Planning purchases for a special occasion like recent Super Bowl parties or Valentine’s Day celebrations might typically require consulting more than one online source — or the primary source of Google — but if Walmart has its way, that is going to change in the future.
Walmart is talking up its ability to use generative AI as a one-stop shop to search when you need to plan an event, rather than online destination to search for individual items. During a call with analysts after its February earnings, Walmart CEO Doug McMillon talked about the gen AI search capabilities in its app.
“The thing we’re most excited about that’s already happened is the way search has improved, and the way generative AI helped us really improve a solution-oriented search experience for customers and members,” McMillon said on the earnings call. “And it happened pretty quickly.”
It also adds to the questions about future use of a search engine like Google.
Walmart long ago established itself as a major tech player, successfully fending off years of anxiety over Amazon and remaining a leader in the retail space whose shares are now trading at an all-time high. The tech narrative is one the company has been spinning since it bought Jet.com, started by a former Amazon executive Marc Lore, noted Forrester vice president, principal analyst Sucharita Kodali. As a technology company, Walmart has to experiment a lot, and in the case of adding generative AI search capabilities, there’s a very low cost for failure, she said.
“It establishes them as an innovator in the space,” Kodali said. “They’re better to be a leader than a follower in their shoes. They’re operating from a position of strength.”
Experiments can go wrong, though, as happened to Alphabet recently when it launched the Gemini gen AI into the market before it was ready. In a rare public appearance, Google co-founder Sergey Brin said the company “messed up” with the launch, but he dismissed concerns about the company’s outlook.
“I expect business models are going to evolve over time,” Brin said. “And maybe it will still be advertising because advertising could work better, the AI is able to better tailor it. … I personally feel as long as there’s huge value being generated, we’ll figure out the business models.”
AI and search, shopping business model shifts
It’s not only Walmart investing in this type of search in the retail sector. Instacart’s AI-enabled “Ask Instacart” allows customers to search based on theme like dinner or date night rather than by item. Amazon’s AI shopping assistant Rufus lets people have a conversation with the platform about what they need rather than just looking for direct items. Shopify’s AI-powered “Semantic Search” helps sellers find the right items to sell potential customers, making sure their search results are more accurate.
“We’re going to see this become a norm for online retailers,” said Jacob Bourne, analyst at Insider Intelligence. “Google is anxious is about search in general, and the question this raises is will it be a death by a thousand cuts for Google Search?” Bourne said.
Kodali sees the threat in terms that are less existential. The world still relies heavily on Alphabet’s core search business for many things, and some early gen AI successes from retailers won’t change that.
“You get in the habit of using Google because you use it for everything,” Kodali said. “You use it for everything else (outside of shopping), and everything else is like 90 percent of the searches you do. So, unless Amazon and Walmart are going to get into the business of the other 90 percent of the searches, it’s not going to happen.”
Alphabet is continuing to invest heavily in Gemini, as well as more specific AI tools to embed itself inside other retail ecosystems, such as Google Cloud’s Vertex AI Search for retail, and its Conversational Commerce tools which allow companies to put virtual AI-powered customer service agents on their websites and apps. Customers of Google Cloud AI products include Victoria’s Secret, Macy’s Ikea, Lowe’s and Rainbow Shops.
Alphabet points to over 35 billion product listings from retailers on a global basis on Google, and its own AI-powered tools that make it easy to find the right one. “People shop with Google more than a billion times a day, and we’re invested in improving shopping journeys across Google as well as giving retailers generative AI tools to create great experiences for their customers,” a spokeperson said.
Traditional search engines are due for change. They suggest thousands of results based on a prompt, which people have to sort through to find the right answer. With content production at an all time high, there’s more information out there than ever, and not everything is accurate or appropriate. Advertising, especially on search products, is also the main way that companies like Google make money.
Instead of researching what to buy on a search engine like Google and then heading to a retailers’ website for those items, retailers’ generative AI can find specific answers, narrowing it down to a few choices and saving people time, while allowing companies to own the experience and build direct loyalty, rather than having to show up on the top of search results.
“Creating great customer and member experiences is our top priority, and gen AI powered search makes online shopping even more intuitive and convenient,” a Walmart spokesperson told CNBC. “A single query for a themed party can serve up relevant, cross-category recommendations, replacing the need for individual searches for each and every item. This can be a significant time saver which leads to a more positive experience.”
It’s something Google at least should be concerned about, said Stefano Puntoni, professor of marketing at The Wharton School, who is also co-academic director of an executive education course on generative AI and business transformation. “Maybe when a retailer has a powerful generative AI engine on their platform, customers don’t feel the need to go on Google at all,” Puntoni said. “Maybe they’re able to get to learn about what they need directly on the retailer’s platform.”
This also gives companies a chance to suggest more products. Brands like L’Oreal are using AI to have people try on makeup virtually, which can show the shopper items they may not have been in the market for. Digital celebrities can theoretically sell products to customers through personalized AI-enabled conversations to customers instead of a pre-programmed chatbot.
“What generative AI search does is it democratizes a lot of the opportunities now for brands and companies, who now can also create those,” said Elav Horwitz, McCann Worldgroup executive vice president and head of applied innovation.
Alphabet also owns a lot of brands that people rely on every day, and plenty of valuable advertising real estate where the results will be more relevant than ever.
“The tech companies keep on experimenting with new features every day,” Horwitz said. “Google is openly speaking about it. The SEO and SEM model is going to change. But I think we’ll probably see a lot of generative search or recommendations in other Google products like in Gmail, Google Drive, Google Photos, and YouTube.”
Read the full article here