This week, an insider look at how Revolve’s AI-powered search is driving better customer experience for its customers and cost savings for its operations. Also, Burberry’s FTSE drop and forecast, plus earnings and executive moves.
Revolve Group is betting big on AI to push boundaries in the e-commerce space. With the launch this year of its internally developed AI search algorithm, the fashion-forward retail company is already seeing significant gains in customer engagement, conversion and efficiency on its FWRD platform. And they’re not stopping there.
In an earnings call on August 6, Mike Karanikolas, Revolve’s co-founder and co-CEO, outlined the company’s focus on AI-driven innovation, positioning it as a critical part of the brand’s data-first strategy. “We continue to leverage AI technology to drive growth and efficiency while further elevating the customer experience,” he said on the call. Karanikolas added that the internal AI search, which initially launched on FWRD in the first quarter, had delivered results that surpassed the company’s expectations.
“For years, consumers have searched for products on our sites through a third-party search platform,” he said. “I challenged our team to develop and test our own AI search capabilities. … It is incredibly impressive that our internal team of data scientists developed a solution that outperforms the third-party search technology, driving higher revenue per search and at a much lower operating cost.”
The AI search algorithm — currently in A/B testing on Revolve’s site — aims to address the limitations of traditional search engines. As Daniel Wu, svp of business intelligence at Revolve, pointed out, “Traditional lexical search matches specific words in a query to specific words within the product metadata,” he said. “While the traditional search excels at exact matches, the semantic search [driven by AI] understands users’ intent, even when no text from the search term matches the product description or metadata.”
In practice, this equates to more accurate and relevant results for customers. For example, a search for “prom” doesn’t just yield dresses with the word “prom” in the title, but a thoughtfully curated collection of gowns that fit the occasion. “Generative AI is wholly transforming and making product search, for example, tremendously better,” said Amanda Cole, CMO at e-commerce personalization platform Bloomreach. “We refer to this as ‘conversational search,’ which means that, instead of using simple, static phrases like ‘orange puffer coat women’s,’ shoppers can ask, ‘I’m looking for a bright ski jacket for my upcoming trip to Denver.’ In other words, tech giants are moving beyond the limitations of traditional keyword-based product searches and leveraging generative AI to help shoppers communicate with a brand in a completely new way.”
“Another example could be a user searching for a brand we don’t offer,” Wu said. “Traditional search would return an empty result set, whereas the AI search would return hundreds of products similar in appearance and aesthetics.”
The early results from FWRD are telling. “We achieved an increase in the user engagement rate, which is the percentage of users clicking on products from the search results,” he said. “We also saw significant gains in both add-to-cart rate and conversion rate metrics that drive top-line results.”
This success isn’t just about higher conversion, though — it’s also about cost efficiency. According to Wu, the new AI search has significantly lowered operating costs compared to the comoany’s previous undisclosed third-party platform. “Internalizing the AI search algorithm allows us to continuously improve and optimize in a very flexible and cost-effective manner,” he said. The internal cost is “a fraction” of what Revolve historically paid its third-party vendor, making the shift a win-win.
But according to Karanikolas, the real value of AI extends far beyond search. “This sort of technology really opens up doors, in terms of innovating the customer experience,” he said on the call, adding that it lays the groundwork for “new ways of customers exploring and navigating the website.” As AI continues to evolve, Revolve plans to expand these capabilities to create even more interactive, personalized experiences for its customers.
Looking ahead, Revolve’s team plans to incorporate additional training data to improve the AI model, constantly refining the algorithm to ensure it stays ahead of the curve. “Our goal is to be at the forefront of that,” Karanikolas said.
On August 6, Revolve Group reported net sales for the second quarter of $282.5 million, a 3% increase. Gross profit for the quarter reached $152.6 million, also up 3%, with a gross margin of 54%, a slight increase. Net income was $15.4 million, a 111% increase, and adjusted EBITDA was $20.5 million, up 97%.
Burberry relegated from FTSE 100 a week before LFW show
Ahead of its London Fashion Week show on September 16, Burberry has been dropped from the FTSE 100, the U.K.’s top stock market index, for the first time in 15 years. Stock market platform FTSE Russell confirmed the changes based on recent share prices on September 4, with Burberry’s stock plummeting by around 50% over the past six months reaching lows not seen since 2010. The changes will take effect on September 23.
