Generative artificial intelligence, or gen AI, is leading the charge of next-gen technologies shaping industries and their workplaces. Already, gen AI can be leveraged across the value chain: from product design and content creation across campaign images, marketing text, website code and videos, to online consumer experiences through virtual styling and digital clienteling. Meanwhile, conventional AI can be leveraged to forecast demand for buying and merchandising teams or gather insights for store associates and retail teams.

The management consultancy firm McKinsey & Company estimates that gen AI could add up to $275 billion of economic potential to apparel, fashion and luxury sectors’ operating profits. It estimates the technology could increase the productivity of the marketing function with a value between 5 and 15 percent of total marketing spending, while as much as one-fourth of gen AI’s potential value in fashion may be driven by use cases in design and product development.

As a result, 73 percent of fashion executives expect to prioritise gen AI this year, as cited in BoF and McKinsey’s State of Fashion 2024, while 62 percent of fashion businesses already use gen AI in the workplace.

However, only 4 percent claim to use AI “regularly”, while 21 percent use it “occasionally” and 37 percent “experimentally”. The most popular use cases are focused around creative experimentation — in marketing, creating copy or visual content, or to assist in design and product development. Use cases in stores and supply chain operations are still nascent despite their potential.

Crucially, the rate of change executives seek in their business by integrating gen AI and other technologies is out of step with existing skill sets. The State of Fashion report finds that many will face a talent gap, given that just 5 percent of the surveyed executives said they are ready to make best use of the technology.

To accommodate next-gen technologies, job requirements across different functions will need to change — in some cases, they already have. Many job specifications in product development require an understanding of computer-aided design (CAD) and 3D modelling software. Soon, fashion professionals can expect requests for skill sets or specialisms in gen AI programmes like Midjourney, ChatGPT and their competitors.

What’s more, leaders and HR teams need to consider how they can foster the right workplace culture and technical support to optimise the use of next-gen tools.

This BoF Careers white paper explores how fashion businesses can approach integrating gen AI into their workplace, the core skill sets needed in a digitally competent workforce, and the pastoral requirements to effectively support an employee cohort reimagining its day-to-day practices for long-term success.

Featuring actionable insights and analysis from global experts:

Rhianna Cohen is the creative director for the creative strategy studio Mørning, working with global brands such as Nike, Calvin Klein, Coty, Meta and more. Cohen has worked in strategy at The Future Laboratory, Protein Agency and Dazed Media and has led projects including Dazed’s The Era of Monomass and Mørning’s Ø, an experimental technology project reframing the relationship between human and machine.

Jessica Couch is a retail technology expert who has worked with companies like Nordstrom and Amazon, focusing on bridging gaps and promoting equity, especially for women. Leading Looks.Ai, a peer-to-peer shopping platform, her work has featured in Yahoo News, Forbes, Essence and Afro Tech. Couch is a board member of the Carnell Couch Foundation, worked as an advisor for MIT’s Kinetic Program and was a member of the NC State College of Textiles Dean’s Young Alumni Council.

Cyril Foiret is a co-founder of Maison Meta, a generative AI agency that offers services in creative direction, consultancy and training. Its clients include Moncler, Zara, Revolve, H&M, L’Oréal, Victoria’s Secret, Mugler, Pangaia, Pandora, Unilever and WPP. Maison Meta also founded AI Fashion Week. Foiret was named in the Vogue Business Top 100 Innovators in 2023.

Holger Harreis is a senior partner at McKinsey & Company and co-leader of McKinsey’s Data Transformation Practice globally. He works with clients on solving critical business issues, employing data and AI to refine customer experiences and journeys, optimise business opportunities, streamline supply chain and logistics operations and strengthen risk management and resilience. Harreis contributed to The Business of Fashion and McKinsey’s The State of Fashion 2024 report and co-authored the McKinsey 2023 report: Generative AI: Unlocking the future of fashion.

Carl-Axel Wahlström is the founder and creative director of Copy Laboratory, a creative agency specialising in AI imagery and brand visuals. Wahlström also launched the first AI fashion magazine, Copy Magazine, in 2023. A senior creative director and consultant with over 20 years of experience, Wahlström has also held senior art director positions at H&M and & Other Stories.

Dr. Katia Walsh joined Harvard Business School as its inaugural chief digital officer in 2023, overseeing the growth of a technology innovation function that builds and scales world- leading capabilities in digital and AI products for both educational experience enhancement and new business opportunities. Prior to HBS, Dr. Walsh was the chief strategy and AI officer at Levi Strauss & Co. and chief data and AI officer at Vodafone Group. She received Global AI Ambassador 2023 and Forbes’ Women Defining the 21st Century AI Movement recognitions, among other data and AI leadership awards.

