Doug McMillon, CEO of Walmart Inc., and Satya Nadella, CEO of Microsoft Corp., left, during the CES 2024 event in Las Vegas, Nevada, U.S., Tuesday, Jan. 9, 2024.
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Planning to shop for a special occasion like recent Super Bowl parties or Valentine’s Day celebrations can usually require consulting more than one online source—or Google’s primary source—but if Walmart has its way her, this is going to change in the future.
Walmart is talking about its ability to use genetic artificial intelligence as a one-stop search service when you need to plan an event, rather than an online destination to search for individual items. During a post-earnings call with analysts in February, Walmart CEO Doug McMillon talked about the AI search capabilities of its app.
“What we’re most excited about that’s already happened is how search has improved and how genetic AI has helped us really improve a solution-oriented search experience for customers and members,” McMillon said in earnings call. “And it happened very quickly.”
It also adds the questions about future use of a search engine like Google.
Walmart has long since established itself as a major technology player, successfully fending off years of distress Amazon and remaining a leader in the retail space whose shares are now trading at an all-time high. The technology narrative is one the company has been spinning since it bought Jet.com, which was 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 genetic AI search capabilities, there is a very low cost of failure, he said.
“It establishes them as innovators in the space,” Kodali said. “It’s better to be a leader than a follower in their shoes. They operate from a position of power.”
Experiments can go wrong, though, and they did Alphabet recently when the Gemini gen AI was released to 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 dismissed concerns about the company’s outlook.
“I expect business models will evolve over time,” Brin said. “And maybe it will still be advertising because advertising could work better, AI is able to adapt it better… I personally think that as huge value is created, we will understand the business models.”
Artificial intelligence and search, changes in the shopping business model
Walmart isn’t the only one investing in this type of retail search. Powered by Instacart AI “Ask Instacart” allows customers to search by topic, such as dinner or date, rather than by genre. Amazon’s AI shopping assistant, Rufus, allows people to have a conversation with the platform about what they need, rather than just searching for items directly. Powered by Shopify AI “Semantic Search” helps sellers find the right items to sell to potential customers, ensuring their search results are more accurate.
“We’re going to see this become the norm for online retailers,” said Jacob Bourne, an analyst at Insider Intelligence. “Google is worried 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 less existential terms. The world still relies heavily on Alphabet’s core search business for many things, and some early-generation AI successes from retailers won’t change that.
“You’re in the habit of using Google because you use it for everything,” Kodali said. “You use it for everything else (besides 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 searches, it’s not it’s going to happen.”
Alphabet continues to invest heavily in Gemini, as well as more specific AI tools to integrate with other retail ecosystems, such as Google Cloud’s Vertex AI Search for retail and Conversational Commerce tools that allow companies to offer virtual service customers with artificial intelligence 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 more than 35 billion product listings from retailers globally 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 providing retailers with productive AI tools to create great experiences for their customers,” a spokesperson said.
Traditional search engines need to 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 a high level, there is more information out there than ever before and not all of it is accurate or appropriate. Advertising, especially in search products, is also the main way companies like Google make money.
Instead of researching what to buy on a search engine like Google and then being directed to a retailer’s website for those items, retailers’ genetic AI can find specific answers, narrowing it down to a few options and saving people time , while allowing companies to own the experience and build instant loyalty, rather than having to appear at the top of search results.
“Creating great customer and member experiences is our top priority, and next-generation AI search makes online shopping even easier and more convenient,” a Walmart spokesperson told CNBC. “A single query for a themed party can provide relevant suggestions across categories, replacing the need for individual searches for each item. This can save significant time leading to a more positive experience.”
It’s something Google should at least be concerned about, said Stefano Puntoni, a marketing professor at The Wharton School who is also co-academic director of an executive education course on genetic artificial intelligence and business transformation. “Maybe when a retailer has a strong AI generation engine on their platform, customers don’t feel the need to go to Google at all,” Puntoni said. “Maybe they’re able to find out what they need directly on the retailer’s platform.”
This also gives companies the opportunity to recommend more products. Brands like L’Oreal use AI to Have people try on makeup virtually, which can show the kinds of buyers they may not have been in the market for. Digital celebrities can theoretically sell products to customers through personalized AI-enabled conversations with customers instead of a pre-programmed chatbot.
“What AI genetic search does is it democratizes a lot of opportunities now for brands and companies, who can now also create them,” said Elav Horwitz, McCann Worldgroup executive vice president and head of applied innovation.
Alphabet also has many brands that people rely on every day, as well as a lot of valuable advertising real estate where results will be more relevant than ever.
“Technology companies continue to experiment with new features every day,” Horwitz said. “Google is open about it. The SEO and SEM model is going to change. But I think we’ll probably see a lot of genetic searches or suggestions in other Google products like Gmail, Google Drive, Google Photos and YouTube.”