Meet retail’s new sustainability strategy: Personalization

We have been raised to believe in recycling, but it has mostly been a sham — only 9% of all plastic waste produced in 2018 was recycled. The beauty industry produces over 120 billion units of packaging every year, little of which is recycled. Globally, an estimated 92 million tons of textile waste ends up in landfills.

Reducing waste is key to meeting environmental milestones, and some retail firms have narrowed in on a unique approach to minimize what their customers throw away: personalization. Accurate personalization can guide consumers to the right products, reducing waste while increasing conversion and loyalty.

For big brands and retailers, personalization is expected to be the top category for tech investment this year. Moreover, personalization holds high appeal, with 80% of survey respondents indicating they are more likely to do business with a company if it offers personalized experiences and 90% indicating that they find personalization appealing, according to a survey by Epsilon.

Startups that deliver sustainable personalization solutions that also improve business for retailers and brands fall into three categories:

• AR virtual try-on with shade matching.
• Advanced virtual fitting rooms with VR/AR for fashion.
• Smart packaging with IoT and distributed ledger technology.

AR virtual try-on with shade matching

Faces are easy to map, since it’s not difficult to virtually place a lipstick color on a face, but using AR and AI to recommend skin-tone-matching makeup products has been challenging for many AR virtual try-on companies. “I’ve been searching for an intuitive foundation-shade-finder tool since launching Cult Beauty in 2008, and nothing has lived up to the experience of having a professional match you in daylight until I discovered MIME,” says Alexia Inge, co-founder of Cult Beauty. “There are so many variables like light, skin tones, prevalent undertones, device, screen, OS, formula density, formula oxidation, as well as preferences for coverage levels, finish, brand and skin type,” she says.

MIME founder and CEO Christopher Merkle said, “Virtual try-on has exploded in the past few years, but for color cosmetics, the technology doesn’t help solve the primary customer pain point: shade matching. From day one, I decided to focus our company’s R&D efforts exclusively on color accuracy. I want to make sure that when the consumer receives their foundation or concealer in the mail, it’s the perfect shade once applied to their skin.”

MIME’s Shade Finder AI allows consumers to take a photo of themselves, answer a few questions, then get matched with a makeup color that pairs with their skin tone. MIME helps retailers and brands increase their online and in-store purchase conversion by up to five times. More than 22% of beauty returns are due to poor customer color purchases, but Merkle says MIME can get returns as low as 0.1%.

The company plans to introduce a guide to inclusive skin tones (GIST) color handbook, akin to a Pantone standard to provide insights for brands to determine which shades will perform best, and for retailers to order the correct shades for their stores at a local level. Licensing GIST scores and ratings to brands will let consumers easily identify their shade matches across brands. MIME has already signed on leading retailers and brands, including Charlotte Tilbury and Cult Beauty, which was acquired by the Hut Group last month.

Last month, L Catterton-backed Il Makiage acquired Voyage81, a 2-year-old Israeli deep tech AI-based computational imaging company, for $40 million. In its acquisition announcement, Il Makiage said, “Voyage81’s algorithms extract 31 channels of hyperspectral information from RGB images taken with existing smartphone cameras with 98% accuracy. Its software is capable of mapping and analyzing skin and hair features, detecting facial blood flows, and creating melanin and hemoglobin maps from a simple smartphone camera photo.”

At the time of its acquisition, Voyage81 had just raised its Series A led by True Ventures, Next Gear Ventures and Maniv Mobility.

AI-powered virtual fitting rooms

In 2020, over 60% of consumers bracketed their purchases (they bought multiple sizes to try and returned those that didn’t fit). This led to increased return rates of 15%-40% on average for apparel, and 80% for women’s dresses purchased online. The lack of standardization of sizing between brands and even within a single brand with different SKUs is a big problem.

While many companies offer virtual try-on and size recommendations for apparel across brands, most ignore the interplay of the 3D properties of garments and the shape of the consumer’s body. They offer visualization options by pasting over a flat image file only, but showing a flat image or comparing sizes doesn’t consider differences in construction or fabrics used (such as jersey versus silk), which make a significant difference in how a garment fits, drapes or works with a consumer’s skin tone.

Perfitly is a virtual reality/augmented reality and AI-powered virtual fitting room solution integrated into the e-commerce platforms of major retailers. It lets consumers make purchasing decisions by taking the guesswork out of size selection. With just a few photos or measurements, customers can create their virtual avatar that is over 97% accurate, allowing them to see how each garment will fit and look on their body.

The startup’s 3D visualization allows consumers to zoom in and out and size up or down, catering to different fit preferences. While the solution was developed to build shopper confidence, it acts as a solution for businesses and consumers alike. The company built its platform by aggregating a large amount of data on design, size allocation and body shapes.

The increase in online shopping has boosted demand for its service, helping Perfitly land several publicly traded retailers as clients. “We expect to double or triple our number of clients by the end of this year,” says co-founder Raghav Sharma. According to Sharma, Perfitly has reduced returns by 64% and increased clients’ conversion rates by 80%.

The global virtual fitting room market is expected to more than double from $3 million in 2019 to $6.5 million by 2025. While some retailers are working with companies such as Perfitly or Apple’s ARKit (for iOS applications), others are creating their own virtual fitting room software and/or acquiring companies.

Amazon in 2018 patented its own “blended-reality” mirror, which works using augmented reality. The patent was published about three months after Amazon acquired Body Labs for $50 million-$100 million. The New York-based startup, which makes 3D body scanning technology for advancing virtual reality applications, was founded in March 2013, according to CrunchBase, and had raised $13.2 million across two investment rounds — closing an $11 million Series A in November 2015.

In May 2021, Walmart acquired Israel-based virtual fitting room start-up Zeekit for an undisclosed amount. Zeekit had only raised about $9 million before being bought.

Smart packaging with IoT and distributed ledger technology

The beauty industry manufactures 122 billion single-use sample sachets annually, very few of which are recyclable. The industry now needs to satisfy the digital, green consumer and change the nature of its relationship with consumers from being transactional to an engaging and personal one. Reusing packaging designed to last will create a huge impact over time.

Szentia provides a B2B service that uses AI, IoT and distributed ledger technology to co-design reusable tokenized smart packaging with its retail customers. It also includes a smart hair and skin analyzer, a brand platform and a consumer app.

Founder and CEO Ignacio Longarte says, “The experience is all under a fair digital exchange, because the vision under our technology is that the consumer is willing to voluntarily and intentionally share data against not just product sales, but something meaningful.”

According to Szentia, net environmental savings can come up to a 71% reduction in brands’ carbon footprint and 50% lower water footprint. So far it is the only platform that tracks the packaging journey from factory, distribution, use and reuse to recycling. Szentia also provides personalized beauty recommendations, content, a smart coach in the bottle/flank (helpful for measuring product) and a loyalty plan. So far, it has signed two beauty conglomerates and a pro beauty salon chain as early customers.

To solve the world’s sustainability challenges, we must leverage expertise from across a broad spectrum of sectors and industries. We need creative-systems-level thinking that cultivates innovation in sustainability. Tech-enabled personalization is one such innovation that provides a more mindful consumer experience, which is key to reducing packaging waste, overconsumption and bracketing.