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Suzy Davidkhanian (00:00):

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(00:21):

Hi, everyone. Today is Wednesday, April 1st. Welcome to EMARKETER's weekly retail show, Reimagining Retail, an EMARKETER podcast made possible by Rokt. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Suzy Davidkhanian, and on today's episode we're breaking down Shoptalk. But beyond the headlines and recaps, we're going to go deeper into a few key ideas coming out of it, especially the three emerging consumers retailers need to consider in the age of AI. Joining me, we have senior analyst Carina Lamb, all the way from the UK. Hey, Carina.

Carina Lamb (00:55):

Hi, Suzy. Great to be back on.

Suzy Davidkhanian (00:57):

Thanks so much for joining us. I'm sorry it's been so long. We'll have to have you on much more often. Be ready.

Carina Lamb (01:03):

I would love that.

Suzy Davidkhanian (01:03):

And we have principal analyst, Sky Canaves, who's back in Texas after a whirlwind trip to Vegas, where she also got to present on this very topic. Hey, Sky.

Sky Canaves (01:12):

Hey, Suzy. It's good to be back home, and good to see you.

Suzy Davidkhanian (01:15):

We're so excited to hear all about Shoptalk. It wrapped last week, which means that there was no shortage of recaps, from big announcements to buzzy themes. It really was everywhere I was looking, so probably you too. We have to start there as well, but let's do a little more than hot take style with a quick take on what actually stood out to you, Sky, the moments offstage that had you thinking.

(01:37):

And that's where this conversation really starts to get interesting, because what Sky presented builds on one of our trends to watch and her latest report on the next era of retail. It's this idea of three consumers in the age of AI and what retailers and brands really need to do now to show up and stay competitive. So Sky, let's talk about Vegas. There was a lot of FOMO on LinkedIn, I contributed to that rhetoric. Tell us, what was one aha moment on stage that stuck with you?

Sky Canaves (02:04):

I think a big one was really not just a single onstage moment, but more around how this year's conference was conceived and the new formats it deployed to kind of bring that to life. So, the big headline theme, the title for this year's conference was AI in retail, because of course we can't spell retail without AI anymore. And I think a big difference I noticed from Shoptalk in the fall was that there people were kind of like, oh, they would talk about AI in a presentation say, "Oh, now is when we're talking about AI. Or look, we made it 20 minutes without mentioning AI."

(02:40):

And this year it was really front and center. But with all of the rapid pace of developments we've seen over the last just even ... Since the last Shoptalk in September, there's so much uncertainty. There's been so much upheaval around AI. And I think a really great thing that the organizers did this year was to kind of bring that to life with debate formats, kind of acknowledging that there are different perspectives from some of the smartest people in retail. So, they pioneered some debates. Our colleague, Sarah Marzano, was up in the first debate that they put up. They also had shorter formats, what they called the Retail Rumble, which was head-to-head individuals in a rapid fire, very entertaining way.

(03:23):

So, this really helped to kind of show just how different the perspectives are and how people are supporting their perspectives and then hopefully help those in the audience make up their minds, or at least understand the different lines of thinking. Because I think in so many conferences we go to, we're used to seeing leaders and chief executives or C-level executives present what they know. And it seems very definitive and like they're doing a great job. And sometimes they really aren't, as we see in results later, so this was really refreshing.

Suzy Davidkhanian (03:55):

And it sounds like it was about multiple perspectives on the same idea. And a couple of weeks ago Blake and I co-hosted the Media Summit, the virtual one that EMARKETER planned. And even there one of the folks who was speaking said something like, "There are many more questions than there are answers." And it sounds like Shoptalk did that too, right? They brought up all these questions with lots of different perspectives and that had you thinking like, "Oh, it could be this and this and maybe these two tension points can coexist, and that's okay too."

Sky Canaves (04:22):

Yeah. And I took a great quote from Sarah that she kind of used as one of her strong closing arguments in her debate when we talk about how brands and retailers need to be paying attention to what's happening and investing and trying new things. And she said that everyone has to be testing and learning, but not reallocating their budget at scale until they have some proof that they're going to be able to get returns for it.

Suzy Davidkhanian (04:47):

Carina, I see you shaking your head.

