The U.S. holiday season spending forecast has rarely been so precarious. On the tail end of the most contentious U.S. presidential elections yet, with unseasonably warm weather in the West and hurricanes pummelling Florida, it would be no surprise if consumers were clutching their purse strings. Fortunately for retailers everywhere, this doesn’t seem to be the case. In not-so surprising news, Generative AI shopping trends are reframing holiday shopping.

Fortunately for retailers, GenAI provides an easy pathway to segment customers and show them only the products they need, those within their budgets, and those touting the societal impact they want to create.

Jolly Outlook

According to Forrester’s latest holiday report, U.S. retail sales will grow from $964 billion during last year’s holiday season to reach $1 trillion in 2024. That includes a 10.1 percent increase in online holiday sales in the U.S., but it also includes one big, fat caveat: Consumers are deal-hunting now more than ever.  They go online to stack up the sticker prices, coupons, and loyalty rewards of their prospective purchases. Internet purchases are often value-based, meaning they require a higher degree of pricing transparency and result in slimmer margins for retailers.

The primary strategy to counter these obstacles? If you’re Amazon, it’s removing prices from the holiday catalog altogether. But recent rollouts by Amazon, Google, and Walmart point to a more cogent holiday strategy: filling the transparency gap left by most online marketplaces with extreme customization made possible by generative AI.

Are AI-based Shopping Tools the New Expectation for Online Marketplaces?

We’ve talked before about the ethical issues of AI in retail advertising. Yet the biggest department and ecommerce stores made one uniform move going into the 2024/2025 holiday season: adopting generative AI to take their customization to the next level. Google, Amazon, Walmart, and Target, among others, rolled out unique Generative AI applications in preparation for the holiday season.

Generative AI shopping apps are particularly popular with younger consumers, but that doesn’t mean that they don’t have applications across demographics. According to Adobe, 2 in 5 customers plan to use GenAI to assist with shopping this holiday season. Visits to retailers’ websites from applications like ChatGPT are also on the rise.

Adobe adds that generative AI product referrals are nearly 8 times higher than last year, with customers using them to:

• Find the best deals (20%)
• Quickly find specific items online (19%)
• Get brand recommendations (15%)
• Discover similar items or brands to those they already know (14%)

Each online marketplace that’s recently adopted Gen AI looks a bit different, depending on the respective platform’s unique technology budget, customer base, and inventory.

Google GenAI

Google added a few features to its existing Generative AI platform just in time for the holiday season. Apparel ads with virtual try-on features enable shoppers with a diverse range of body types and aesthetic proclivities to view video shorts of folks with similar body types wearing the apparel. But it doesn’t end there, with 360-degree product views, visual brand search profiles through Google’s shopping graph, and free and easy image generation for sellers in Google’s Product Studio, it’s beginning to look a lot like our most tech-driven Christmas yet.

Amazon GenAI

While most GenAI applications are on the backend of retailers’ operations, Amazon recently rolled out an AI shopping assistant that works more like a store associate. Amazon’s AI-powered shopping assistant, Rufus, provides customers with AI-powered answers to their queries and product recommendations. Rufus can help customers home in on the perfect product for their unique shopping needs, preferences, and budget.

But the behemoth didn’t stop there. Amazon’s new video ad generator is currently in its beta phase, enabling brands and retailers to create promotional videos from static images. It also has live image capabilities that let brands add dynamic touches to their existing static images, like moving snow in the background of a holiday photo.

Walmart GenAI

Walmart’s AI-powered shopping assistant is almost ready to move out of its beta testing phase. The legacy retailer’s GenAI assistant is being rolled out across Walmart.com just in time for holiday shopping, allowing customers to ask it for recommendations like “What’s the perfect gift for a millennial mom” or “Show me organic pet treats without chicken.”  Walmart’s also entering the alpha phase on an Immersive Commerce API in collaboration with Unity, so shoppers can purchase No Boundaries products for their online avatars that match what they’re wearing in the physical world.

Target GenAI

Target’s GenAI chatbot, Store Companion, works differently than the other bots we’ve covered. That’s because Store Companion is available to Target employees on their handheld devices to provide real-time answers about company procedures. If you’ve ever encountered a clueless seasonal hire when trying to knock out your holiday shopping list, the benefits of Store Companion don’t need to be elaborated here. The feature was rolled out to Target’s nearly 2,000 stores in preparation for the 2024/2025 holiday season.

Differentiation in an Era of Ubiquity

Like many millennials, I don’t want technology forced upon me and quickly get frustrated when presented with an AI chatbot with no (or a labor-intensive) process to reach a store associate. For this reason, the direct pathway to a better physical shopping experience offered by Target’s Store Companion is the most exciting use of GenAI that I’ve seen going into the 2024/2025 holiday season.

Customers are still prepared to spend this year, but their spending is tempered by the harsh realities of the tariff situation, the challenging labor environment, and burgeoning political unrest in the wake of the recent election. In this environment, Adobe reports that deep holiday discounts will remain a priority for many households. Lower-income families and those including individuals from marginalized communities will use discernment in their purchasing decisions, as they need to be financially prepared for the national changes on the horizon. So, retail offerings need to be equally bifurcated for the haves and have-nots this year.

Fortunately for retailers, GenAI provides an easy pathway to segment customers and show them only the products they need, those within their budgets, and those touting the societal impact they want to create. The GenAI-based holiday shopping experiences coming to fruition this season call to mind the words of Jim Morrison “Strange days have found us. Strange days have tracked us down.”  But in these strange days (and perplexing) brand practices lie the promise of a world where consumers are recognized by technology to be fully, unapologetically themselves.