Zalando’s Cutting-Edge Application of Artificial Intelligence for Enhanced Customer Experience

Background

Since its founding in 2008 by business school friends Robert Gentz and David Schneider, Zalando has established itself as a leading European online platform for fashion and lifestyle, consistently driving innovation. The German-based company operates in 17 European markets, offering an extensive selection of 400,000 products from over 2,000 brands. With a growing customer base of 27 million, Zalando's success can be attributed in part to its early and ongoing commitment to harnessing artificial intelligence (AI) and machine learning technologies. Recently, the retailer announced the upcoming launch of a ChatGPT-powered fashion assistant designed to revolutionize the online shopping experience.

Executive Summary

Zalando has decisively leveraged AI and machine learning to revolutionize the shopping experience, gaining unparalleled insights into customer preferences and needs.
Our groundbreaking Algorithmic Fashion Companion (AFC) harnesses AI power to deliver personalized outfit recommendations, driving significant improvements in key business metrics like basket size.
We've demonstrated exceptional financial performance, with an impressive 87% surge in Q2 2023's adjusted EBIT, despite challenging market conditions, underlining the effectiveness of our AI-driven strategies.
Our upcoming ChatGPT-powered fashion assistant represents a quantum leap in customer interaction, promising to transform our platform into an even more intuitive and personalized shopping destination.
We've successfully integrated AI across our entire operation, from logistics and supply chain optimization to innovative size recommendations, showcasing our mastery in leveraging this versatile technology.

Problem

At Zalando, we've embraced a customer-centric AI strategy that's revolutionizing the shopping experience. Our primary focus is on elevating user satisfaction and driving sales through hyper-personalized experiences. With a dedicated team of 120 researchers, we're investing heavily in cutting-edge technology to gain unparalleled insights into customer preferences and the ever-evolving fashion landscape. This approach allows us to stay ahead of the curve, consistently meeting and exceeding our customers' expectations.

Solution

We've implemented a range of innovative AI solutions to transform the online shopping experience. Our Algorithmic Fashion Companion (AFC) was a game-changer, offering tailored outfit recommendations based on customers' wish lists and purchase history. We've enhanced this tool by integrating human stylists' expertise, ensuring our algorithms stay in sync with the latest fashion trends. Building on this success, we're now launching a ChatGPT-powered fashion assistant, set to revolutionize how customers navigate our marketplace. This AI-driven tool interprets natural language queries, making the shopping experience more intuitive than ever. Beyond customer-facing applications, we've integrated AI into our back-end operations, optimizing everything from supply chain logistics to size recommendations based on customer photos.

Impact

The results of our AI implementation have been nothing short of remarkable. Our AFC has driven a substantial 40% increase in basket sizes, directly impacting our bottom line. Our Q2 2023 financial report showcases the power of our AI-driven strategy, with an impressive 87% increase in adjusted EBIT. Moreover, our AI-powered platform has become a magnet for premium brands like lululemon and Lancôme, further solidifying our position as a leader in the e-commerce fashion space.

Change Management

While we've achieved significant success with AI, we're acutely aware of the challenges that come with this technological revolution. We're actively working to enhance our AI's ability to factor in external influences like celebrity trends and social media impacts on customer preferences. We take data privacy concerns seriously and are implementing robust measures to protect our customers' information. As AI automates certain roles, we're strategically reallocating our workforce, ensuring we maintain the perfect balance between technological efficiency and human expertise.

Roadmap

Our future in AI is bright and ambitious. We're committed to continuously improving and scaling our ChatGPT-powered fashion assistant, expanding its capabilities to offer comprehensive fashion and beauty advice. We're also focusing on solving the persistent e-commerce challenge of size and fit at scale, leveraging AI to provide even more accurate and personalized recommendations. At Zalando, we're not just adapting to the future of retail – we're actively shaping it, setting new standards for the industry and delivering unparalleled value to our customers.

Publications:

Zalando launches AI fashion assistant

Zalando to launch virtual fashion assistant powered by ChatGPT

The Amazing Ways Retail Giant Zalando Is Using Artificial Intelligence

How Zalando uses AI for hyper-personalised customer experiences

Zalando launches new brands and AI-powered size recommendations