Is The Retail Industry Ready For The Booming “Chat” Economy?

Is The Retail Industry Ready For The Booming “Chat” Economy?

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Don’t search, just ask.

That’s shorthand for a profound change that is quietly but quickly forcing retailers to rethink how they market, how they structure their websites, and how to deal with the inevitable sunset of traditional search advertising.

According to reports on industry news sites, there appear to be a lot of retailers who are just now scrambling to catch up. The cost to retool websites to synch with AI is enormous. There may be a number of retailers, especially those who sell direct-to-consumers, who do not survive the transition. And it’s coming faster than most realize.

By the end of next year, the predominant way consumers will shop is expected to be through one AI platform or another. Furthermore, the interaction will not be a search, it will be a chat.

Instead of typing, “bridesmaid dress,” a shopper might tell the AI “agent” a story: My best friend from college is getting married in June on a cliff at a golf course overlooking the ocean and the color theme is robin’s egg blue and we set a budget of $150 each, etc.

That’s pretty much the same thing one might say if they walked into a bridal store, except saying it to the AI agent is like saying it to a salesperson at just about every bridal shop in the world with a website.

And just like salespeople in stores, but better and undistracted, the AI agent will ask a series of follow up questions. How many dresses? Do you have a picture of the bride’s dress to send to avoid a clash of styles? What kind of fabrics? What about shoes? On and on. It’s a conversation that ends only when the consumer decides. Unlike the store clerk, the AI agent will never go on break, never get tired of your questions, and won’t make you feel uncomfortable if you ask, “I’m a little overweight. I need a dress that will help camouflage it.”

That conversation will not be with a fashion label, or a brand—a profound change in how e-commerce that has been set up for a quarter-century. It will be with an AI agent. Currently, if you type a search for “bridesmaid dress” in a browser and you’ll get a handful of sponsored listings followed by some of the usual suspects, like Bloomingdale’s and ThredUp. Click on those links and you’re browsing one retailer’s products only, with limited filters.

The near-term future is “Conversational commerce”. The term for the AI shopping agent model.

The concept has been around a few years but is becoming one of the top concerns that retailers are spooked by and working on. Julie Sweet, CEO of consulting giant Accenture, recently told CNBC that until now the firm’s clients have been focused on the efficiencies of AI in managing operational functions.

But she said that in a recent survey, almost 80% of the C-suite execs queried said they see even bigger gains in growth, by reworking their websites to synch with AI agents, and developing their own internal AI agents. Soon, shoppers will be having conversations with brand-controlled AI agents, like the one Amazon has been developing called Rufus.

For years, Amazon and more recently Walmart have been the go-to e-commerce “search engine” or “catalog” for products. Walmart cut a deal last fall with OpenAI, one of the leading platforms, to create a conversational agent that will allow its customers to complete purchases from Walmart directly within ChatGPT.

It’s been a quarter century or so since e-commerce became possible thanks to online payment methods like PayPal. Back then, detractors dismissed it as a fad.

Today, you won’t have a problem finding retail execs who scoff at the idea that search is dying and conversational commerce is a passing fancy. Technological change is only happening faster. A year from now there won’t be many of them left who still have successful companies or perhaps offices.