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Daydream, Constructor AI and Zalando. Will they redefine Fashion Retail?
The Niche Market of AI led search discovery. [Data Backed Insights]
The Opportunity Scanner
January 18, 2025
What's Making Fashion Shopping So Overwhelming, and Is There a Fix?
Shopping for clothes has become overwhelming – there are just too many choices out there! It's not just shoppers who are feeling the strain; fashion brands are struggling too.
So what’s changing? In 2025, fashion industry leaders are turning to AI for help, with half of them focusing on making it easier for customers to find exactly what they're looking for.
And they're onto something – more than 8 in 10 shoppers say they'd love AI's help to cut down on endless browsing time.
The search struggle is real: while 69% of shoppers start their journey at the search bar, a whopping 80% end up frustrated with the results.
Smart retailers like Asos and Revolve are leading the charge against choice paralysis. Asos has even cut back their stock by 30% compared to last year. And guess what? It's working! Shoppers are more engaged, and finding what they want is becoming less of a headache.
We’re officially testing a new beta feature: the ASOS AI Stylist. Using generative AI, it’s an interactive assistant that can help our customers discover fashion that meets their unique personal style and preferences 👗 👟 #InsideASOS#GenerativeAI
— ASOS news (@ASOS_news)
3:23 PM • Feb 5, 2024
How Are New AI Companies Transforming Fashion Retail?
Who’s capitalising on this painful problem you ask? Some exciting new AI companies are completely changing how we shop for clothes.
Constructor is making serious waves – they're now worth a cool $550 million! How did they do it? By making product search seriously smart with AI.
Big names like Under Armour and Birkenstock jumped on board, and wow – they've handled over 100 billion customer interactions in just six months. Some brands have even seen a 20x ROI after implementing Constructor’s AI Product Search. Talk about a shopping spree!
Read More: Constructor AI Financing
Then there's Daydream (love their domain name) – the new kid on the block with some serious backing ($50 million in seed funding!). What makes them special?
They're blending generative AI, machine learning, and computer vision to create super-personalized search results. Luxury brands are loving it – Alo Yoga and Jimmy Choo were among the first to try their beta launch in late 2024.
Read More: Daydream secures $50M Seed Fund
Remember Shazam for music? Well, Capsule is like Shazam for fashion! This clever Y Combinator startup crunches through 20,000 data points every day to help you find exactly what you're looking for.
How well does it work? During their launch week, they matched 99% of user images to shoppable items – pretty impressive, right?
Capsule's new beta feature lets you search for clothes using concepts – just type in "simple white t-shirt" or even "Carrie Bradshaw-inspired dress" and let AI do the work. Looking ahead, they plan to share these search insights with brands to inspire future designs.
So what industry shifts are we looking at?
Source: McKinsey & Company
Are Multi-Brand Retailers Sleeping on this?
Let's peek behind the curtain at what Zalando and Alibaba are cooking up:
Source: McKinsey & Company
Zalando's AI Fashion Revolution: They're not just playing around – they've launched a super-smart AI shopping assistant (powered by ChatGPT) that's already helping 500,000 shoppers discover new styles.
But that's not all – tools like Zalando Stories and Trend Spotter keep tabs on fashion trends in real time.
Plus their clever acquisition of Highsnobiety is bringing in 7 million new fashion enthusiasts, Zalando is transforming from a simple retailer into the ultimate fashion destination.
Zalando Trendspotter
Alibaba's AI Game-Changer: Meet Wenwen, their revolutionary AI chatbot that doesn't just talk – it shows you what you're looking for through text, images, videos, and audio.
During their massive 11.11 shopping festival in 2023, it handled an incredible 1.5 billion interactions!
The result? An impressive 30% boost in click-through rates, proving that shoppers really do love that personal touch.
2 Startup Ideas in this space that you can start with minimal investment:
Trend Prediction Newsletter for Small Brands | |
|---|---|
Problem | Small fashion brands can't afford expensive trend forecasting services but need to stay competitive |
Solution | AI-powered newsletter that aggregates and analyzes social media, search trends, and retail data to predict upcoming fashion trends for specific niches |
Revenue Model | Tiered subscription model with different levels of trend detail and frequency of reports |
TrendPulse AI | |
|---|---|
Problem | Fashion brands are missing out on revenue by being too slow to spot and capitalize on emerging style trends across social media and search data. |
Solution | An AI-powered trend detection engine that monitors millions of social media posts, search queries, and e-commerce interactions in real-time to identify micro-trends within hours (not weeks), automatically matching them with manufacturers' existing inventory or providing rapid production specifications. |
Revenue Model | Monthly SaaS subscription ($2,000-$10,000 based on brand size) plus premium real-time alerts for viral trends ($500 per alert) and trend-response strategy consulting ($15,000 per quarter). |
Thanks for reading! Stay tuned for the next edition, where we’ll dive into more complex insights and uncover fresh investment and startup opportunities to keep you ahead of the curve.
This Edition was based on McKinsey’s Report Titled “State of Fashion 2025”
