Christmas shopping – some love it, others find it a pain. This year, for the first time, many of us will outsource the annual task of coming up with gift ideas to artificial intelligence.
Traditional internet searches, social media, especially social media such as TikTok and Instagram, and simply strolling down your local high street will continue to be the main routes to buying presents for most people this year, but around a quarter of people in the UK are already using AI to find the right item, according to PricewaterhouseCoopers.
For brands that appeal to young people, the revolution is well underway. According to rival advisory firm KPMG, as many as 30% of shoppers aged 25 to 34 use AI to find products, compared to 1% of shoppers aged 65 and older.
Rather than typing “whiskey” or “socks” into Google or DuckDuckGo, asking a large-scale language model (LLM) like ChatGPT or Gemini what your father-in-law should buy you might seem like a small change in your habits. But this represents a big change for retailers accustomed to paying search engines to advertise their products.
LLM allows users to ask questions in conversational language, such as speaking into a computer or phone. Rather than simply providing a list of links, we provide specific suggestions for regularly recommended items that can generate big sales.
Chatbots generate responses by scraping the internet and built-in datasets to retrieve relevant information. Some sources are given a more trustworthy status than others.
Companies large and small are scrambling to adapt to this new world. Here, the importance of keywords and ad deals, which have traditionally been central to web marketing, becomes less important than reviewer opinions, accurate inventory information, and product details read by LLMs such as OpenAI's ChatGPT, Google's Gemini, and Meta's Llama.
While this shift may create a path for independent businesses to move online, some big brands fear they will be lost in the wild west, where there is no clarity on how to reach consumers. In addition to appealing directly to shoppers, marketers need to appeal to AI bots as well.
“Retailers can’t pay to participate in search; they have to earn it,” says Emma Ford, director of digital transformation at PwC UK. “Experience, expertise, reliability, trustworthiness [of a brand online] Help. Sentiment on the internet is very important. ”
Several major UK retailers told the Guardian they already have teams working on this and are considering a range of tactics, from ensuring they appear on Reddit forums, a key source of information for some platforms, to responding to reviews on Google and Trustpilot, to ensuring AI models have access to the correct product data.
While some say private LLMs are becoming more cautious with their resources as there are signs that they may disappear just as quickly as they emerged, this new way of interacting online is likely to be here to stay.
Nickel Raisata, CEO of online card and gift retailer Moonpig, says that while AI search is relatively less relevant for businesses this year, his company is well prepared for rapid change.
He said Moonpig uses generative engine optimization (GEO) techniques in its content, discussion boards and YouTube videos, including “online content discussing the best way to make someone happy on Mother's Day,” to ensure its products are featured in AI searches. He added: “The science around this is evolving and we're all learning.”
Ford said companies are still navigating the finer points of how technology discovers and responds to their online presence. For example, while it's clear that online reviews are a factor in AI decision-making, it's not clear how much weight a particular platform is given or how it ranks compared to other factors such as reliable availability data, brand longevity, and secure payment options.
Suppliers that have been around longer and have a wider profile may come to the fore, but a long history of ups and downs may also hurt them.
“I think AI will transform retail over the next 20 years,” says Peter Lewis, managing director at John Lewis. He argues that while established brands like his can benefit by implementing technology for online sales and gaining a strong reputation, shoppers may find themselves stocking products previously thought to be available only in specialty stores.
In the future, industry watchers believe ChatGPT, Amazon, and Google will likely seek to monetize their AI platforms with some form of paid search or featured advertising.
More sophisticated “AI agent” models are also being developed. It is a bot that can autonomously perform complex multi-step tasks such as finding the best deals, placing orders, and arranging deliveries.
For example, these digital secretaries may be able to negotiate tailored offers for specific customers, such as bulk purchases of furniture purchased from various retailers during a move, customized to budget, style and delivery preferences, according to advisory firm McKinsey & Co.
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This could allow retailers to change product prices in their systems to attract specific searchers.
The AI agent may also be responsible for arranging the return of unwanted items. One person acts on behalf of the shopper and the other person acts on behalf of the retailer.
However, such technology has potential pitfalls. Retailers need systems that can handle a potential flood of inquiries and clear rules about who is responsible for glitches, such as unwanted purchases made by bots.
In the US, online marketplace Etsy first partnered with ChatGPT to enable payment for items through LLM's instant checkout service. E-commerce platform Shopify and retailers Walmart and Target quickly followed suit. While these deals don't seem to prioritize your products in search, adding a “buy” button to your products could give you an edge over others.
Anna Bancroft, a partner in PwC's digital transformation team, said current UK rules make it impossible for AI bots to shop on behalf of humans, and that regulations would need to change for such systems to operate without human oversight. She says retailers and shoppers are wary of giving robots access to customer data or processing payments.
There are also concerns that agents are susceptible to manipulation, as Microsoft discovered in research simulations. Meanwhile, tech retailers are becoming territorial over who can crawl whose data.
Last month, Amazon sued AI company Perplexity over a shopping feature that automates orders for users. Amazon accused the startup of secretly accessing customer accounts and masquerading AI activity as human browsing. Perplexity defended users' right to delegate shopping to AI agents and called the lawsuit a “bullying tactic to stifle competition.”
In this rapidly changing landscape, Ford suggests independent retailers may have a chance to shine. “Independent companies have the potential to move more quickly,” she says, and have the ability to be nimble without signing off on large budgets.
Michelle Ovens, founder of Small Business Britain, which advises independent retailers how to survive in a changing high street, agrees. “[Independent businesses] You don't necessarily have to spend a lot of money. “You don’t necessarily need a big team,” she says.
Ovens advises local merchants to ask the AI platforms themselves how best to ensure visibility. “Make it clear who you are,” she says, with a description that makes it clear that you're an independent specialist, an up-to-date photo, and “encourage customers who have experienced your brand to leave a good review.”
But all of this shouldn't take precedence over making the website attractive and easy to shop, Ovens added. “There will not be dramatic changes this Christmas. We will see changes over time and carriers will rise to the challenge.”
