The search for speed, accuracy, and uniqueness is driving the rapid adoption of AI in fashion retail. As technology evolves, AI is quickly becoming a critical tool for retailers aiming to stay competitive. From improving operations to personalizing customer experiences, AI offers a wealth of opportunities for businesses to not only streamline their processes but also innovate in ways that were previously unimaginable.
Many executives in the fashion industry now consider AI a crucial part of their business strategy, with a growing number already using it in key areas. For example, 60% of businesses rely on fully automated marketing campaigns driven by AI to deliver content to customers, and over 53% of retailers say that their warehousing and delivery departments are the most important places to invest in AI. By all means, the market for AI in the fashion industry is growing, and is expected to reach $4.4 billion by 2027.
In this article, we’ll uncover the game-changing benefits of AI in fashion retail and explore how it’s revolutionizing the industry. Also, we’ll share 16 real-world examples from leading companies like Nike, SHEIN, and Amazon, followed by key challenges and practical steps to get started, drawing on Neontri’s experience.
Key takeaways:
- AI brings many benefits to fashion retailers: better customer service, lower returns, more security, and smoother operations.
- Fashion companies are using artificial intelligence across areas like product design and development, inventory management and logistics, marketing, and customer experience.
- Big fashion players such as SHEIN, Amazon, Etro, and Uniqlo have already implemented AI for various purposes, from trend forecasting and logistics optimization to creative marketing campaigns.
- To leverage this technology successfully, fashion brands must identify key areas for implementation, understand potential risks, train employees, and begin with small pilot projects before scaling up.
Benefits of using AI in fashion retail
Fashion companies can see a wide range of benefits from adopting artificial intelligence in their processes, from enhanced customer experience to smoother operations and more sales. Simply put, AI is reshaping how fashion is bought and sold, bringing advantages for customers and retailers alike.
| Benefit | Description |
| Higher customer engagement and conversion rates | With the help of AI tools, retailers can create more personalized shopping experiences for their customers. This really matters, as 65% of buyers stay loyal if only offered greater personalization. Smart recommendations, mix-and-match suggestions, and virtual try-ons are just a few out of many commonly used features that help consumers find products they like much easier and faster. This keeps them engaged and makes it more likely that they will buy something. For instance, BrandAlley, a UK e-commerce platform for designer and high-end clothing, got 77% more sales when AI-powered suggestions were used. |
| Reduced return rates | By using AI and the possibilities it offers, fashion retailers can cut down on return rates by up to 35%. |
| Improved customer service | AI-powered chatbots and virtual assistants help fashion businesses meet these expectations and enhance the overall customer service. Powerful virtual agents can handle even 80% of customer inquiries like order tracking, refund requests, and FAQs, which allows human workers to focus on more complex issues. Automated customer support reduces service costs by up to 30% while keeping high-quality interactions. |
| Better security and fraud prevention | AI can detect and prevent illegal activity even before it causes damage. Also, with machine learning algorithms constantly evolving to newer types of fraud, security programs become more effective with time. The 2023 DigitalOcean Currents report shows that 37% of organizations increased their cybersecurity spending on advanced AI-driven security systems to fight digital fraud. |
| Efficient operations and inventory management | AI helps fashion brands optimize inventory levels and avoid typical stock issues. Through AI-powered predictive analytics, retailers can reduce warehousing and forecasting errors by 20-50%. |
Use cases of AI in fashion retail
Leading fashion retailers as well as medium-sized and smaller businesses are now integrating AI to keep up with changing consumer expectations, grow user loyalty, and boost sales. GenAI solutions, in particular, are revolutionizing the industry, having a real impact on designing products, optimizing workflows, and personalizing shopping experiences.
AI for product design and development
Fashion retail heavily relies on creativity to attract customers and stand out from the crowd. In fact, nowhere is the “art” of fashion more valued than here. However, the industry has started to turn to innovative AI tools that make it possible to design and develop products faster and easier than ever before. Artificial intelligence is used for:
- Trend analysis: AI-powered tools allow brands to analyze large amounts of data from various sources, such as social media platforms, fashion shows, and consumer behavior, to create collections that align with future trends. With such solid user and market insights, businesses can make more informed decisions and ensure their designs are appealing to consumers.
