Gen AI in retail | Why GEO is replacing SEO according to Euromonitor International

Speaker A: Retailers and brands today are serving both humans and bots. Genai is likely to impact across different categories, but the level and degree of that impact will be different because of that need for comparison and reassurance.

Speaker B: For today's episode, we chatted with Michelle. We talked about a lot of different trends in retail and E comm. Some very really interesting insights. Like always, we talked a bit about AI. Excited for this episode. Welcome to another episode of the E Commerce Toolbox Expert's Perspective. Joining us today we have Michelle Evans. Welcome, Michelle. Hi.

Speaker A: Thanks for having me.

Speaker B: Awesome. Michelle, we always like to start off by learning a bit more about your career journey. So why don't you take us through your career journey and how you ended up in your current role?

Speaker A: Yeah. So I've been@Euromonitor 15 years, been covering sort of that intersection of retail and technology as it stands today. My role, uh, my title is called global Lead. So I lead our retail insights and engagements on retail specifically at uh, Euromonitor and obviously do things like this out at conferences, writing reports, speaking at clients, all the above.

Speaker B: Very cool. I've seen some of your posts online. You're very passionate about AI discoverability, things like that. Obviously being at Euromonitor for 15 years, you've been through a couple of different platform shifts. Just how big is kind of AI for ecom as a platform shift and maybe talk us through some of the

Speaker A: trends that you're seeing out of the

Speaker B: gate, like what's hype, what's real when

Speaker A: it comes specifically to technology and how it influences different parts of retail. I think there's often hype associated with it. So like I said, I've been covering this for a good 15 years now and we've had AI as in machine learning probably in 2016 and IoT was everything in 2017 and blockchain and the like. So I think my analysis is more known for taking, um, a more grounded and cautious view. So certainly I think AI or Genai as we know it is rapidly changing E commerce. I think where we're seeing a lot of that change is in terms of the discovery experience and rewriting that. Consumers are turning more and more to these platforms to ask questions and then it's changing where those products come up in terms of where they see them first. It also is creating a lot of back end changes as well. So that sort of shift from SEO to GEO that brands have to implement, I'm um, a little less bullish on the autonomous checkout at least as it stands today. At the very least, I Think we're a ways off but when it comes to Genai and its influence, I think this is going to be a pretty big change. You know, I think it's certainly bigger than mobile was The Rage in 2010, 2011, 2012 sort of time frame. I think it's certainly bigger than that. I think it's bigger than social. I think it's a lot more like when the Internet came into retail and started to change how consumers shop just because of the kind of fundamental changes going on underneath.

Speaker B: Very interesting. So talk to me a bit about why you think it's going to be bigger than mobile or social, which are two huge drivers for E comm. Right. If you look at socials effectively most of the ads spend that people are doing are TikTok, meta, uh, Instagram and then mobile is now dominating. I think last time I looked at it's like 60, 70% of website sessions. So that's a really interesting take. Talk to me a bit about more detail like why you think gen AI in the context of online retail is, is going to be a bigger shift than those two things.

Speaker A: I think from a social perspective where my mindset is going is more like we have a lot of referral. AI referrals are growing fast, so they grew 300% last year and obviously their gains deemed still a small part of the overall pie. And when we look at it, so is social really, a lot of it is driven so by search or direct links as well. So that's why I wanted to put it into perspective from that standpoint. I think mobile, what it did off the back of the Internet was sort of rewrite the consumer path and how they experienced websites. Obviously retailers and such had to make changes to make their web experience more mobile friendly and the like. But I think what Genai is doing is more like the. When the Internet came in from the standpoint of sort of, you know, it's going to force players to sort of rewire that piping underneath commerce. So I think the front end experience is changing for consumers. I think there's going to have to big, big shift in the back end as well and I think you'll see it at the end of the day in a few years in terms of the numbers, in terms of the referrals and such. So that's why I think it's a little bit bigger deal than those two I noted.

Speaker B: Yeah, that's interesting. And you're right, referral data is still pretty small, but it is growing really quick. How are you seeing from Your data and just from chatting with merchants, like how are you seeing the conversion side of it things? Is it super high intent traffic?

Speaker A: Yeah, it's obviously the conversion piece is still very small because overall I think if we look at just global share, AI referrals has about 2% of the total sort of discovery driven referrals. So it's small potatoes at this point, rapidly growing and then the conversion piece is going to be even smaller than that. But in terms of what we're seeing come down the pipeline, we are starting to see information from retailers to show or to indicate the AI driven referrals are leading to higher conversion rates. So I know some retailers are speaking openly about this. I spoke at Shop Talk Europe in June and obviously that had a lot of European retailers and one of them is Douglas Group out of Germany, which is more pharmacy and beauty in those kind of products. And the executive there spoke about referrals or conversion was up from 3 to 4% to more like 5 to 6%. So kind of borderline doubling that rate. And I think it makes sense because essentially Genai and those tools that are out there, it's helping consumers sort of move further down the path to purchase, gather more information on products, build that confidence and whatnot before execution. So already when they come to the retailer site, they're maybe more primed to make that purchase than if they were coming from a traditional website.

