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Will the proliferation of Artificial Intelligence tools in the beauty industry for online shopping experiences, is physical retail stores irrelevant?

What does AI’s increasing dominance in the beauty industry spell for physical retail stores?

Will the proliferation of Artificial Intelligence (AI) tools in the beauty segment to offer seamless online shopping experiences make physical retail stores irrelevant?

Globally, the photo-editing app Lensa clocked in over a million active users this month. It recently created a stir for its ‘Magic Avatar’ feature, which enables users to upload selfies and turn them into Artificial Intelligence (AI)-generated portraits or avatars. Given how technology is evolving today, AI is no longer part of a dystopian, distant future—it is widely available on your Amazon Echo and most recently, the viral Lensa App. 

Augmented Reality (AR)   AR blends the virtual and real worlds for more realistic solutions (think Snapchat filters that adorn your images) and AI involves the application of algorithms and statistics to contract the need for human interaction. Image: Pexels

Augmented Reality (AR) AR blends the virtual and real worlds for more realistic solutions (think Snapchat filters that adorn your images) and AI involves the application of algorithms and statistics to contract the need for human interaction. Image: Pexels

Rajat Mathur, head of education and customer experience, Kiehl’s India, believes that AI tools enable the brand’s skincare experts to get data and information about the customers’ skin that the naked eye cannot otherwise assess

Rajat Mathur, head of education and customer experience, Kiehl’s India, believes that AI tools enable the brand’s skincare experts to get data and information about the customers’ skin that the naked eye cannot otherwise assess

The beauty industry started leveraging AI in 2018, when global beauty retailer Sephora partnered with Dynamic Yield to implement the company’s AI machine that analyses factors like location and the user’s favourite products and shopping patterns, fetching them a return of six times on their investment, according to a report. The presence of such AI tools provides users with tried-and-tested assistance without breaching their privacy—both online and offline.  However, the long-established dominance of brick-and-mortar stores in India cannot be discounted; the Indian consumer is used to the idea of in-store shopping, especially those belonging to the generations before Gen Z or millennials, or when big-ticket products have to be purchased. But do such stores, involving massive investments, stand a chance down the road?

The clout of AI in the beauty industry 

With the launch of Nykaa in 2012, the e-commerce beauty conglomerate  democratised online shopping by reaching every pin code in the country, more and more people—women, in particular—began engaging with the app for their beauty needs, which was considered a rather ambiguous practice in the early 2010s. Today, consumers from Tier-2 and Tier-3 cities actively engage in online shopping. As a result, brands  are constantly looking to enhance  the user experience by relying on endless technologies—AI being a clear standout. Augmented Reality (AR) also has a key role to play. While AR blends the virtual and real worlds for more realistic solutions (think Snapchat filters that adorn your images), AI involves the application of algorithms and statistics to contract the need for human interaction. The global AI market pertinent to beauty was valued at $2.7 billion in 2021 and is expecting a hike of 19.7 per cent every year between 2022 and 2030.

Rajat Mathur, head of education and customer experience, Kiehl’s India, believes that AI tools enable the brand’s skincare experts to get data and information about the customers’ skin that the naked eye cannot otherwise assess. The AI tools scan and examine the skin’s deepest layers ( beneath the epidermis) through hyper-zoomed images (think cell-level visibility) of the skin. “At Kiehl’s, providing effective solutions to our customers’ skincare needs and concerns is of utmost importance to us. The presence of the Healthy Skin Assessment AI tool in our physical store helps us suggest products to each customer in the most efficient way possible.” 

“PHYSICAL STORES WILL ALWAYS HAVE AN UPPER HAND BECAUSE CONSUMERS PREFER TO SEE, EXPERIENCE, AND TEST PRODUCTS IN PERSON BEFORE BUYING THEM. A PHYSICAL STORE ALSO PROVIDES THE OPPORTUNITY TO DELIVER A POWERFUL BRAND EXPERIENCE”

Venkataramani K

The beauty industry started leveraging AI in 2018, when global beauty retailer Sephora partnered with Dynamic Yield to implement the company’s AI machine that analyses factors like location and the user’s favourite products and shopping patterns, fetching them a return of six times on their investment. Image: Pexels

The beauty industry started leveraging AI in 2018, when global beauty retailer Sephora partnered with Dynamic Yield to implement the company’s AI machine that analyses factors like location and the user’s favourite products and shopping patterns, fetching them a return of six times on their investment. Image: Pexels

United Kingdom-based skincare brand Dermalogica has a similar feature on their Indian website ‘Face Mapping’. “The feature helps to reveal a person’s true skin type and the possible underlying causes of the skin conditions they might have, such as breakout activity, dehydration, sensitivity or uneven skin tone. These insights help curate a personalised ‘Skin Fitness Plan’ report, along with product recommendations, which is shared with the user via email. The person is then guided even if they can’t visit the store and consult with the skin therapists,” shares Pushkaraj Shenai, CEO and  director, Lakmé Lever. “Consumers who have used Face Mapping have a higher conversion rate as opposed to those who don’t,” he points out. 

