AI Is Transforming Retail. These Companies Lead the Way.

The Rise of AI in Holiday Commerce

AI chatbots are set to revolutionize the way consumers shop during this year’s holiday season, marking a significant milestone for artificial-intelligence technology. As retailers and consumers embrace this innovation, the potential for billions in commerce is becoming increasingly clear. While full agentic commerce—where AI tools handle everything from finding merchandise to placing orders—is still in its early stages, the influence of AI is growing rapidly. This shift promises new commercial opportunities for brands and a more personalized experience for shoppers.

A recent survey by Salesforce revealed that 57% of respondents who use AI plan to rely on it for gift inspiration this year. The company predicts that AI will drive $263 billion in global online holiday sales, with $51 billion coming from U.S. holiday sales alone. This would account for about 18% of total e-commerce revenue. AI has already played a significant role in directing shopping activity during the 2024 holiday season, with traffic from generative-AI sources increasing by 1,300% year over year, according to Adobe analytics.

Adobe anticipates another dramatic increase in AI-generated holiday shopping activity this year, as consumers become more comfortable with the technology and its recommendations. Referral traffic to brand and retail websites from generative-AI sources such as ChatGPT and Perplexity rose 1,200% just in October compared with the year-ago period.

For retailers, advertisers, and investors, this marks a fundamental shift away from traditional search engines. This change could reroute consumer spending and create winners and losers during the holiday season and beyond. Companies that adapt their marketing strategies quickly will benefit, while those that lag may struggle in both the short and long term. Early data suggests that AI referrals lead to better purchase rates and could potentially shift e-commerce market share.

“While we are in the top of the first inning, we believe agentic commerce has the potential to fundamentally change how consumers shop and retailers sell online,” said Yun Kim, an analyst at Loop Capital.

A survey by Menlo Ventures found that 61% of U.S. adults used a generative-AI tool in the past six months. Top use cases included writing emails, conducting research, managing expenses, and shopping. AI users in the Salesforce survey reported that the technology provided better personalized product recommendations, eliminated tedious product research, and helped them compare prices and stay within their budgets.

New shopping initiatives from OpenAI suggest that the company is betting on AI playing an even bigger role in the shopping experience. On Monday, OpenAI introduced a new shopping research tool aimed at making it easier to compare products, specifications, and prices. Earlier in the fall, OpenAI announced partnerships with Shopify, Etsy, Target, and Walmart, allowing users to buy products directly via ChatGPT. This move indicates that OpenAI aims to guide users through the entire purchase process, from investigation to checkout.

However, this may not be the top use case for AI during this holiday shopping season. The function hasn’t been fully rolled out yet, and the platform’s checkout process remains clunky, allowing people to purchase only one item at a time. Retailers also face challenges connecting their loyalty programs to third-party AI search platforms, and data insights remain difficult to obtain.

“Right now, you can check out only one item [per ChatGPT AI-guided transaction], so I don’t think any of us is making the investment until there is more than one item, one checkout,” said Rachel Levy, chief operating officer of Brooklinen. “It would diminish the brand experience, and it may create customer confusion.”

Despite these challenges, companies like Brooklinen are strategizing to capitalize on the growing interest in AI. The company is trying to understand how to cater to new users that AI is funneling to its website and ensure its products are featured when people ask AI chatbots for recommendations.

Many other companies are also grappling with the issue of discoverability. “We are trying as best as possible to make sure we have the content that AI is ‘crawling’ for,” said Vince Adams, chief financial officer at Everlane.

While the number of AI referrals still pales in comparison to traditional paid and organic search and email advertising, Adobe found that once AI sent consumers to a retail site in October, those shoppers were 16% more likely to make a purchase compared with referrals from non-AI traffic sources. They also spent more time on a retailer’s website and generated more revenue per visit.

Tiffany Yeh, managing director and partner at Boston Consulting Group, says optimizing a retailer’s website for AI is key. That means having clear product titles and descriptions that large-language models can easily pick up. Another important element is ensuring that products are recommended by independent third parties online, including through product reviews, social-media suggestions, or editorial content.

Most companies are just starting to define their AI strategies, and until they do, referral traffic is up for grabs. Smaller, digitally native brands such as Everlane and Brooklinen may have an opportunity to capture market share from bigger, well-capitalized companies that have dominated e-commerce in the postpandemic years.

“It’ll be interesting to see if there is a spreading of the traffic and referrals away from some of the bigger players in the fourth quarter, as some other players are being surfaced within these platforms,” said Ben Parkes, head of Americas, advisory services at Similarweb.

But don’t count the titans of retail out just yet. Their scale is a competitive advantage, giving them resources to invest in AI efforts. Many, including Walmart, Lowe’s, and Home Depot, have been experimenting with their own AI search functions, which may position them to integrate their systems and data with third-party search platforms such as ChatGPT or Perplexity.

Analysts have praised Etsy and Shopify for their active embrace of agentic commerce, with Shopify emerging as a standout in AI adoption. The company has long provided merchants with multiple automated tools across its platform and is now “the default e-commerce platform,” says Anthony Chukumba, an analyst at Loop Capital.

Shopify’s AI suite includes tools that enable AI agents to search for and gather product data, add items from multiple Shopify stores to a single cart, and check shoppers out via the AI interface. The company declined to comment, pointing Barron’s to its previous comments on agentic commerce. “It’s still obviously very, very early, but what we’re really trying to do is [lay] the rails for agentic commerce,” said President Harley Finkelstein on Shopify’s November earnings call.

As Shopify and others lay the groundwork for an open-agent ecosystem that drives traffic, one important player is taking a more cautious approach to large-scale integration. It could alter the nature of long-term AI adoption. Amazon.com, which operates its own AI agent, Rufus, is betting on a more selective approach in a bid to retain control over the customer shopping experience and the company’s data—and encourage adoption of its own agentic capabilities.

Amazon recently sued Perplexity to prevent it from allowing its agent to make Amazon purchases for users, alleging that its AI agent had “degraded Amazon customers’ experience” and presented a cybersecurity risk to client data. In a blog post following the filing, Perplexity said Amazon’s resistance stemmed from the company’s desire to “sell more ads right now and partner with AI agents designed to take advantage of users later.”

Perplexity couldn’t be reached for comment. Amazon directed Barron’s to the company’s Nov. 4 statement about Perplexity, which said, in part, “We think it’s fairly straightforward that third-party applications that offer to make purchases on behalf of customers from other businesses should operate openly and respect service provider decisions whether or not to participate.”

Amazon CEO Andy Jassy said on the company’s third-quarter earnings call that while Amazon expected to partner with third-party agents “over time,” it would do so in a way that didn’t affect the customer experience.

While it may be months before there is a ruling on Amazon’s lawsuit, filed in U.S. District Court in northern California, the filing itself tees up the next battle in agentic commerce: Who gets to control the shopping experience—AI agents, or retailers? And, who gets to monetize the insights that AI gleans?

Digital advertising driven by customer data has become a major profit source for companies such as Amazon and Walmart. These retailers may be reluctant to let AI companies in on such profits. Most AI agents such as ChatGPT don’t offer sponsored ads yet, but it’s just a matter of time before they do, says Todd Parsons, chief product officer at digital advertising firm Criteo. The firm and its clients are already exploring how to advertise successfully on AI platforms.

Consumers can expect to see AI technology integrated into many more retail applications and experiences this year, as companies lay the groundwork for the next iteration of e-commerce. Shopping may never be the same.