Carina Lamb (04:48):

Yeah, no, I'm just agreeing with that 100%. I think the really interesting thing about AI and how quickly everything is developing is it kind of puts everyone on a bit of a leveled playing field. No one really knows exactly how it's going to unfold and what's going to happen. So, I think it's really interesting that there can be all of these different views on what might happen. And it's a really kind of interesting debate there, but I do think that point of waiting until you can prove returns before you go all in on things is a really wise bit of advice.

Sky Canaves (05:15):

But at the same time we saw some really big announcements and who's taking which side, like Gap going with Gemini and Sephora pairing up with ChatGPT, which also announced a new revamp of what it's doing with shopping, which is still kind of like nobody knows how well it's going to work. So, it's really interesting. And then Nordstrom has launched a new shopping assistant in its app at the same time, which I think is one of the really powerful opportunities for brands and retailers is with their own native assistants. We heard from Macy's chief store officer talking about how they're trying to now think of the online journey and or the online customer experience as one where they want to encourage customers to spend more time and engage more deeply online. So, it's not just in the in-person stores, but also bleeding over into online experiences, rather than having the quick transaction you go in, find what you want, and get out.

Suzy Davidkhanian (06:11):

We can talk about this forever. I think the most important thing is not only to not reallocate budgets, but also to know what you're testing for and what success looks like before you start to move things around. We often think success comes from increase in sales, but as we're going to talk a little bit further down the line, it's much more than that. It's about traffic and about just showing up in the right spot. With that, showing up in the right spot, was there a booth on the exhibit floor that surprised you, Sky? And if so, good or bad way, what was it?

Sky Canaves (06:41):

Yeah, I'm going to talk about a good way, a positive way, because I don't really have anything bad to say about everyone who is out there working so hard. But I was told to go check out Google's booth, which was mostly focused on its universal commerce protocol and the new Google shopping experiences. But in the corner they had a cookie corner. So, they had set up app iPads with nano banana and you could enter a prompt to create an image and have it very photorealistically printed on a cookie. So, they had a very fancy looking cookie printing machine. And so, I actually wound up printing a few cookies, because this was towards the end of the event, so they had some extra cookies they wanted to use up. I did a family portrait of our pets, just our two dogs and our cat, and then some other creative things for my daughter to enjoy. She wants a Chinchilla, which she's not getting a real one until she's an adult, but I put one on a cookie for her.

Suzy Davidkhanian (07:37):

Wait, I'm having a tough time picturing this. It was a piece of paper where you got to print a AI generated ...

Sky Canaves (07:42):

It was an iPad and you typed your prompt being as descriptive as possible. The prompt, there was a question like, "Imagine where you'd rather be," but they said, "Just write what you want to see on your cookie." So, you would write out-

Suzy Davidkhanian (07:56):

On a physical cookie?

Sky Canaves (07:56):

... what you want to see on a physical cookie, and they had cookies and then the icing would print out with all of the colors-

Suzy Davidkhanian (08:05):

It's like 3D printing.

Sky Canaves (08:05):

... and all of the detail. Yeah, but making the cookie picture. And it was just a reminder of kind of how AI can be a tool to bring our creativity to life. And with great personalization all of us can create cookies at the lightest.

Suzy Davidkhanian (08:24):

I love that.

Sky Canaves (08:24):

And it made me think about in the retail context, like how we could enable greater personalization for consumers where I would be able to tell my retailers, "This is what I need, this is the customization I want." And beyond that, just like things like, "How do I want things delivered? How do I want to engage with loyalty? Where do I want to get my points? How do I want to redeem my benefits?" All of these things, where when we talk about AI and retail becoming more conversational, it's not just a matter of going from three or four keywords to 30-word prompts. It's what the conversation means in that it's trying to express the thoughts and the thinking and the intent and the context that we as humans are full of and can really drive deeper engagement through creating these new kinds of experiences.

Suzy Davidkhanian (09:12):

Yeah. I'm going to leave it at that, but ask you a different related question, which is, have you guys, actually, we think about it a lot. We talked to a lot of people about it, but have you guys, I'm going to start with you, Carina, have you made a purchase using an LLM yet?

