Abstract

This case study is about the foray of French multinational personal care company L’Oréal into AI-driven augmented reality (AR) and how this impacted not only the company but also beauty retail, consumer engagement, and digital commerce. After acquiring ModiFace, L’Oréal used the proprietary AI technology to incorporate virtual try-on on its websites, e-commerce platforms, retailers, and physical outlets. The technology also improved L’Oréal’s online business as it minimized returns. L’Oréal was credited with bringing in customer-focused innovation and AI strategy to the beauty industry, and for seamlessly integrating the digital and physical channels. However, its competitors were not far behind as they had come up with their own virtual try-ons. At the same time, the use of AI / AR technology led to ethical issues about customization and privacy. L’Oréal CEO Nicolas Hieronimus (Hieronimus) needed to focus on the strategic issues related to expanding the use of the proprietary AI / AR technology and differentiate the company from competitors who were using similar technologies, address the ethical predicaments related to customization and privacy, and also re-evaluate trust, all-inclusiveness, and human connection in a virtual-first period.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Evaluate technology as a competitive differentiator and examine the impact of technology diffusion on such an advantage
• Analyze the ethical and strategic trade-offs involved in deploying AI-powered personalization in beauty retail.
• Critically assess how AI-driven virtual try-on and recommendation systems reshape frontline service roles in beauty retail.
• Assess trade-offs in prioritizing AI/AR investments across channels – e-commerce, marketplaces, retail partners, and in-store – to maximize ROI and customer impact.

Keywords

L’Oréal; AI-driven augmented reality; digital commerce; ModiFace,; customer-focused innovation; AI strategy; digital channels; technology diffusion; virtual try-on; beauty retail; AI-powered customization; Digital Transformation,