- Generative design: During the design process, GenAI in fashion retail helps convert quick sketches into detailed, high-quality drawings and even 3D models, which can shorten the time by up to 70%. In December 2022, a group of fashion designers from the Laboratory for Artificial Intelligence in Design (AiDLab) in Hong Kong presented their generative AI-supported designs in a fashion show. Tech businesses like Cala, Designovel, and Fashable offer tools that help use AI to develop new ideas and explore design variations without producing expensive samples.
- Sustainable practices: Artificial intelligence also plays a crucial role in designing fashion products that promote sustainability. By looking at factors like biodiversity, water usage, chemical toxins, and carbon footprint, the technology finds materials that are eco-friendly and optimize energy consumption.
| Company | Headquarters | AI usage in fashion retail | Company size |
| SHEIN | China | Uses AI to identify emerging trends and align the style of their products with what customers expect | Large |
| Tommy Hilfiger | US | Collaborates with IBM Watson to create AI-driven designs based on customer data | Large |
| H&M | Sweden | Employs artificial intelligence to recommend sustainable materials and optimize energy consumption | Large |
| Trendyol | Turkey | Uses AI for 3D modeling to build digital prototypes, reducing the need for physical samples and minimizing production waste | Large |
Top example: SHEIN
The company leads the way in using AI to revolutionize product development and design in the fashion industry. It operates a Consumer-to-Manufacturer (C2M) model, where AI analyzes massive amounts of customer data like engagement rates with specific products, browsing behavior, and preferences to predict trends and design new clothes. This allows Shein to introduce thousands of new items daily, precisely tailored to what customers really want.
AI in inventory management and logistics
As new trends appear each season, brands need to produce new designs regularly to keep a competitive edge. The problem is that inventory management in fashion is complex and mostly labor-based. With so many stakeholders and procedures spanning regions, getting the right fashion items to the right place at the right time is challenging.
Often, excess inventory, or so called remainders (unsold goods, which are usually destroyed) pile up. It’s estimated that almost 100 billion pieces of clothing are produced annually, and over 30% of it is discarded in the first year alone. This amounts to 92 million tonnes of wasted material. So, in an industry which requires accuracy and speed, AI becomes a powerful tool, helping businesses with:
- Demand forecasting: Through machine learning and big data analytics, AI analyzes historical data, market trends, and other relevant factors (like weather or social media buzz) to precisely predict future demand for products. As a result, companies can plan and optimize inventory levels, reducing the risk of stockouts or overstock situations by even up to 50%.
- Supply chain management: Artificial intelligence simply makes supply chains more efficient as it detects problems before they happen. It chooses the best delivery routes and also improves the cooperation between suppliers and stores. Without this modern technology, all of it would be much more difficult and time-consuming.
- Warehouse automation: AI-powered robots and systems make work easier by keeping track of inventory, sorting products, and packing them. These technologies make things run more smoothly, cut down on mistakes, and speed up the delivery of orders, which helps stores meet customer needs more quickly.
- Store operations: AI can optimize store layout planning by creating and simulating layout plans according to different parameters (e.g., foot traffic, local consumer audience, size). It also streamlines in-store labor to avoid bottlenecks such as gaps in staff scheduling and theft detection through real-time video data analysis. Support AR-assisted devices, on the other hand, are used to better inform the workforce on products (for example, condition, assortment, inventory, or recommendations).
| Company | Headquarters | AI usage in fashion retail | Company size |
| Amazon | US | Employs AI-powered robotics for automated picking and packing processes | Large |
| Zara | Spain | Uses AI to predict market demand and optimize inventory levels across stores | Large |
| Farfetch | UK | Improves supply chain visibility and connects online inventory with physical stores | Large |
| Zalora | Singapore | Uses AI to predict what customers will buy, automate warehouse tasks, and track inventory in real-time | Medium |
Top example: Amazon
It stands out due to its strategic use of AI to address key challenges with managing inventory and logistics. As its delivery stations need to handle up to 110,000 packages a day, Amazon has invested in new AI-driven systems like Sequoia to ensure faster deliveries to customers across the globe.
