Opportunity:
The US Luxury goods market is $85B and growing slowly, worldwide the market was $249B in 2016. The luxury goods industry has seen a recent foray into augmented intelligence with the advent of the Apple watch. At the Basel Fair in March, de Grisogono, one of the biggest jewelers in the world launched a product-driven chatbot, that guides users into selecting various types of jewelry (rings and pendants in this case). The chatbot first introduces itself and then compliments the customer, finally proceeding to ask questions about the customer’s taste and using augmented intelligence eventually offering a choice of jewelry to buy. The industry in general is facing a decline with big players like Tiffany & Co. seeing declining sales and profits in the last two years. As Millennial tastes move away from jewelry and traditional diamonds, companies like De Beers are focusing on ways to improve customer experience. This brings us to our solutions to improve this market.
We believe a potential enhancement to this industry would be an app to virtually try on jewelry. Data-driven marketing utilizing customer CRM data and on-site browsing habits would ensure customers tastes are met in the best manner. WIth the help of the AI demonstration and experience, retailers such as Tiffany & Co could potentially decrease the size of their brick and mortar stores, reducing rent costs.
Effectiveness and commercial promise:
This strategy seems like it will pay off in a large way. According to statistics by McKinsey, online sales of luxury goods have been increasing relative to overall sales, showing an increasing willingness to make large purchases virtually. By creating augmented displays, these companies decrease the time and effort required for a consumer to “try on” their product and increase the variety of available options to test out with smaller operational costs. These tools could be easily scaled with little additional marginal cost.
One limitation to this effort’s success is the ease of reproducibility. Because other competitors in the space can easily copy any successful initiatives, it may not serve as a strong differentiator for any one firm. However, it should drive further sales industry wide by lowering the cost of creating an endowment effect by showing the potential customer what it would look like if they wore this particular jewelry.
As the chatbot and the photo get information on customer preference, the company can further personalize the offerings. In this case, the phone acts as a sensor, returning information on how long users interact with the app and how many options they are choosing between. Information from photos that users take with the app would sense information as well. For example, the app could suggest different jewelry for different outfits. Chatbots are an easy win for luxury retail. The more data is gathered by the chatbot, the more personalized the price can become too, allowing for capture of the maximum consumer surplus.
Chatbots are replacing human customer service through online chat. The more bot use, lead to decreased cost and higher service value for the customer. For a concierge, the efforts to ask many questions, the time it takes to analyze it and the potential for error in recommending a new product are all costly. Whereas once a chatbot is programmed well, the cost is very low and the service is available 24/7/365.
The chatbot will assist in gathering consumer preferences and then the virtual “fitting room” will be used to determine whether the customer is satisfied with the item. There is significant effort in the online retail space to develop the technology needed for an accurate virtual fitting room. If the experience is not accurate, it could adversely affect the credibility of the retailer and its technology. Amazon has introduced the Echo Look style assistant, which has received positive reviews.
The virtual stylist is being applied to fashion, there is an opportunity to bring it specifically to the jewelry space. The company GRANI is an early adopter of the virtual jewelry fitting room space. The design will be refined, allowing users to try jewelry with different outfits/ hairstyles, improving the image quality so the exact cut and quality of the jewelry is apparent.
LINKS:
https://www.wsj.com/articles/tiffany-hunts-for-path-to-regain-cool-1499621248
https://thinkmobiles.com/blog/augmented-reality-jewelry/
https://www.fool.com/investing/2018/03/17/why-tiffany-co-stock-dropped-on-friday.aspx
https://www.mckinsey.com/industries/retail/our-insights/luxury-shopping-in-the-digital-age
https://www.ft.com/content/1c2a6b24-a514-11e7-8d56-98a09be71849
Market size: https://www.luxurysociety.com/en/articles/2017/07/us-luxury-goods-market-sees-another-year-slow-growth/
http://www.bain.com/publications/articles/luxury-goods-worldwide-market-study-fall-winter-2016.aspx
Personalized Pricing http://review.chicagobooth.edu/marketing/2018/article/are-you-ready-personalized-pricing
Analogy to Chatbots: https://chatbotsmagazine.com/3-high-value-chatbots-types-and-1-you-need-to-fire-immediately-49832901fe8a
https://www.retaildetail.eu/en/news/mode/amazon-brings-virtual-fitting-rooms-your-home
https://www.trendhunter.com/trends/try-on-jewelry-pieces
Team Members:
Jess Goldberg
Anu Mohan
Louis Ernst
Pranav Himatsingka
Andrew Herrera