Internet algorithms and brand allegiance

I am afraid that top fashion brands such as Guess, The Limited, and Abercrombie & Fitch might go bankrupt in the near future and therefore be obligated to close their operations because of artificial intelligence technology. Let me say this differently — These former companies may be on their way to extinction because of the way we are thinking about our underlying human assumptions of what makes us profitable and functional which is a fundamental change in how things have been done in the past. Artificial Intelligence is changing us maybe unconsciously which will have a tremendous impact on the retail industry.

This article is about artificial intelligence and how AI may financially impact top fashion brands in the coming years. I am predicting that a number of well established luxury fashion brands will close their doors by 2025 because of technology. I hope that I am wrong about this but the signs seem clear cut to me. IBM is predicting almost 90% of customer interactions to be handled on-line without a human agent. This is very bad news for luxury fashion brands because their main sales point is selling their name. Millennials and younger do not have brand allegiance to these “old school” brands. They don’t know they exist! No wonder why stores like Macy’s and Sears are in the position that they are today. Those department stores are one of the main dealers for luxury brands.  Think about it — When was the last time you saw or you personally bought a luxury brand item from a department store? How about when it wasn’t a holiday? In the new age of information, these traditional brands may be at a disadvantage because there will be app algorithms that will find customers the best, cheapest items but those items will be tailored to what they are watching or clicking on. These luxury brands can no longer ride the coattails of success because brand allegiance is based on internet views not how long a brick and mortar store has been in existence.

Let me share something with you. My wife and I used to own a small business back in Pennsylvania prior to moving to the south. We learned, through experience and the science of observation, that customers will only buy from a local business if the prices are cheap or if the item is handmade. People are only trusting in the reviews from YouTube celebrities, bloggers, and vloggers. Younger and younger generations will turn to the internet and turn away from the customer service experience, being taught by older generations that the “salesman” is trying to sucker you. So, who will the new buyers trust?

The human side of their business, which has been at the center of their business model for decades, will prove to be irrelevant in the new age of intelligent machinery. We are going to see the birth of reinforcement learning where autonomous agents will maximize rewards. The traditional luxury brands will fight this war with “horses” where emergent e-retail giants will annihilate them with intelligent algorithms from behind.    

The old fashioned way Guess used to sell expensive clothing to you and me will mean very little in 2025. Is there a solution for them? I don’t know… I don’t think so. I am very skeptical that these companies will be able to adapt to this artificial intelligence mindset. Even if they could adapt to this upcoming reality, I don’t even think that there is enough time for them to make the transition even if they wanted to. I am afraid that these luxury company’s days are counted.

This is what I believe. We are going to see more and more intelligent systems that will help us to buy products at the cheapest price and tailored just for us. The machine will only get better at learning what you like the most and dislike the least. I do think that new e-brands will emerge in this transition. I also think that the adoption of AI in e-retail will also prove to be the “Analog” companies biggest nemesis. Tomorrow, I bet, will prove to be nothing like the past. Life changes. Retail is no exception.

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