This software helps the company identify and store inventory 75% faster, reducing human effort and employee injury by 15% and slashing the processing time by 25%. As a result, in 2020 alone, Amazon saved $1.6 billion in transportation and logistics costs and 1 million tons of CO2 emissions using machine learning and AI.
Moreover, to avoid delivering damaged products, Amazon came up with an AI model called Project P.I. (Private Investigator) to detect defects. It combines generative AI and computer vision to spot damaged items and verify product size and color before shipping.
AI in marketing and advertising
Reaching the right audience is challenging, especially now when there are so many digital platforms available. AI technology, however, helps the fashion industry create more targeted marketing strategies that improve conversion rates and foster brand loyalty. Typically, retailers rely on it when it comes to:
- Personalized marketing: AI analyzes customer data, like browsing behavior, purchase history, and demographics, to create marketing campaigns that better match the target audience’s geographic regions, languages, and aesthetic preferences. This level of personalization might increase ad engagement by 25% compared to traditional ads.
- Generating content for advertising: Thanks to AI-powered text and image generation tools, fashion companies can quickly create various types of content such as product descriptions, ad copy, social media posts, videos, photos and even entire campaigns. This way they can save both time and resources and also make sure the advertising material perfectly aligns with their business goals and brand message.
- Cross-selling and upselling: AI looks at customer preferences, shopping habits, and regional trends to suggest goods that go well with the items a client buys or are more valuable than the current ones. For example, if a customer gets a winter coat, AI might suggest gloves and a scarf that go with it. This method not only boosts sales, but it also makes shopping more enjoyable by giving helpful and relevant advice.
| Company | Headquarters | AI usage in fashion retail | Company size |
| Benetton | Italy | Uses AI-powered tools to analyze browsing and purchasing data to create more personalized product recommendations and targeted campaigns | Large |
| Levi’s | US | Recommends complementary products based on regional preferences and past purchases by using AI-powered engines | Large |
| Etro | Italy | Uses AI for generating models and photoshoots in ad campaigns | Medium |
| Casablanca | France | Blends real and AI-generated visuals in their ad campaign to captivate customers | Small |
Top example: Etro
Etro is one of the first brands to use AI in advertising campaigns to such an extent, paving the way for future tech advances in the fashion world. The Italian brand used entirely AI-generated models and surreal landscapes in its Spring/Summer 2024 collection campaign, titled “Journey to Nowhere”. This way Etro blended creativity with cutting-edge technology.
However, instead of replacing the human touch completely, the company collaborated with Silvia Badalotti, a Digital AI Prompt Designer, who treated AI as a creative partner in the process rather than just a tool.
AI in customer service
Since 73% of shoppers expect companies to understand their unique needs, and 67% are even willing to pay more for a better customer service experience, fashion retailers can’t ignore these numbers. With the help of AI tools, they can meet these expectations. It’s really important, as 93% of customers will buy from the same company again if they have great customer service. Brands might use artificial intelligence for:
- AI-powered chatbots: Smart assistants like that act like human agents, offering the same level of personalized service that an in-store employee would, helping buyers find what they are looking for, and solving all sorts of problems. AI chatbots play an important role in improving customer service, especially now when over 60% of people expect a reply to their query within less than 10 minutes.
- Virtual fitting rooms and style advisors: Augmented reality (AR) and machine learning make it possible for customers to visualize how certain clothes will look on them without physically trying them on. IBM reports that 52% of women want to use virtual try-on features. This advanced technology ensures a better fit and reduces returns.
- Inclusive shopping: Companies like Lalaland, a Dutch tech start-up, are pioneering AI-generated virtual models with diverse body shapes and skin tones. By collaborating with brands like Levi Strauss & Co., they help fashion retailers supplement human models with AI-generated ones, which increases model diversity in a sustainable and engaging way.
- Visual search: Instead of typing keywords, AI allows users to look for products by simply uploading an image. For example, if a shopper sees a dress they like but doesn’t know its name, they can upload a photo, and AI will analyze the image’s features to find the same or similar fashion items.