In December 2021, when Nykaa partnered with L’Oréal for its acquired AI tool ‘ModiFace’, Anchit Nayar, CEO of the e-commerce platform had said, “The technology allows us to provide a rich, immersive buying experience to our customers. With the new AI-powered virtual try-on option, customers on Nykaa can now confidently choose from our wide range of options–wherever they are, whenever they want!” Other brands like Clinique, Bobbi Brown, Dermafique, Neemli Naturals, Lakmé and M.A.C Cosmetics also have up-and-running AI and AR tools on their websites, extending shade matches as well as product recommendations, helping the user “swatch” the product virtually and gauge its suitability, along with shopping for products that cater to their skin’s requirements, just like they would in a physical store. 

Tech company Perfect Corp’s YouCam Makeup Appconducted a survey on consumer engagement with their AI skin diagnostic tools during the COVID-19 pandemic and 26 million users had tried the app globally. “In the U.S., there was an 11 per cent increase in Skin Score engagement between February and March 2020, the start of pandemic closures. The months with the highest ‘Skin Score’ engagement were March, April, May and June, the period of strict lockdown,” the company told CosmeticObs.

In December 2021,  Nykaa partnered with L’Oréal for its acquired AI tool ‘ModiFace’,

In December 2021, Nykaa partnered with L’Oréal for its acquired AI tool ‘ModiFace’,

Kiehl’s  AI tools  scan and examine the skin’s deepest layers ( beneath the epidermis) through hyper-zoomed images (think cell-level visibility) of the skin

Kiehl’s AI tools scan and examine the skin’s deepest layers ( beneath the epidermis) through hyper-zoomed images (think cell-level visibility) of the skin

When it comes to AI’s relevance to the Indian consumer, Sunil Jose, senior area vice-president and country leader, Salesforce India, told The Hindu, “AI is coming of age. As businesses continue to find new ways to innovate with AI technologies, awareness and education on its benefits for consumers will become increasingly important.” The results of a survey conducted by the company revealed that 78 per cent of Indians are aware of AI’s potential and 86 per cent of that lot preferred interacting with AI tools over humans on various applications

The India story 

While AI might be here to stay, brick-and-mortar stores aren’t going anywhere. According to Venkataramani K, managing director and CEO, Health & Glow, that advantage continues to give physical retail stores an upper hand, despite the pandemic-induced hiatus over the last two years. “During the pandemic, e-commerce platforms gained momentum as people were restricted to the four walls of their homes. However, physical stores will always have an upper hand because consumers prefer to see, experience and test products in person before buying them. A physical store also provides the opportunity to deliver a powerful brand experience.”

Shenai is suggestive of the fact that there’s no stopping when it comes to expanding Dermalogica’s physical footprint. “We want to be present where our customer goes shopping for skin care. We are increasing our presence in salon chains as well as beauty retail stores across the country,” he shares. When it comes to purchasing perfumes, it is inevitable to factor in the necessity of a physical store because how much can the classification of notes divulge and how many consumers have an in-depth understanding of the same? “We need to experience perfumes in order to connect with the fragrances and understand the olfactive sensibilities, which might then lead to a purchase,” says Saurav Bhattacharya, president, Ajmal & Sons, NHA Division India. “So much of AI will drive our future; there will, however, be a need for physical stores, at least for trial purposes, if not transactional,” he adds.

The future is omnipresence 

Why should brands have to make a choice if they can afford both mediums, particularly since both aim at an elevated customer experience? “We strongly feel that the way forward is to have an omnichannel presence wherein you allow consumers the convenience to shop the way they want. This hybrid structure will continue to evolve with innovations and will be the new face of retail due to the additional merits of the physical and internet channels,” says Venkataramani, who is happy with the results that H&G Skin Expert, Health & Glow’s AI tool has rendered—both online and offline.

United Kingdom-based skincare brand Dermalogica has a  feature on their Indian website ‘Face Mapping’, that helps  reveal a person’s true skin type and the possible underlying causes of the skin conditions they might have, such as breakout activity, dehydration, sensitivity or uneven skin tone

United Kingdom-based skincare brand Dermalogica has a feature on their Indian website ‘Face Mapping’, that helps reveal a person’s true skin type and the possible underlying causes of the skin conditions they might have, such as breakout activity, dehydration, sensitivity or uneven skin tone

“Since its [AI tool] launch, our in-store footfall has doubled and return rates are up threefold. A majority of our customers come back for a repeat analysis using our tool, once they have implemented their new skincare routines and tried our samples,” comments Mathur on the success of Kiehl’s AI tool available in their physical stores. It’s critical to note that investing in AI can drop a brand’s marketing and sales costs by 44 per cent, according to a McKinsey & Company report, alluding towards the high, organic user engagement with AI, in physical stores as well as e-commerce and m-commerce websites.

Also Read: What does it take to be a winning beauty brand in 2022?

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