Carina Lamb (09:28):

Kind of, yes. I think I've been a very typical consumer in my habit with the LLM. So, I decided I wanted some running shoes, so I used ChatGPT to compare some different options. I went back and forth with it. But then when it actually came to the purchase, I didn't kind of purchase it straight away via a link. I went away. I went to a retailer that I know and trust. I compared some prices manually on search. I read my own product reviews, and customer reviews, and then I went and bought a pair of shoes with a retailer.

Suzy Davidkhanian (09:56):

Yeah, it's that idea of trust, critical. And we talk about that all the time. We will continue to talk about that. And it's interesting that we see it ourselves in the things we do. Sky, I know you've bought a lot of things.

Sky Canaves (10:07):

Yes. Every time a new way of buying something through an LLM is announced, I'm there to try out and see how does it work. I'm a little frustrated this week, because I know Sephora announced a ChatGPT launch and Walmart announced a new experience on ChatGPT and Gap has its announcement, and I'm looking for all of them, and I can't find a way-

Suzy Davidkhanian (10:30):

Oh, you're not part of the beta maybe.

Sky Canaves (10:31):

Maybe I'm not, or they just haven't fully launched or ... I mean, it sounded like the Sephora one was in the coming soon phase, but the Walmart one sounded like it should be here right now. And I'm calling them up. I'm like at Walmart, "Hey, let me buy something." And I'm not getting anywhere, so I'm a little frustrated, but-

Suzy Davidkhanian (10:50):

You're ahead of the curve.

Sky Canaves (10:51):

But in real life, in my non-research role, I do tend to buy things at the typical retailers that I know and trust and have the assurance that I can get things on time. And that's what we see from our research, that shopping journey still for the most part start and end on brand and retailer websites and apps.

Suzy Davidkhanian (11:10):

Then with that, I mean, you were on stage, and part of your whole thesis for your presentation at Shoptalk, and it was one of our trends for '26 was around the three consumers. What does that actually mean? And is that something that we're seeing right now, or is that much more of a future state?

Sky Canaves (11:29):

No. So, the way we conceive the three types of consumers is there's the traditional human consumer that brands and retailers have always catered to. That consumer is becoming more, as we hear on earnings calls, more discerning, more choiceful with bringing higher expectations and new expectations, both of what they're looking for online and in stores. And then at the other end of the spectrum there's this future vision of agents that are going to talk to agents and do our shopping for us and anticipate our needs and kind of have such a deep understanding of us as individuals and what we need that they'll be able to autonomously undertake a lot of our commerce activity. And that's still pretty sci-fi. And I think in the debate, Sarah made the good point that we like to shop. We like to go and touch and feel in stores. And I think more fundamentally, we want to have agency and a sense of control over our decisions and especially how our money is spent.

(12:24):

So, that is still very speculative. What we have in the middle, the big inflection point is this human AI hybrid shopper. It's an human assisted by AI tools and platforms and chatbots and shopping assistance that is increasingly looking to AI in different parts of the path to purchase. And right now a lot of that is focused on the middle. The middle of the funnel is the sweet spot for AI-assisted shopping, as Carina was talking about, doing the research, turning to AI where it's most helpful and where it adds the most value.

Carina Lamb (12:58):

I think that mid-funnel thing is really interesting, because I think AI is becoming a discovery channel. We are seeing people use it for discovery. But like Sky said, actually, a lot of the use has concentrated in that mid-funnel. So, people are still starting their shopping journeys on search engines. They're starting their shopping journeys on marketplaces. I think I saw one survey which showed that AI is kind of ranking above social now in terms of discovery, but the kind of primary way that people are using it is for product consideration, for product research, and to find really good prices and deals, which as we know for consumers is a kind of big concern.

Sky Canaves (13:33):

And I think it's also like, how do we think of discovery and how do the consumers that we survey think of discovery? So in our U.S. consumer Path to Purchase survey, we ask directly, "Where do you learn about new brands and products that you've gone on to buy in the last six months?" And most people, the top source that people think of is stores, or that they choose. And then second is social media, social networks, and AI was far, far down there. But when you ask people, "Where do you go to start a product search?" Yeah, then they typically pick sources like search engine or Amazon or Walmart or retailer site. And then that's where the AI platforms also come in, because they're going there to start the shopping journey. So, there's that difference in how we conceive of discovery. Is it like, "Oh, you become aware where you're open to learning about new brands and products." And that tends to be in stores and on social channels, like especially like TikTok or Instagram.