- Automated returns and exchange processes: When a customer wants to return a product, AI provides accurate instructions, generates return labels or schedules pickups. It also tracks the status of returns in real-time and keeps customers informed. This works well for both clients and retailers.
| Company | Headquarters | AI usage in fashion retail | Company size |
| Uniqlo | Japan | Deploys chatbots to assist customers with product selection and queries | Large |
| Burberry | UK | Uses augmented reality to create virtual fitting experiences for customers | Large |
| Nordstrom | US | Streamlines return processes using AI-driven automation systems | Large |
| Nike | US | Integrates AI into its Nike Fit app to accurately measure foot size and recommend suitable shoes, improving the shopping experience | Large |
Top example: Nike
The company has developed Nike Fit tool—a standout example of how AI can revolutionize customer experience in fashion retail. This innovative app scans the user’s feet using augmented reality and machine learning and then recommends the perfect size. This translates to better comfort, fewer returns, and happier customers. Since its launch, Nike Fit has reduced sizing errors and cut returns by up to 60%.
How to get started
As exciting as generative AI technology can be, fashion retailers need to be strategic before giving AI complete control over any of their core tasks. However, considering how quickly this technology is developing and how fast its user base is expanding, it could be equally counterproductive to ignore the opportunities it presents. Now is the time for executives to explore how they can strategically integrate this technology into their organizations. Here are a few key steps to start with:
Step #1: Identify key areas that could benefit the most from AI
Fashion leaders need to decide where artificial intelligence can deliver the greatest value for their company. Start by figuring out which areas might benefit from AI. This could be creative design, ad campaigns, customer service, or inventory management. Then, rank these AI use cases based on their potential impact on business.
After that, evaluate how easily these solutions can be implemented, build a short-term roadmap to test and validate these use cases, and determine long-term goals.
Neontri’s recommendation: Even though it might be tempting to play around AI, tapping into its potential will require twice the effort. So, instead of randomly trying out tools that are already out there, focus on building such ones that will bring real value to your processes.
Step #2: Know risks and plan to mitigate them
AI adoption in fashion retail carries certain risks, and decision makers and owners need to be proactive in understanding and managing them. One is that legal issues around who owns the creative rights for AI-generated designs are still unclear. Some designers have already been criticised for creating derivative works and copycat designs.
Another challenge is making AI-powered systems more accurate and objective, especially when dealing with biased data sets. For example, if a picture-generating tool creates offensive images that get shared across the globe, a brand’s reputation might be harmed. And employees may not catch AI errors if they aren’t properly trained.
Homogenization is also a concern. As AI learns from existing data, it can sometimes produce outputs that lack originality, resulting in a market full of similar-looking items. This could make it harder for retailers to differentiate themselves and stand out in a crowded marketplace.
While risks are unavoidable, they can be mitigated. Take all possible problems into consideration and establish clear processes to address risk, ethics, and quality assurance.
Step #3: Upskill current workforce
Since AI tools might be used in various areas of business, it becomes important to educate and train employees from different departments on how to use this technology. These can include designers, marketers, sales teams, or customer service representatives.
With an AI-savvy workforce, working together will take on a completely new meaning. Leaders thus should clearly define roles for both technical and nontechnical staff to work together effectively.
Step #4: Start small, then scale up
Start with small pilot initiatives, which make it possible to test out AI applications in a safe space. Using AI for product recommendations or one segment of inventory management might be a good idea to begin with.
This will help you understand how the technology will affect the business, identify potential problems, and gain useful insights without putting significant resources at stake. As soon as these pilot projects show success and a clear return on investment, integrate AI into more parts of your business.
Implementing artificial intelligence successfully requires the right expertise, which not every company has in-house. In such cases, partnering with experienced professionals can make all the difference. With over 10 years of experience in IT outsourcing, Neontri helps businesses connect with a network of 40,000+ top tech experts to develop tailored technology solutions.
Neontri’s recommendation: To get the most out of AI, focus on areas where it can offer quick wins and measurable improvements. With this approach, you’ll boost your team’s confidence and also see real-world benefits of artificial intelligence, which will make it easier to adopt it across the whole organization.