Online beauty sales in China last month surged by 58 percent year over year, according to Bernstein, providing a counterpoint to a stream of sobering earnings from global brands that have struggled there of late.

Major beauty firms including Estee Lauder, Shiseido, and L’Oreal, this month had all reported a softening of sentiment in the Chinese market. Japanese cosmetics makers in particular have been grappling with Chinese consumer fears and a boycott over the release of treated wastewater from a nuclear plant in Fukushima.

Bernstein’s measure of online beauty sales, which mostly strips out the idiosyncracies of the massive duty free market in China, can provide a clearer look into true Chinese beauty shopper sentiment. The country’s main duty free hub Hainan is on a protracted slump digesting regulatory changes made last year that impacted the daigou market and a higher propensity for Chinese shoppers to buy internationally with travel now more accessible.

L’Oréal in particular saw exceptional performance for Chinese e-commerce, Bernstein noted. Its topline grew by 56 percent in January, driven by strong results at its top luxury brands, Lancôme and Kiehl’s. LVMH ‘s beauty division grew by 47 percent, Shiseido 36 percent, Estee Lauder 19 percent, and local player Proya 110 percent.

Still, concerns surround the overall recovery of the Chinese consumer. Last week, it was revealed that China’s consumer price index in January fell 0.8 percent year over year, the fastest annual drop in 15 years, inflaming deflationary fears. It was the fourth straight month of decline.

Learn more:

China’s Consumer Slump Claims Another Victim as Shiseido Profit Slides

Weak consumer spending has also hit profits at L’Oréal and Estée Lauder.

The golf legend’s new apparel and footwear brand created with golf equipment brand TaylorMade was unveiled Monday at a press conference in Pacific Palisades, California. Called Sun Day Red, the “active premium lifestyle brand” includes apparel, shoes and accessories that will go on sale via the brand’s DTC site on May 1.

”My lifestyle is this. This is what I wear day in and day out,” said Woods onstage at the press conference while wearing the new brand’s 3D Knit cashmere hoodie. He described Sun Day Red as “modern, contemporary and premium,” emphasising it as something to be worn both on the golf course and at the clubhouse after a round of holes.

Joined by TaylorMade CEO David Abeles onstage at an event space in the Pacific Palisades shopping centre, where Abeles gave a shoutout to the centre’s billionaire owner Rick Caruso in the audience, Woods said that the brand was named after the signature colour he wears for every Sunday tournament. The brand’s tiger logo has 15 stripes to represent each of his major championship wins, and is spelled with three words to convey that golf is not just played on Sunday.

The brand operates as a separate business unit based in San Clemente under the leadership of president Brad Blankinship, the former general manager of Quiksilver.

”There is no influence from TaylorMade on this brand,” said Abeles of its day-to-day operations and design process.

In addition to the cashmere hoodie, other products on display at the event included long and short-sleeve golf shirts, pants, shorts, gloves, hats and black lace-up shoes with red soles. Available first in North America before being rolled out internationally, it is starting with men’s products, and will be followed by women’s and eventually children’s.

The new brand builds on an existing partnership with Woods and TaylorMade after the two signed an endorsement deal in 2017. Woods teamed up with the brand to develop the P-7TW irons, which were released for sale in 2019.

Last year, Luca Faloni, founder of the Italian menswear brand of the same name, suspected that if he wanted to grow his brand, he had to look beyond social media to reach new consumers.

The DTC brand has historically marketed its cashmere sweaters, chinos and more online, but in September, it placed a wraparound ad on a Milan tram that travels one of the city’s most popular routes. The brand went further in November, stamping its logo on the sides of 50 London taxis.

“If [customers] see you on different channels, let’s say once it’s print, once it’s a store, once it’s online, once it’s a friend, they believe the brand is more real,” Faloni said. “It increases the likelihood that they’re going to buy.”

His hunch was right: Luca Faloni ended 2023 with 53 percent year-over-year sales growth and broke even on the basis of earnings before interest, taxes, depreciation and amortisation, propelled in part by these non-digital ads. As the company seeks to grow sales 40 percent year over year and notch EBITDA profit margins of 4 percent in 2024, they’ll up the number of non-digital ads accordingly, accounting for 20 percent of the brand’s marketing budget versus 10 percent last year.

