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Will Estée Lauder and Microsoft’s AI Collaboration Affect the Beauty Industry?
In a recent announcement, The Estée Lauder Companies (ELC) and Microsoft Corp. disclosed plans to establish an AI Innovation Lab, marking an extension of their existing global partnership. Through the utilization of advanced generative AI (GenAI) capabilities within Microsoft’s Azure OpenAI Service, the objective is to foster closer connections with consumers, expedite product launches, and enhance local relevance across ELC’s portfolio of over 20 beauty brands.
The collaborative effort aims to address key areas within ELC’s operations, including:
- Agile response to market trends: ELC and Microsoft have developed an internal GenAI chatbot to bolster marketing efficiency globally.
- Accelerated product innovation: GenAI tools are being integrated into ELC’s research and development processes to streamline product development cycles.
Jane Lauder, EVP of enterprise marketing and chief data officer at The Estée Lauder Companies, emphasized the role of technology in amplifying the company’s commitment to high-quality products and personalized consumer experiences. She said, “With Microsoft’s generative AI tools and extensive expertise, we are able to leverage ELC’s tremendous data to create more personalized consumer experiences and faster insights to action resulting in increased speed to market and stronger local relevancy.”
Shelley Bransten, corporate vice president of global industry solutions at Microsoft, highlighted the potential of GenAI to revolutionize the beauty industry by delivering immersive customer experiences, expediting product launches, and driving sustainable product innovation.
This collaboration marks a significant milestone in the longstanding partnership between ELC and Microsoft, which commenced in 2017. Notably, ELC previously utilized Azure AI as the foundation for its Voice-Enabled Makeup Assistant, a pioneering mobile app launched in early 2023 to assist visually impaired users in makeup application. The app, available on iOS and Android in select markets, is slated for further expansion in the coming months.
The AI Innovation Lab is specifically designed to harness GenAI across ELC’s extensive portfolio of beauty brands, including Clinique, Mac Cosmetics, and the Estée Lauder brand itself.
Among the projects currently underway is the development of an internal chatbot. This tool employs sophisticated conversational AI technology to help brands efficiently access authorized product claims, facilitating rapid responses to emerging trends or consumer needs. By tapping into a database of scientifically proven product benefits, marketers can align their campaigns more effectively with local and emerging trends.
Moreover, the lab is exploring ways to utilize GenAI to expedite responses to evolving product and ingredient trends, thereby streamlining the research and development process. This integration of AI tools enables scientists and product development specialists to respond promptly to emerging trends.
These innovations hold particular significance for the beauty industry, where rapid shifts in consumer preferences necessitate agile responses, according to Bransten. She noted that an IDC study commissioned by Microsoft “found that for every $1 a retail and consumer packaged goods company invests in AI, it sees a return of $3.45.”
ELC’s exploration of GenAI dates back several years, with the development of internal standards guiding its initiatives. In 2023, the company hosted its inaugural “AI Ideathon” for global employees, fostering creative brainstorming around AI-powered solutions.
Operated as a joint venture with Microsoft, the lab will integrate existing employees from both companies, with some ELC employees undergoing upskilling initiatives.
This endeavor represents one of the earliest instances of a dedicated AI incubator in the fashion and beauty realm, spearheaded by Lauder. Amidst a surge in GenAI innovations, industry players are increasingly drawn to AI startups and tools. Notably, the New York Fashion Tech Lab and the LVMH Innovation Prize reflect a growing emphasis on AI-driven solutions.
Major tech companies, including Google and Meta, are also making strides in AI integration, offering tools tailored to retail and creative industries.
Discussion Questions
How might the integration of generative AI technology into beauty brand operations redefine the landscape of consumer engagement and product innovation within the retail industry?
With ELC’s AI Innovation Lab focusing on agile responses to market trends and accelerated product innovation, what implications does this approach have for other consumer-packaged goods companies seeking to leverage AI for competitive advantage and enhanced customer experiences?
Poll
Loading …BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Trevor Sumner
Head of AI and Innovation, Raydiant
Estée Lauder has been underperforming. In the year to date its sales are down by 5% and its net income has cratered by a third. One of the main reasons is that it has not been as innovative as rivals like L’Oréal, and it has too many laggard brands in its portfolio. Performance in China has also been soft.
AI can help solve some of these issues, especially if it allows Estée Lauder to identify trends and market patterns more accurately and speedily. However, it is only part of the solution; a kick-starter for the innovative process, if you like. It does not replace the need for human talent and creativity, a deep understanding of global markets, and a culture receptive to innovation.
I was fortunate enough to connect with one of my LinkedIn contacts in my Consumer Goods & Retail Professionals Group, who works closely with Estee Lauder. She offered me a crash course, and I took notes, so here we go! I will refer to Estee Lauder as ELC, as she did.
This does provide me with an opportunity to plug LinkedIn Consumer Goods & Retail Professionals (Group.) Since 2010, we have signed more than 100,000 members in the network, and if it were not for the network, I would not have had the benefit of the information, below.
One area where both companies intend to use AI is to respond faster to social trends and consumer demands.