Challenges in AI implementation and how to overcome them
The adoption of artificial intelligence in fashion retail brings great benefits, with some potential challenges to consider during the process.
| Challenge | Solution |
| Cost of entry barriers: One of key challenges for around 40% companies in scaling artificial intelligence initiatives is high initial investment. The cost of AI infrastructure, software, and talent can be a burden, especially for small and mid-sized businesses. | Start with pilot projects to show the benefits before fully rolling out the technology. To keep costs low, you might also want to look into scalable, cloud-based options. Neontri’s recommendation: Partnering with tech providers to share costs and get strategic expertise might be a good move here. |
| Integration with legacy systems: For 70% of businesses, connecting AI with existing IT systems might be a challenge. Mostly because many older systems weren’t built to support AI-driven processes, which leads to problems with compatibility issues and data silos. | Look at the technology you already have and buy middleware or APIs that make integration easier. Work with skilled vendors to make sure the implementation goes smoothly. Neontri’s recommendation: Consider choosing modular AI solutions which are designed to work with existing systems and cause less trouble during integration. |
| Data quality and management: AI performance relies to a great extent on the quality of the data that it processes. Poor, inconsistent, or outdated data can result in inaccurate insights, unreliable automation, and even biased decision-making. | Set up strong systems for data governance, regularly clean and update information, and make sure that all sources of data are accurate. Neontri’s recommendation: Use automated data validation tools to keep high-quality datasets for AI apps. |
| Security risks and ethical concerns: 60% of managers think that the lack of clear rules on data privacy issues related to AI makes it more difficult to implement it in their organizations. Without well-defined policies, companies risk non-compliance, security breaches, and reputational damage. | Ensure strong cybersecurity measures, such as encryption and secure access controls, and stay compliant with regulations like GDPR or CCPA. Neontri’s recommendation: To deal with privacy issues ahead of time, do regular audits and follow ethical standards that are specific to AI. |
| Homogenization of designs: If brands rely too much on AI for design, fashion collections might simply lack creativity and variation typical for human designs. Over time, this could lead to dwindling customer interest and brand uniqueness. | Use artificial intelligence tools as complementary rather than a replacement for human creativity. Neontri’s recommendation: Regularly improve AI training data and add different design inspirations to avoid repetitive outputs and keep unique aesthetics. |
Partner with Neontri for innovative retail solutions
The fashion retail industry is changing fast, and AI is at the heart of that technological revolution. Perhaps, we’ve crossed the point of no return and keeping up isn’t just an option—it’s a must for those who want to stay ahead of the competition. Neontri can help you with that.
With 10 years of experience and 400 successful projects, both in retail and GenAI solutions, we know how to deliver impactful innovations that drive business success. So, whether you need a better return process, smarter marketing, or advanced GenAI tools, our experts create AI solutions that fit your needs.
To illustrate, we streamlined MODIVO’s return process, previously paper-based and manual. Neontri designed a simple, paperless solution, making returns quick and hassle-free. As a result, MODIVO improved customer satisfaction, optimized operations, and reduced environmental waste—a crucial step toward sustainability and ESG alignment.
Reach out to our technical experts to get the personalized AI solutions that can revolutionize your retail business.
Final thoughts
AI is rewriting the rules of the trade for fashion brands by helping them optimize their supply chains, take personalization to the next level, and boost creative marketing. Local and international fashion brands are already using AI to design clothes, predict trends, make their warehouses run smoothly, and help shoppers find what they want. But getting started with AI doesn’t have to be complicated. Companies can start small, focus on one area that needs improvement, and then grow from there.
FAQ
What are the cost implications for local fashion brands adopting AI technologies?
Implementing artificial intelligence can require some investments. Local fashion retailers need to often face upfront costs for infrastructure, tools, and expertise. To manage expenses, they can start with pilot projects, consider scalable, cloud-based solutions or cooperate with local tech providers.
What are ethical considerations of using AI in the fashion retail industry?
Leveraging artificial intelligence and generative AI in fashion retail comes with ethical considerations. Brands must take into account data privacy risks, potential biases in AI algorithms, and the overuse of automation, which can reduce creativity and uniqueness—something fashion is all about. Since AI tools are often trained on existing designs, there’s a chance they could create outputs similar to competitors’ work, which might take away from originality.
Moreover, fashion companies need to focus on sustainability, making sure their AI solutions are planet-friendly and aligned with eco-conscious practices. It’s also important to stay compliant with regulations like GDPR and keep human oversight to address these challenges responsibly.
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