DTC brands like Luca Faloni have long been synonymous with social media ads, but they’ve fallen out of favour in recent years as their costs have risen while their effectiveness simultaneously sank. Facing increased pressure to grow sales and increase profits, DTC brands began experimenting with new advertising channels to reach consumers, including the kind of offline marketing that Luca Faloni invested in last year.

Now, however, the tide is turning. The costs to advertise on Meta decreased 22 percent last year versus 2022, according to estimates from marketing strategy and services firm Belardi Wong. The social media giant is also working more closely with brands to better target potential shoppers, capabilities that took a hit after Apple enacted its much-discussed privacy changes in 2021.

Still, these more favourable conditions won’t bring brands back en masse, as they continue to invest in both offline ads as well as other digital channels, like search.

In 2024, DTC brands will continue to expand their advertising mix, tying digital campaigns to traditional formats, such as events, in hopes of driving sales and customer retention. And as Google phases out cookies, which track user behaviour across different websites and help brands target potential shoppers with ads, they’re also extending their search ad strategy to platforms like Amazon and TikTok, while collecting more data on their sites to prepare for a cookie-less internet.

“It’s about looking at the efficiency of your overall marketing mix, really understanding your consumer and connecting with them,” said Calla Murphy, vice president of digital strategy and integrated marketing at Belardi Wong. “It’s almost a little bit of going back to marketing basics. You have to know your consumer, you have to be everywhere.”

Deepening Diversification

Brands today understand that convincing people to shop with them requires interacting with customers across multiple touchpoints. As brands invest in a range of marketing avenues outside of social media, they are ensuring that those channels work well together.

For example, last year Dermalogica ran its “skin we treat it all” campaign — which highlighted the brand’s ability to address all skin conditions — on Instagram, YouTube and podcasts. At the same time, the 38-year-old skincare brand hosted events for Sephora and Ulta Beauty called “give a treatment, get a treatment,” where customers learned more about treating their specific skin needs.

The brand found that this multichannel brand awareness approach helped it attract more engaged customers who spent more time on its site and bought more goods. In the past, Dermalogica’s social media ads, which accounted for 40 percent of its paid advertising budget last year, could increase traffic on its site, but algorithms sometimes caused campaigns to reach customers who were less likely to be interested in the product once they got there. This year, multichannel campaigns will account for more than 60 percent of Dermalogica’s marketing budget, up from around half of the budget in 2023, said Aurelian Lis, the brand’s chief executive.

“There’s been a shift for more meaningful interaction with brands,” said Julia Ramanadhan, Dermalogica’s vice president of global marketing.

“You don’t want to buy reach, you want to buy engaged reach,” Lis said.

Luca Faloni is also investing in in-person events to grow the number of places that potential shoppers can happen upon the brand. The company is sponsoring the tennis open in Munich in April, where it will sit alongside sponsors like BMW, and the Financial Times’ luxury summit in Venice in May.

The Enduring Power of Search

Social media is no longer the be all, end all of digital advertising, and search — where brands find lower costs and more eager-to-buy consumers — is benefitting from that shift.

For the first time in 2023, Luca Faloni spent half of its digital advertising budget on Google, in part buying search terms like “menswear” and “knitwear,” where it found customer acquisition costs were 30 percent lower than on Meta. Google will likely account for more than 50 percent of the brand’s marketing budget this year.

“Obviously you need to keep spending on Instagram to generate that awareness, even for people that are not in buying mode in the short term,” Faloni said. “Google works really well for people with purchase intentions in the short term.”

Skincare device maker Therabody has also had success using search engines to amplify new product launches. For example, its $200 smart goggles eye mask, which claims to reduce anxiety and assist with sleeping, sold out upon launch last year in part because Therabody targeted people searching for sleep trouble solutions on Google, said John Solomon, Therabody’s chief marketing officer.

This year, the brand is taking that strategy further, spending to appear at the top of Amazon search results and on influencer content that links to its TikTok shop in order to reach Gen-Z, Solomon said.

But with the end of the cookie on the horizon, brands that rely on Google are strengthening their abilities to compile their own data. Lab-grown diamond maker Lightbox, which spends nearly 40 percent of its annual marketing budget buying search terms on Google and will continue to do so this year, for instance, will comb through its existing customers’ purchase history and newsletter sign-ups to identify buying patterns. Then, it will work with a media agency to target potential shoppers who exhibit similar behaviours.

“We’ll continue to learn and expand as Google makes bigger moves,” said Melissa Crivillaro, Lightbox’s chief marketing officer. “We’re trying to make sure that we’re doing everything we can to prepare for that.”