Suzy Davidkhanian (14:28):

It sounds like, Carina, you spend a lot of time thinking about agentic commerce and the different components as well, as well as how shopping is happening in the UK and in Europe. I'm assuming all of this is the same, no matter what country or what market you're in. And it sounds like it's both a small behavioral shift, but also a mindset shift from the consumer perspective where there's like a mixture happening between the upper funnel for discovery, but also reshaping that decision tree. Is that what we're all seeing across the globe basically?

Carina Lamb (15:01):

Yeah, I think so. And it's very much just another channel. It's another branding channel, it's another discovery channel. It is another sales channel, although less so as we've kind of talked about, most of the transactions are still happening on retailer websites. So, I think we're seeing that certainly in the UK and Europe we're seeing very similar consumer habits. And I think it's just another touchpoint.

(15:22):

And we have now such a fragmented consumer journey, because a consumer might start on a search engine and then go to an LLM to do a bit more research and then go off what we're seeing is that people kind of after a product recommendation on an LLM, they're very likely then to go and look at more information outside of the AI. They might go to social media, they might go and read some reviews, and then they might go perhaps back to the LLM, ask a couple more questions, and then eventually they might decide to buy an item and go to a retailer website. So, it's a very kind of fractured path to purchase, but the AI is just part of that journey. It's not replacing the kind of traditional path to purchase.

Sky Canaves (15:59):

Yeah. And what was really counterintuitive from the survey findings was that we tend to think of AI as making us more efficient, helping us save time in so many ways. But the respondents in the survey, only a third of them said that using AI shopping assistance helped them buy faster. The other two thirds said it either took the same amount of time to make a purchase, or actually took longer to make a purchase. And that's because they are going outside of AI to look for additional information, do their own research to support those AI recommendations. And then they're also asking follow-up questions, engaging more deeply with the AI. So, we end up with a middle of the funnel that's potentially more stretched out and covering more sources as well.

Suzy Davidkhanian (16:45):

It's interesting, right? It's adding potentially maybe a layer of extra friction in some cases versus speeding things up. And like you were saying, Sky, before, there are a lot of mixed messages and headlines around AI and the impact to retail. So, are retailers overestimating or underestimating where AI is actually showing up, Carina?

Carina Lamb (17:05):

Like I said, I think there's maybe a little bit of overestimation in terms of discovery, but I would say not necessarily just retailers, but everyone, the kind of real hype that was around this kind of concept of zero click commerce, around this idea that people are going to discover product, read about a product and purchase a product directly on an AI platform. And we're really not seeing that kind of happen in consumer behavior. And we've even seen ChatGPT take a step back on AI and instant checkout and sort of move to a slightly different model focusing more on that kind of middle funnel. So, I think that that's probably where there's been a lot of hype that is perhaps not playing out as people first thought it might.

Suzy Davidkhanian (17:44):

Right. And speaking of hype versus reality, I mean, we do have the three customers. You guys said it earlier on. Some of it is a little bit future state. So, if I'm a retailer right now, how do I think about, what is my most valuable shopper versus like what everybody's talking about, which is that end-to-end "consumer" that is making decisions for you, which we have decided is maybe a little bit more future state. Maybe I just answered the question myself right now.

Carina Lamb (18:09):

I think you kind of did. I think as Sky pointed out earlier, I think people are using AI tools, they're using AI platforms more, they're integrating it into their shopping journey. They enjoy that experience. So, I think retailers really need to think about having their own proprietary AI tools as a way to engage people, to elevate product discovery on their own sites, to elevate engagement, and also just really concentrating on kind of how they're showing up in that consumer journey and making sure that if LLM is recommending a product to them, that then that kind of handoff is smooth and the checkout is smooth. And it again comes back to what we always talk about, which is just the kind of real basics.

(18:49):

It's interesting. There's some data from Adobe that shows that conversions from AI generated traffic are actually higher now than other sources. But I've seen some other data which shows that over half of AI traffic is coming on mobile devices, but those mobile devices are only accounting for kind of 25% of conversion.