Teams can navigate and leverage ELC’s product database and claim data with the help of an internal chatbot built using Azure OpenAI Services. Consequently, ELC’s brands are able to launch locally relevant campaigns faster.
Marketing campaigns could be streamlined with such a tool. With this feature, teams can pull up information from counterparts in other regions and replicate it by typing in a query.
Accelerating product innovation is another area of focus. As a result of gene AI, ELC’s research and development teams are better able to identify emerging product and ingredient trends.
Microsoft’s software enables scientists to run a query to find possible solutions they can develop and market instead of scouring through literature.
My impression is that this technology will be an asset at first to ELC, itself, and eventually it will enhance the buying experience for the consumer, but in no way will it replace the in-store personal experience, nor even the online experience as we know it today.
This might be enough though to help ELC recover from its 5% decline in sales.
I knew nothing about this when I woke up this morning, so I did my best to summarize three pages of notes in a few paragraphs. How did we do? Ha! -Db
The summary was great! I was hoping that you wouldn’t say it would replace the instore experience. From experience (I took notes too) , I know that it is very much a personal experience when you buy or think about purchasing a fragrance, a lipgloss, or any kind of make up. I believe women (I can vouch for my wife) like to be pampered or like the personal attention when making those purchases. I can’t see a robot with AI capabilities put makeup on a woman.
AI is many things to many businesses but as everyone here reinforces, it does not replace a human. It streamlines tasks, creates many efficiencies on the administrative side, can indicate trends providing the data is available, and can target marketing. But it can’t innovate or create a brand. That requires talent, vision and investment along with dogged determination.
Estee Lauder and Microsoft may well establish a template for other brand/technology partnerships on AI. With top executive buy-in and some creativity, they might realize significant advantages.
Given the diversity of products across markets, I think GenAI could be used really effectively here to help with product ideation/development- that’s the most modern and impactful way I see it being used for them.
Integrating GenAI capabilities into any operation is another enabler for growth by providing the insights and data points to help drive growth and transformation. However, for Estee Lauder and other CPG brands, GenAI capabilities will only get you so far, as it will all come down to execution, product, and performance. In addition to all the challenges they are experiencing, For the nine-month period that ended 31 March, organic sales decreased by 5 percent. Estee Lauder has been outperformed by L’Oréal, who fared better, reporting sales up 9 percent on a like-for-like basis in the first quarter.
There are a series of challenges and opportunities that lie ahead for Estee Lauder:
The GenAI innovation lab, in partnership with Microsoft, will reap significant benefits, as it will enable their team to respond more quickly and accurately to trends. With these investments in innovations and customer-facing improvements Estée Lauder is at an inflection point and has a chance to turn the business around for the second half of fiscal 2024.
This partnership offers great possibilities and learning opportunities for both firms however I believe that the ultimate payback depends on the strength of the ELC Marketing team. Given ELC’s recent results as documented by some of my colleagues here, I am not optimistic that, at this time, AI will strengthen a weak team or strategy. Later it might, but not now.
Estee Lauder is struggling as new DTC brands appeal to a new generation of beauty shoppers and underserved demographics. AI investment and GenAI will help create efficiencies and insights, but the key will be to revamp their brands to appeal to a new shopper. AI analysis of trends will help, but only if coupled with an executive will to act on the trend data (much of which they already know).
Remember ELC is a tale of two worlds retail and wholesale.
Wholesale – AI will have a large impact in both. Being able to leverage AI to bring products to wholesale markets faster and with a greater focus on local demographics and markets will be key. they will also be able to pass their learnings on to there wholesale clients to improve their margins and make them a stronger player.
Retail- ELC has been a leader for over a decade in understanding their client and building a client specific set data including what shade she wears by season and many other details. They long ago got rid of the black book and made the engagement more personal. With AI they will be able to turn the years worth of data they have bee collecting into a differentiating experience. They have a leg up in retail because as we now AI is only as good as the data it is working with and ELC has been investing in gathering and leveraging its customer data for years.
The ability to synthesize and provide enhanced insights through AI will become more prevalent as we move forward. Important to note the role of AI as an assistant – we will see more AI agents soon that will come alongside human talent. More of this type of collaboration is coming.
An AI partnership focused on marketing efficiency, R&D, & GTM velocity with Microsoft makes sense for a large consumer goods company like Estee Lauder. However, when I read an announcement like this I always think about the data that is consumed by the AI technology. What differentiates an AI project at Company A vs. Company B is the internal company data sets about customers, purchases, products, & suppliers. Most consumer goods companies have this data spread across the company & with key trading partners in pockets & silos in varying different states & conditions. It is very difficult to have proper AI that can be trusted (and affiliated outcomes) without proper Data Management in particular at large complex companies with sprawling data estates. These projects start at the data & don’t end well without clean, valid, governed data powering the AI project.
I think bringing AI into beauty brand operations could really shake things up in how companies connect with customers and create products. It might mean quicker responses to what’s trending in the market and faster development of new products. For other consumer goods companies, this could set a new standard for keeping up with customer demands and staying competitive. But it’s important to keep in mind that while AI can help, it’s not a magic fix – companies still need to listen to their customers and create products that truly meet their needs.