Some high-end retailers race to use AI to drive sales, while others remain wary. 

Artificial intelligence (AI) is no longer a futuristic concept in the luxury fashion world. Instead, it’s increasingly table stakes to compete. As brands move from pilot projects to full-scale AI adoption, the legal landscape grows more complex. Clients demand hyper-personalized journeys, immersive virtual try-ons, and instant insights, while regulators expect rigorous governance and accountability. Understanding the legal implications of these innovations is essential for any brand navigating this evolving space.

Balancing exclusivity and privacy in AI personalization

AI-driven personalization now sits at the heart of luxury clienteling, powering everything from product recommendations to dynamic content and real-time support via virtual stylists and chatbots. Brands can analyze customer data, preferences, and purchase history to deliver experiences that feel bespoke and exclusive. This level of personalization relies on collecting and processing customer personal information. Surveys reveal that while luxury shoppers crave tailored experiences, they remain wary of sharing personal information – especially images – due to concerns about data breaches and misuse. 

To address these concerns, brands should (and in some jurisdictions must) build robust data privacy consent mechanisms that allow for granular, revocable permissions and clear opt-outs. To ensure compliance with applicable, comprehensive data protection laws, such as the California Consumer Protection Act (CCPA), and the EU General Data Protection Regulation, data flows should be mapped, and data should only be collected as necessary to provide the personalization services. Regular audits of AI models help ensure that personalization does not result in unlawful profiling or discrimination, particularly in regions with strict data protection laws. Data minimization and defensible retention schedules are critical, as is careful vendor management. Contracts for AI and Software as a service (SaaS) solutions should specify data ownership, processing purposes, localization, and subprocessor rights, while also requiring high security standards and prompt breach notification. Aligning Customer Relationship Management, analytics, and retail systems to a unified privacy posture can improve both compliance and customer experience, especially as many luxury clients report feeling under-recognized across channels. 

A landmark example of the risks of failing to meet these standards, the first ever CCPA enforcement action was a $1.2 million settlement with a beauty retailer in August 2022. The complaint accused a beauty retailer of failing to disclose consumers that it was selling their personal information and failing to process user requests to opt out of sale via user-enabled global privacy controls in violation of the CCPA. Although the CCPA has been amended since this enforcement action, the essence remains the same: brands must maintain accurate disclosures in its privacy policy, provide mechanisms for consumers to opt out of the sale or sharing of their personal information (including by recognizing Global Privacy Control), and must ensure that there are appropriate contractual provisions in place with service providers.

Virtual try-ons and augmented reality: Innovation meets biometric regulation 

The rise of AI-powered virtual fitting rooms and augmented reality applications is transforming the online luxury shopping experience, allowing customers to try on clothes and accessories virtually to improve fit accuracy and reduce return rates. For example, luxury brands such as Cartier (behind a paywall) provide customers with augmented reality try-on experiences for jewelry, and Google’s latest virtual try-on tool allows users to upload personal photos for garment visualization at scale. However, some tools may process biometric identifiers or other personal information considered sensitive and are subject to heightened legal scrutiny. 

Facial geometry, body measurements, and similar signals may be treated as biometric data subject to biometric laws, such as those in Colorado, Texas, and Illinois, and require written consent, clear disclosures, and strict retention policies. Brands that prioritize transparent and layered consent flows that explain the purpose of personal information processing, offer alternatives for those who prefer not to upload photos, and even implement instant deletion protocols (e.g., Zara’s “Size Recommender” tool that doesn’t require account log-in and has a “Delete My Information” option after users input body measurements and receive a recommended size) increase consumer trust in tools while decreasing regulatory exposure. Additionally, security is paramount: data should be encrypted at rest and in transit, training pipelines should be isolated, and contracts must prohibit secondary uses. For children and other sensitive contexts, heightened protections are essential. Offering privacy-first try-ons using avatars or model surrogates can also increase adoption. 

Looking ahead: Building trust and defending brand value 

Recent developments highlight the need for a proactive legal approach. Client expectations continue to rise, with many luxury shoppers dissatisfied with current experiences. AI can bridge this gap, but only if it enhances the human touch and respects privacy. Adoption will hinge on trust. 

Our team advises on AI product counseling, including SaaS agreement drafting and negotiation, compliance with biometric and data protection regimes, and global transfer strategies across the luxury value chain. If you plan to scale AI, now is the time to align your legal stack to ensure innovation can move forward with confidence and speed.