(19:06):

So, we're seeing the same patterns play out in kind of more traditional normal retail, which is things like mobile conversion is a problem. So, I think retailers really need to be also concentrating on getting the basics right and kind of eliminating friction between that handoff between AI and their own platforms.

Suzy Davidkhanian (19:22):

So Sky, you teed up Shoptalk. So, you had a lot of people that must have come to you throughout the conference to talk to you and ask you around the three consumers and how they should be thinking about it and what's most valuable. So, how do you answer that? How do you measure value?

Sky Canaves (19:37):

I think one really strong opportunity to add value is in the retailer and brand owned assistance. What we saw from our survey is that a lot of these AI-assisted shoppers are already using the general purpose LLMs, as well as the AI that's integrated, like AI overviews, and a smaller but still fairly significant share using brand and retailer AI assistance. And I think the only reason that share isn't higher is because they're still somewhat limited. There just aren't that many yet and they're not always featured that prominently insights. I think what Amazon has been doing with Rufus and its own AI and embedding it throughout more of its site and app in different contexts is really interesting, because then they're kind of promoting this like passive AI adoption where customers might not even be aware that they're interacting with AI when they have a blue roof as prompt come up and they click on it and then you're launched into a conversation, or you could have an agent who's buying a product for you at a lower price that you set yourself when it hits that low price.

(20:40):

So, we're still in the very early days of brands and retailers launching their own AI assistance. But the opportunities to really achieve like more engaging online experiences and what is truly going to be conversational commerce through those and really gain a much deeper understanding of customers and what they want is really present there.

Carina Lamb (21:00):

I think as well that Walmart is a really interesting example. So what it's done since kind of ChatGPT rode back a little bit on instant checkout, it's going to embed its own Sparky assistant into ChatGPT. So, people can discover products in ChatGPT, but then you have Sparky handling that kind of transactional element, and meaning that customers are getting exactly the same experience when they're using that app on ChatGPT as they would on the Walmart website. And I think that's a really kind of strong and compelling offer for consumers there, because they're getting the best of both worlds.

Sky Canaves (21:33):

Yeah. And that's to me, it's a big if it works, because I'm looking for it and I'm still not finding it. And my experience with the other apps that I've used on ChatGPT from like Instacart and Target is that they're not as seamless. And I don't see yet a compelling reason to use the ChatGPT version of the app versus going directly to the Instacart or Target app where I have established the relationship and my credentials are there and my history is there and my benefits are there and are seamless. I don't have to worry about integration, because I'm right there where I need to be.

Suzy Davidkhanian (22:09):

Hopefully that'll happen. And it's probably a way for the LLMs to sort of lean into that tension around, yes, I'm helpful, but also you can trust me, because now it's the halo effect of the Walmart or the Instacart. And also one of the things when I worked in retail that was an issue at the time with social commerce is who owns the customer relationship and the data. So if the apps are plugged directly into the LLM, then it becomes more of a shared data, sort of shared customer, which is also a really neat way of fixing that tension.

Sky Canaves (22:40):

Yeah. And then there's a big incentive for the brands and retailers to participate. And I'll note that Macy's noted that from their early test of using Gemini and working with Google's Universal Commerce Protocol, that their AI shoppers who are coming from that platform are spending more than four times as much as all the other shoppers.

Suzy Davidkhanian (23:02):

This is such a meaty topic, and you guys spent three days in Vegas talking about it. And unfortunately we don't get to have three days to talk about it, so we'll have to do it again very soon. Unfortunately, it's all the time we have for today. Thank you so much, Carina, for joining us.

Carina Lamb (23:16):

Thanks for having me, Suzy.

Suzy Davidkhanian (23:17):

And thank you, Sky. Welcome back.

Sky Canaves (23:19):

Thank you, Suzy.

Suzy Davidkhanian (23:20):

And thank you to our listeners and to our team that edits the podcast. Please leave a rating or review, and remember to subscribe. I'll see you for more Reimagining Retail next Wednesday. And on Friday, join Marcus for another episode of Behind the Numbers, an EMARKETER podcast made possible by Rokt.