Luxury retail has been hit hard, and Burberry, known for its check print and trench coats, was impacted by the slow reopening of the Chinese economy post-pandemic and a broader slowdown in the luxury sector. “Burberry’s share price has been the worst performer on the FTSE 100 over the past year,” said Bryce Quillin, economist and co-founder of luxury strategy agency It’s A Working Title LLC. “This halving of Burberry’s share price has led to a steep decline in their market capitalization, now around £2.3 billion, down from £6.5 billion in 2023. It’s likely the biggest decline of any company in the world over this period.”
Quillin added that while shifts in the FTSE 100 are common, Burberry’s decline stands out. “Membership in the FTSE 100 is reviewed quarterly, and there are usually a few changes based on market capitalization, which is driven by share price. Burberry’s steep fall over the past year made its relegation to the FTSE 250 inevitable.”
Burberry also saw a leadership change, with Joshua Schulman, former CEO of Michael Kors and Coach, stepping in as CEO in July, replacing Jonathan Akeroyd. Other C-suite changes were anticipated as well, as reported by Glossy in July. The company made two new announcements on Wednesday: It has tapped former Gucci CMO Jonathan Kiman as its new CMO, and Laura Dubin-Wander, who held senior roles at Coach, will lead its Americas division.
Despite the changes, a quick recovery seems unlikely. “I haven’t seen anything in their recent decisions that make me believe their performance will turn around in the next six to eight quarters,” Quillin said. Burberry chairman Gerry Murphy has warned of a potential operating loss in the first half. The company reported a 22% revenue drop in its first quarter and has suspended its dividend payments while it focuses on stabilizing its finances.
Earnings to know
On September 5, G-III Apparel Group Ltd. reported a profit of $24.2 million for its fiscal second quarter, with earnings of 53 cents per share, or 52 cents per share when adjusted for one-time gains. The company, which owns brands including DKNY, Donna Karann and Karl Lagerfeld Paris, and operates licensed brands such as Calvin Klein, Tommy Hilfiger and Levi’s, had revenue of $644.8 million for the quarter.
Despite a 2% year-over-year decline in net sales to $644.8 million, the overall tone of the earnings call was positive. G-III highlighted the success of the Donna Karan relaunch and announced a new licensing agreement for Converse.
“G-III’s brands are quality, across a range of prices, but many of them sit in the mid-price point range, which has been a challenged space within retail given consumers’ cost consciousness,” said Melissa Minkow, director of retail strategy at digital transformation company CI&T. “However, the combination of inflation coming down and a focus on a compelling product assortment could create more room for these brands, especially if they lean into digital to offer strong discounts and provide convenient shopping experiences.”
According to Minkow, “G-III’s continued strategy will be to rely heavily upon marketing investment for its iconic brands, leveraging influential celebrity ambassadors. While the brands are aligned with powerful spokespeople, it was reassuring to hear that leadership is also focused on an assortment of products that will resonate.”
Looking ahead, G-III expects third-quarter earnings of $2.20-$2.30 per share, with revenue of around $1.1 billion. For the full fiscal year, the company anticipates earnings of $3.95-$4.05 per share, with total revenue of $3.2 billion.
Executive moves
- Haider Ackermann has been named the new creative director of Tom Ford, succeeding Peter Hawkings, marking his return to fashion and earning praise from Tom Ford himself for his modern designs and sharp tailoring.
- LVMH has appointed Miu Miu CEO Benedetta Petruzzo as managing director of Christian Dior Couture, effective October 15, following her success in driving significant growth at Miu Miu.
- Fredrik Olsson, a veteran of H&M and former head of Dubai’s Max Fashion, has been appointed CEO of PVH EMEA, where he will oversee the growth of Tommy Hilfiger and Calvin Klein across Europe, the Middle East and Africa, reporting to PVH CEO Stefan Larsson.
- Barcelona-based fashion company Mango is restructuring its management team, appointing Marlies Hersbach as the new e-commerce executive director, reporting to Elena Carasso, director of online and customer relations.
- Mytheresa has appointed Amber Pepper as chief customer experience officer, effective October 1, where she will oversee marketing, brand management, communication, customer experience and top customer engagement, reporting to CEO Michael Kliger.
- Uniqlo has appointed British designer Clare Waight Keller as its new creative director, expanding her role beyond the Uniqlo: C collection to include the brand’s mainline collection, including menswear.
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