brands and customizable search].”

For many brands and retailers, the use of AI “extends beyond product recommendations to include personalized marketing messages and dynamic pricing strategies,” said Greene.

Joe Einhorn, founder of the membership-based luxury shopping club Long Story Short, said Apple’s universal “do not track” feature launched in 2022 has impacted the online luxury market, in the same way it has other markets. It increased customer acquisition costs, straining profitability and leading to higher advertising listing fees and larger sales cuts for brands, ultimately inflating consumer prices.

As Einhorn sees it, the traditional online luxury business model is finished. “Luxury brands are increasingly focused on defending their heritage and maintaining control over pricing and distribution channels, while the online luxury platforms struggle,” he said. 

Companies offering sophisticated levels of personalization and customer service are set to win out. Think: retail concepts built on personalization, like the new Dover Street Market in Paris and two-month-old LN-CC in London. LN-CC features a curated selection of high-end fashion, as well as personal shopping services and an online experience offering recommendations based on shoppers’ preferences. The platform enhances this personalization with exclusive content, style guides and special events. Dover Street Market Paris, meanwhile, offers a curated selection of avant-garde and luxury fashion reflecting the unique tastes of its clientele. The store supplements its shopping experience with bespoke services, exclusive collaborations and unique in-store installations. Even Sam Altman, the creator of OpenAI, has said that people will soon place a premium on in-person experiences. 

“Spaces are more important than ever within the retail landscape,” said Reece Crisp, buying and creative director at LN-CC. The new LN-CC store’s design aims to provide a unique shopping experience, showcasing a highly curated edit of brands in themed rooms. LN-CC’s e-commerce platform continues to act as an amplifier for its assortment and serve its young, global consumer base. 

As the luxury market continues to evolve, platforms and retailers that prioritize personalized experiences, like Lyst and LN-CC, are setting new standards. “The future of the online luxury market lies in innovative models like ours,” said Einhorn. 

Exclusive research: The brands that got in on the F1 Miami Grand Prix buzz

The Miami Grand Prix F1 race has fast become a fashion event, with brands like Tommy Hilfiger and Puma making appearances. “Ever since Netflix launched ‘Drive to Survive,’ Formula 1 has seen an increase in viewership, reaching new, younger audiences than before. In response, we’ve also been observing a new generation of brands that have been jumping on the bandwagon to connect and be a part of the current cultural dialogue,” said Alison Bringé, CMO of brand performance platform Launchmetrics. 

During the Miami F1 event, held May 5-12, notable celebrity and fashion appearances included A$AP Rocky in A$AP x Puma ($362,000 in media impact value), Kendall Jenner in Tommy Hilfiger ($261,000 MIV), Blackpink’s Lisa in Acne Studios ($233,000 MIV), Travis Kelce in Givenchy ($43,000 MIV), and Lewis Hamilton wearing both Tommy Hilfiger ($158,000 MIV) and Marc Jacobs ($67,000 MIV). Media impact value is a proprietary metric from Launchmetrics used to measure the value generated from media coverage, including print, online and social media.

New funding

Laws of Motion, a leader in AI sizing technology for eCommerce brands, announced a $5 million seed funding round led by Corazon Capital, with participation from The Scout Program at Sequoia Capital, Leadout Capital, and notable investors in consumer tech and fashion. This funding will support the expansion of the company’s AI sizing technology licensing solution, as well as market growth and team development. Their technology has achieved a 99% sizing accuracy and a return rate of less than 1%. With the new SaaS offering, other brands can now leverage this technology to improve customer experiences and reduce return rates, while providing real-time transparency on its impact. The company continues to invest in its DTC fashion brand — it recently launched a shape- and size-inclusive bridal collection.

“It’s extremely rare to see a company have two different business lines this early in their development,” said Sam Yagan, co-founder of Corazon Capital and former CEO of ShopRunner, who invested in the company.

Executive shifts

• Sidney Toledano is reportedly back at LVMH after four months. The fashion company appointed Michael Burke, renowned for transforming Louis Vuitton into a global powerhouse as the new CEO of its fashion group division in January, succeeding Toledano. In his new role, Burke oversaw brands including Celine, Loewe, Marc Jacobs and Givenchy.
• Tory Burch LLC has strengthened its management team with three new executive appointments. On June 3, Christophe de Pous will join as president of North America, overseeing retail, e-commerce and wholesale operations; Emilia Fabricant has been promoted to president, chief merchandising and global supply chain officer; and Beverly Morgan will become chief people officer, with a focus on global hiring, retention and employee engagement, effective June 3.
• John Lewis Partnership has named Rachel Morgans as its new fashion director. Morgans, who began her fashion retail career as a buyer for Topshop, has held buying director positions at Asos, Finery London, Topman and Brown Thomas. Starting her new role in June, Morgans will report to commercial director Kathleen Mitchell. In her position, she will oversee the curation of both in-house and third-party brands for the high street retailer.

Inside Glossy’s coverage

• Beauty brands are renewing their partnerships with the WNBA as more brands get in on the opportunity. 
• Uniqlo sister brand GU is launching in the U.S. and targeting Gen Z.

Other news to know

• Australian Fashion Week gave a global stage to emerging designers.
• Inside Under Armour’s executive changes and revenue slumps.