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Fashion, beauty and apparel brands are leading the way to a future of immersive and sustainable shopping

Experiential

Fashion retailers are pioneering a revolution in experiential shopping, blending digital and physical elements to create immersive consumer journeys. 

Brands like Gucci and Louis Vuitton are leading the way with AR-powered virtual try-ons and exclusive pop-up stores that offer unique, interactive experiences. These retailers are setting new benchmarks for customer engagement and brand loyalty as they reshape the retail landscape.

Reimagining brick and mortar

The rationale for in-store shopping is changing. While stores may no longer be the primary channel for product acquisition, leading retailers are transforming them into sites of meaningful consumer experiences. Stores are becoming places where consumers can socialize, learn about brands and their products, or simply immerse themselves in a brand-specific atmosphere. This transformation is happening first and fastest among luxury apparel, beauty and fashion brands.

Brand experiences

Web3/metaverse

Leveraging emerging tech and channels to drive new forms of loyalty through innovative brand activations.

 

​Early in 2021, luxury brands including Louis Vuitton and Nars Cosmetics were quick to explore the use of NFTs as a new distribution channel.37 That year, Gucci made a splash when its virtual bag sold on Roblox, the gaming platform, for 20% more than its physical version retailed for.38

Pop-up stores

Creating unique and temporary retail spaces that offer exclusive experiences and generate buzz.

 

​In 2021, JW Anderson’s pop-up at Selfridges in London used QR codes to trigger AR visuals39, and customers at Louis Vuitton’s Paris pop-up tapped into an AR experience to interact with animated mascots.40

Over the past few years, luxury fashion brand Jacquemus unveiled a series of unique destinations including a flower and coffee concept in Paris and Seoul and a Barbie-pink 24/7 vending machine in Milan and Paris.41

Next-gen technology for interactive shopping

Allowing customers to engage with products and brand stories in innovative and immersive ways.

 

​Before the 2020 Olympics in Tokyo, SK-II designed a “social retail” pop-up in Hainan, China, that immersed visitors in a cinematic universe and offered AI-powered skincare analysis, counseling and product recommendations.42

In 2023, Savage X Fenty launched Fit Xperience, a changing room solution that uses scanning, AI and other technology to scan the customer’s body and createa 3D avatar that can then be used to fit clothing items.43

Advances in managing space

A worldwide survey of retail execs indicates that providing “an in-person component to customer experience” is the most important virtue of the physical store, with 44% of respondents naming it.44

Retail facilities geared more toward encouraging a brand experience than toward moving merchandise are starting to emerge, signaling a different way to use store footprints for engagement.

Seattle startup Augmodo is deploying a range of cutting-edge technologies, including computer vision, spatial computing, AI and AR to track and map products in complex retail environments, such as sprawling grocery stores.45 The company’s technology could be accessible to users as MR overlays on the physical world, courtesy of spatial computing hardware.

Runway indicators

Some fashion companies are leveraging generative AI for highly customized marketing campaigns — adapting messages for individual consumers, using large language models to create content, and modifying website and app interfaces to deliver more personalized experiences. L’Oréal has used a generative AI solution that analyzes shopping habits to produce product recommendations — resulting in a 20% increase in sales for one L’Oréal brand.46

Sustainability and circular commerce

Luxury brands are adopting digital product passports (DPPs) to comply with the European Commission’s upcoming Ecodesign for Sustainable Products Regulation (ESPR), which mandates transparency and traceability for products made or sold in Europe. DPPs connect physical products to a digital identity, providing comprehensive information about the entire product lifecycle to promote sustainability and circularity. This innovation not only helps brands meet regulatory requirements but can also combat counterfeiting and confirm product authenticity. Additionally, DPPs enable rich product storytelling and deeper consumer engagement, driving higher conversion rates and fostering long-term customer trust and loyalty by transparently showcasing the sustainability of luxury products.

 

Numerous leading retailers, including Lululemon, Madewell and Patagonia, maintain “sell-back” programs in which they compensate customers for used items and then resell them, promoting circular economy principles.

Lululemon’s Like New Program

Most Chinese environmental disclosure regulations combine mandatory and voluntary measures as established by the Chinese Securities Regulatory Commission and the Ministry of Ecology and Environment (MEE). Recent updates to the disclosures that the MEE released in February 2022 confirm that a basic mandatory disclosure system is to be implemented in the next five years.

Patagonia’s Worn Wear Program

In addition to its sell-back program, Patagonia will repair most damaged garments for free, with employees using on-site sewing machines in some stores.48

Outook

Emerging use cases, such as virtual try-ons and home visualization apps, are expected to see widespread adoption due to their ability to enhance customer confidence and reduce returns. 

Ensuring accurate and user-friendly technology for body scanning and AR/VR experiences is challenging, and the current cost of MR devices is an impediment. However, as technology advances and costs decrease, retailers that can address privacy concerns and offer seamless, valuable and immersive experiences could lead the way in redefining the e-commerce landscape.

A retail renaissance

Over the next five years, retail will be transformed as individualized consumer engagement, conversational shopping, dynamic loyalty programs and immersive experiences become industry standards. 

Companies that integrate AI chatbots, digital shopping assistants, in-store digital touchpoints and VR/AR experiences into the consumer journey will enhance product discovery and should ultimately increase brand loyalty and customer retention. 

Each of these five attributes underscores the importance of treating customers as unique individuals and building more robust, meaningful connections with the brand. Successful retailers can achieve this — along with improved financial performance — by providing a retail experience that is individualized, contextually relevant and responsive to consumers' evolving needs and preferences.

Mastercard stands at the forefront of innovation in retail and commerce, leveraging its deep expertise in AI and data analytics to revolutionize shopping experiences, optimize payment operations, enhance cybersecurity and bolster trust.

Making commerce even smarter

With over two decades of AI expertise, Mastercard is at the forefront of using generative AI to optimize operations and innovate payments. Solutions like Authorization Optimizer and Scam Protect empower partners with intelligent transaction routing and smarter recommendations, driven by the analysis of over 143 billion transactions annually.

Making commerce even safer

By embedding AI-powered security measures in our products and services, Mastercard proactively identifies and neutralizes threats, ensuring data security and building trust in the digital economy. Mastercard's deep bench of AI-powered cybersecurity solutions prevented over $20 billion in potential fraud losses in 2023. Due to advances in generative AI, card fraud detection has doubled in speed and reduced false positives by up to 200%.

Making commerce even more personalized

Mastercard is revolutionizing retail with AI-powered tools that enhance consumer shopping experiences. Through Dynamic Yield, Mastercard helps its customers deliver valuable, useful and enjoyable experiences at scale with smart personalization. DY uses AI to personalize every step of the consumer journey, across numerous channels, including web, mobile apps, email, SMS, digital assistants, kiosks, in-store displays and more. In 2023, DY's AI delivered 371 billion impressions of personalized info across hundreds of brands.

Partner of choice

Mastercard's co-creation approach with partners drives innovation at scale. By leveraging its global infrastructure, Start Path program for supporting startups and commercial partnerships, Mastercard collaborates with over 80% of the top digital payment and neobank fintechs on the CNBC global fintech list, solving real-world problems and transforming the commerce ecosystem and its vast network of innovative new companies.