celiaosk/iStock via Getty Images
A type of artificial intelligence technology that works to create images, text and other forms of media could have a profound and positive impact on soft-line retail businesses.
This is the assessment of UBS, which has just held a conference in New York on the impact of generative ai in fashion retail.
“Experts believe Gen ai will also help fashion companies make significant strides in areas such as sales/customer experience, product development, innovation, marketing, store operations, supply chain/logistics, and organization,” analysts wrote. from the Swiss bank. “Experts believe that the global Softlines industry could achieve between 500 and 900 bps of EBIT margin gain in the long term using Gen ai and part of this gain would be reinvested in the businesses to drive revenue growth.”
UBS said companies are already using generative ai to develop personalized messages for customers, leading to better engagement and higher sales. The firm added that this type of marketing is more economical than what is currently done.
Additionally, generative ai is improving the online payment experience. “By inserting personalized language and messages when consumers go to check out online, fashion companies see online conversion rates increase as the percentage of consumers abandoning their carts toward the end of their shopping journeys decreases” , the team wrote.
UBS mentioned Ralph Lauren (New York Stock Exchange:RL) as a clothing retailer that will especially benefit from generative ai. This is because they have enough money to adopt generative ai and personalize it, as well as strong customer data and IT infrastructure. Finally, Ralph Lauren benefits from a company culture that embraces new technologies and can adapt to new ways of working.
Because it is an online fashion retailer and is focused on technology, the bank also believes that Revolve Group (RVLV) also embraces generative ai. UBS currently rates the stock as neutral.
Other soft-line retailers that could be affected by generative ai include PVH Corp. (PVH), Under Armor (New York Stock Exchange: UAA), Nike (New York Stock Exchange: NO), Deckers Outdoors (DECK) and Lululemon Athletica (NASDAQ:LULU).
While some may believe that generative ai is overhyped and that returns on investment in the technology have been modest so far, UBS analysts say many are underestimating the impact of generative ai on the industry in the future.
“Our view is that ai generation is a topic that will only grow in importance and the companies that best leverage it are likely to experience outsized financial returns and stock market performance,” UBS said. “Therefore, we believe the time has come for investors to start focusing on this issue to identify which companies will win.”
