Why Revolve Can’t Stop Talking About AI

Revolve Group isn’t the only fashion retailer using artificial intelligence, but it’s a clear contender for being the most willing to talk about it publicly.

Just months after ChatGPT’s November 2022 debut, the online retailer known for its festival wear and wedding guest dresses released what it said was the first AI-generated billboard, at — where else? — Coachella. Since then, Revolve has rarely gone long without a press release, interview or activation touting a new use for the technology.

And while much of the rest of the industry has grown cautious about how it adopts AI amid a consumer backlash and uncertain economic payoff, Revolve has doubled down. In its most recent call with analysts after releasing fourth-quarter results, AI was mentioned 29 times in contexts ranging from product discovery to styling to fraud detection — almost double the references in Apple’s last earnings call.

Revolve’s full-throated embrace of AI nonetheless raises two questions: Does its implementation of AI match the talk, and is it working?

To be sure, Revolve isn’t the only fashion player embracing the algorithm. A recent UBS evaluation of major retailers’ AI integration placed Revolve in a group of 14 companies that are using the technology across every facet of their business, from trend forecasting to logistics. AI-friendly peers include Levi’s, Lululemon, Ralph Lauren, On and Macy’s.

Revolve is running in an increasingly crowded race where staying ahead of the curve requires constant investment. Its advantage, co-founders Mike Karanikolas and Michael Mente said in an interview, is an “organisational culture” of AI. In addition to top-down encouragement, the co-CEOs have turned the company into an AI sandbox. It’s an all-hand approach where the technology is being used to troubleshoot every corner of the business, big and small. Whether it’s automating emails or refining a global search algorithm, the goal is the same: Use AI to remove any friction that slows the company down.

“We’re having a field day over here,” said Mente. “The effort is coming from all over the organisation.”

The next test for Revolve is whether it can apply its AI chops in the real world. Its first permanent store opened in Aspen, Colo. in 2024, and a second in Los Angeles’ The Grove mall in January. More are planned, and the company sees physical retail as an eventual major driver of growth.

“If I move one rack from one place to another, I don’t have automated reporting to tell me, did that work?” said Mente. “I would have to ask someone on the floor … versus anytime we touch anything on the web we’d know exactly what’s going on.”

Right now, how to display merchandise or position a mannequin may be more art than science. The goal is to bridge that analog gap by building tools that apply its signature data-first, AI-everywhere approach to the physical realm.

“These are the types of things we still need to build,” Mente added.

A Culture of AI

Mente and Karanikolas met at a software company and launched their fashion e-commerce site in 2003 with the then-new idea that every customer click was a potential data point. This data-first approach led the company to launch dozens of private-label brands to fill specific gaps they saw in the market. Revolve went public in 2019, and last year, annual sales grew 8 percent to over $1.2 billion.

“It’s not like I’m looking at their code, but the senior management is very fluent in AI,” said TD Bank analyst Oliver Chen, who in a recent research note predicted investments in AI, along with international growth and new brick-and-mortar stores would “drive Revolve’s long-term growth flywheel.”

Revolve said it has incorporated the technology everywhere from targeted marketing and the design illustration process to internal research and the online user experience.

For instance, Revolve replaced its third-party service for on-site search results with an internally developed programme that increased engagement and conversion rates by double digits. Rather than manually tagging certain attributes to a product, its AI tool automatically decodes images and tags them with the relevant metadata so that when a customer searches for a “party dress,” anything sequinned, reflective or with a short hem would come up in the results without the product being explicitly listed as a party dress.

“Even a percentage gain is a huge win normally,” Karanikolas said.

Earlier this month, the retailer tested out an internal research programme that allows employees to generate voice reports on company data — such as sales performances — akin to Siri or ChatGPT’s Voice Mode. There are several more examples of how Revolve has been able to incorporate AI to boost productivity, such as using LLMs to troubleshoot programming code errors, invoice processing and turn images into videos, according to Mente.

AI has also allowed Revolve to build more effective landing pages from search engines. Whereas before a Google ad would direct users to a specific product, Revolve has been testing new landing pages that include the specific product as well as related and recommended products.

The Curation Opportunity

While it seems simple, one of Revolve’s biggest opportunities in AI is recommendations and personalisation, according to Janine Stichter, managing director and analyst at BTIG, a financial services firm.

Predictive technology acts as a customer filter for a catalogue that exceeds 100,000 products, which could easily feel overwhelming. By relying on automated recommendations across both Revolve private labels and third-party brands, Revolve can maintain an elevated and streamlined shopping experience without devolving into an Amazon-style endless scroll.

“Part of Revolve’s differentiation for better or for worse is that they have a lot of different brands and a lot of different products,” said Stichter. “AI can lead the search and discovery process and do a better job of showing each individual consumer what they want to see.”

Currently, Revolve’s private labels drive about 20 percent of its sales, but that penetration has reached as high as 36 percent in the past. According to the company, the vast majority of customers don’t know what brands they purchase from the website, the catalyst behind the launch of its biggest, priciest private label yet this spring, Revolve Los Angeles.

Revolve’s new namesake label marks its 29th private label, and has tapped Bella Hadid to be the face. It’s also a departure from traditional private-label strategies that favour basic pieces at lower prices. Instead, Revolve Los Angeles carries striking gowns and outerwear, many of which exceed $1,000.

“I do expect it to cast a halo that will transcend to the third-party brands on the site,” Mente added, “as well as drive traffic to our stores and to the website.”

Mente and Karanikolas are confident that Revolve is seizing a competitive edge by embracing the technology holistically.

They have competition on that front. On Wednesday, Macy’s chief financial officer Thomas Edwards said on an earnings call that the department store operator saw “significant opportunity to leverage AI throughout the organisation.” And at a conference last month, a Nordstrom executive spoke of using AI extensively in procurement.

Building the Revolve Brand

Ultimately, Revolve’s success comes down to the customer experience, and AI is simply one tool towards its objective of making shopping simple and seamless for shoppers. Its high returns rate is case in point. Fast, free returns are baked into Revolve’s margins, and give consumers a sense of safety at a time when many other retailers have pulled back from offering free returns.

Convenience, combined with its vast assortment of products, both third-party and private-label, has allowed Revolve to become a leader in Gen-Z retail, according to Chen.

“They have the best brands and kept up with desirability,” he said.

In many ways, Revolve is now stepping out from behind the scenes to build its own brand. Revolve Los Angeles plays a critical role in this endeavour, as does retail.

In addition to building out its biggest owned label yet, Revolve is expanding its physical footprint with potential new stores on the East Coast this year. On the technology front, an emphasis on continued innovation means pouring savings generated by its current AI implementation into even more AI research. Its speed of innovation, the CEOs said, is only increasing.

“Fast-forward six months from now, you’ll see a different organisation,” said Mente.