For retailers, the changes may prove more painful not in terms of sales, but in terms of profit, reports Investing. If a customer entrusts the search for a product to an AI agent, the agent can select an offer based on price, specifications and delivery terms, without showing the user the shop’s usual advertising results.
This poses a problem for the retail advertising business. Today, retail chains generate significant revenue from promoting products on their websites and apps. An AI agent can simply bypass such advertising offers and select products based on other criteria.
That said, UBS does not yet expect this to have a serious impact on the retailers’ revenue itself. People will continue to buy goods, but the way in which they find the right product and retailer may change.
The bank highlights Walmart, Target, Costco, Home Depot, Lowe’s and Kroger. What they have in common are advantages that an AI agent is able to take into account when selecting a retailer: scale, prices, logistics, product range or services.
Walmart is among the companies that can draw on several of these advantages at once. The scale of the business, well-developed logistics, low prices and a wide product range remain important regardless of whether a customer comes directly to Walmart or is directed there by an AI agent. At the same time, according to UBS, the company’s main task is to protect its advertising business and other high-margin sources of revenue.
Target will face the same shift. If AI starts to compare retailers’ offers independently, the advantage will go to retailers capable of consistently offering a good balance of price and quality. For Target, this raises the question of how to maintain sales without losing advertising revenue.
Costco can rely on its membership model, scale and pricing power. These characteristics fit well with the new way of selecting goods: it is easier for an AI agent to compare a specific offer in terms of price and value to the customer than to take traditional advertising into account.
For Home Depot and Lowe’s, another aspect of their business is key. Buying DIY products often doesn’t end with simply selecting the right item online. Customers may need advice, technical assistance or installation. Therefore, services and expertise remain an advantage that is harder to reduce to a simple price comparison.
The situation is different for Kroger. Grocery shopping lends itself particularly well to automation: an AI agent can remember a customer’s usual shopping basket and assist with regular orders. However, fresh produce, the need for rapid collection and reliance on the physical infrastructure of the shops limit the scope for full automation.
For now, this is more about the beginning of change than an established market. However, for the retail sector, the point of contact with the customer is undergoing a fundamental shift. Whereas previously a shop would strive to ensure that a customer visited its website specifically, in the world of AI agents, a query may first be directed to the algorithm, and only then to the shop. And it is precisely this, according to UBS, that has the potential to transform not only the customer journey, but also the economics of the entire retail sector.
This story was translated with the assistance of artificial intelligence.The translation was also reviewed by the Logos Press editorial team.
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