Can Generative AI Power Best-in-Class Personalization for Estée Lauder?

The Estée Lauder Companies is seeking to enhance its operations through a strategic partnership with Google Cloud that will focus on finding new uses for generative AI across its brand sites. The retailer is aiming to utilize AI to better understand consumer sentiment, enhance its R&D efforts, and create high-touch digital experiences to elevate its prestige beauty brands.

Generative AI will enable Estée Lauder to monitor consumer sentiment and feedback in real time in order to proactively address customer concerns and respond to external trends, with the goal of ultimately creating more personalized experiences.

Additionally, Estée Lauder is developing new generative AI business applications on Vertex, Google Cloud’s AI platform, that could help it streamline and simplify operations to reduce costs. The retailer is also using PaLM 2, Google's large language model, to gain greater insights into consumer sentiment on channels including social media and call center operations.

The new efforts with generative AI build on a multi-year partnership between Estée Lauder and Google, as well as development partner Eviden. Estée Lauder has been using Google Cloud technology to consolidate its data into a single environment to help it better understand consumer intent and tailor personalization for more than 20 brands.

"The beauty market is undergoing a significant transition, with heightened consumer expectations, ever-changing trends, and a shift to personalization," said Thomas Kurian, CEO of Google Cloud, in a press release. "Our work with The Estée Lauder Companies to build a foundational data platform is now helping drive new generative AI use cases that will transform the consumer experience and the beauty industry overall."

Greater investment in generative AI puts Estée Lauder in good company when it comes to building a better personalization engine. A recent survey by BCG found that 67% of major GenAI users harness the technology for personalization, including retailers creating “hyper-personalized recommendations that entice shoppers to buy more.”

While personalization is beneficial for all companies across retail, it’s particularly important for the beauty industry. A survey by Bolt found that 75% of shoppers would pay more for beauty and skincare products if they got personalized online shopping experiences. This opportunity is especially large among Gen Z, where 72% are willing to pay a more than 10% premium for personalization, while 57% would pay 11% to 20% more for purchases that include custom and curated online shopping journeys.

Making the most of this opportunity will be essential to Estée Lauder’s near-term success. The company is expecting sluggish sales growth in the second half of 2023 due to a slower-than-anticipated recovery in its travel retail business, particularly in Asia, and weakening demand in the U.S. Standing out with personalized recommendations and cost-efficient processes could help the company offset this weakness and build momentum for the future.