In the-post-Covid world, retailers have been working hard to improve the customer experience as the retail landscape continues to move from in-store to online. From fitness to footwear, couture to cosmetics, data analytics and artificial intelligence are the new ingredients accelerating product development and providing consumers with personalised products and services.
According to McKinsey, in 2022 the beauty market generated approximately $430 billion in revenue and is expected to reach approximately $580 billion by 2027. Amongst the factors driving this growth is the increased digital sophistication of both brands and retailers.
Customer Feedback analysis
Mintel’s 2024 Global Beauty and Personal Care Trends reports that “AI will permeate the beauty industry in the form of personalised recommendations, virtual try-on experiences and data-driven insights.”
The report goes on to say that “By analysing social media trends, customer feedback and market research, AI will help brands identify emerging beauty preferences and eco-friendly options.
Brands positioning In AI
In the last few years brands and retailers have been deploying an increasingly sophisticated range of tools and analytics to enhance the consumer experience. For example, the Taiwanese company Perfect Corp has an extensive range of augmented reality enabled tools.
These include virtual make up, hair colour and nail effects, as well as photograph enhancements like virtual tattoos and personalised avatars. No7 used Perfect Corp’s artificial intelligence and augmented reality technology, for its cosmetic shade matching experience and Yves Saint Laurent, L’Oréal Paris, MAC Cosmetics, and Macy’s have all used Perfect Corp technologies to offer customers virtual try-ons of clothes and cosmetic products.
In 2018, L’Oreal acquired ModiFace and used its technologies for an AI makeup app with augmented reality in cooperation with Facebook. With Modiface technology customers use a smartphone camera ‘try on’ products virtually and then move to the product page to make a purchase.
In 2019, Coty released Wella Professionals AR enabled smart mirror for hair salons. Combining AR, facial recognition and 360° video capture that works in salon and on smartphones, Wella customers can retrieve past hair styles and view their hair at every angle in their smart mirror, creating a highly personalised customer experience.
DeepAR‘s augmented reality and emotional detection tools are being used by customers for virtual try-ons of Ray-bans sunglasses and Allbirds footwear, virtual make up by Lush and Sephora as well as augmented reality advertising. It teamed up recently with Sky to integrate AR to the Sky Glass TV using body-tracking software to deliver an AR experience for casual games, and fitness applications at room-scale.
Risks of AI Implementation
Whilst Beaut-AI offers many benefits for brands and consumers, the collection, storage and processing of personal data, and in particular biometric data from facial recognition software is already subject to Data Privacy laws and regulations.
Companies looking to use technology in this area must guard against data breaches and misuse, ensuring that their policies include adequate customer consents to the collection and use of personal data, and in particular special category data such as biometric information. Beaut-AI will soon be subject to more rigorous and extensive regulations and policies in the EU and UK.
In the EU the use of artificial intelligence will be regulated by the AI Act, the world’s first comprehensive AI law. The new rules will establish obligations for providers and users depending on the level of risk from artificial intelligence. These will range from unacceptable risk AI systems (which are systems considered a threat to people), through to high and limited risk systems.
Unacceptable risk AI systems, such as cognitive behavioural manipulation of people or specific vulnerable groups, or social scoring people based on behaviour, socio-economic status or personal characteristics will be banned. High risk systems will have to comply with EU product legislation and certain categories of products will have to be registered on an EU database.
Limited risk AI systems will have to comply with transparency requirements that allow users to make informed decisions.
At present the UK does not intend to introduce new legislation. In the White Paper published in March 2023 the Government set out five principles underpinning its AI regulatory approach:
- Safety, security, and robustness
- Appropriate transparency and explainability
- Fairness
- Accountability and governance
- Contestability and redress.
Conclusion
As Mintel predicts “Transparency in AI systems will be crucial to building consumer trust and ensuring the disclosure of data sources and decision-making processes. Consumers will prioritise data protection and privacy by demanding customer consent and pushing brands to adhere to relevant regulations.”
Companies using AI-powered software solutions should pay close attention to the new regulatory landscape since the risk of damage to brand and reputation are moving to a whole new level.
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