Speaker B: That's something that we've been hearing in the market as well, like from our customer base, especially on the conversion side. Do you think that's going to apply unilaterally across retail or are you seeing from your early conversations that certain categories are actually seeing more of it than others? For example, like luxury, not seeing it compared to like home goods and things like that.

Speaker A: So I don't think that what we're seeing happen in terms of this pivot towards AI shopping is not going to happen uniformly across categories. So we look at it from a few different angles, but I think it's about how many products are on the shelf. And can Genai help you have a more convenient experience and get to that product recommendation quicker? And then also what's the confidence level you need to be able to make that decision. So with a higher ticket item, um, you may want more information before making that purchase. Obviously we're buying a car, right? We'd probably do more research than when we were buying eggs. So in terms of some of the areas where we're seeing sort of faster pickup, one of the areas is definitely just kind of the beauty space, beauty and also health for that matter. And those tend to be areas that have high online penetration, high online sales. Consumers are shopping there already. But there are also products that lead to high intent queries. So what is the best moisturizer for eczema? Something like that. And if you think about skin care, there's a lot of products out there. So Genai can really help a consumer navigate through that and find that product selection. And then health does well. Um, think about specific subcategory like supplements. Just because there's thousands of supplements out there, they all have different claims for how they will help your health. So in that sense, AI has a different role to play. So you can start to think about those different dimensions that drive that and take it to other categories. So I think beauty has a lot of similar characteristics as fashion, for example, to use. To pull back to your example that you used in. Um, the question to start.

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Speaker B: You named recently Next gen online storefront as one of your kind of defining trends for the year ahead. What does that mean? Like in plain terms, like what is the next gen storefront look like in your opinion? How is it different from what people are working on today?

Speaker A: Yeah, so this was something that we've been looking at for a number of months and essentially this idea is that the savviest retailers and brands are embracing new places of discovery and tools for engagement and ways to serve shoppers. A piece of that is all this AI, the gen AI that I'm talking about. But it's obviously not the only piece. So the way shoppers discover products is changing. So retailers and brands trying to embed more closer to the moment of inspiration where you can consumer first gets excited. So that speaks to that social piece that we talked about why TikTok does so well. You even see it in terms of if you think broadly about TikTok, it's about commerce, eating content. So you see players like Netflix moving into this and that's where a lot of gen AI comes in as well in terms of discovery. And then there's also how do we engage shoppers when they're online? And so retailers and brands are using different engagement tools like shoppable videos and gamification and VR conversational commerce, all to make that online shopping experience feel More like what we experience in store. So those are just two of the ways that we've approached that or talked about it in that content.

Speaker B: When you're chatting with these VPs of Ecom that are balancing kind of like getting pushed on core metrics and growing revenue, in some cases their overall traffic is kind of flat. How are you kind of advising them to think about the whole, like, well, it's small, but it's growing 300% when it comes to the call it like the new front door to your site.

Speaker A: So I think where they need to be clear is a shift is underway and retailers and brands today are serving both humans and bots. So we'll see some categories. Categories like I mentioned earlier, with beauty and health more impacted some others, like snacks and pet care and soft drinks, may have limited impact today. So that potential really depends upon where that player where retailers and brands sit in the ecosystem, sort of how fast they need to make changes. I think Genai is likely to impact across different categories, but the level and degree of that impact will be different, I'm sure, because of that need for comparison and reassurance. Like I spoke about a couple minutes

Speaker B: ago, it makes sense now to transition to something that's a bit more up in the air. The AI checkout. Obviously it was pretty highly publicized earlier this year. Shopify, OpenAI, they were doing commerce in app, uh, checkout. I think that's been abandoned. But when I use ChatGPT for product discovery, it kind of like broke it and it's been broken for like three months. So what's your thoughts on that? Is it inevitable? Is it something that's still up in the air?

Speaker A: So for Context, in March, ChatGPT pulled away from trying to create that in chat checkout experience on the platform itself. So that was a shift away. At this point, they're sort of conceding retailers own this experience. You do have someone like Shopify that on the heels of that made an announcement that they're going to enable this for their merchants. But in that case, also merchants still own the experience. It's just leveraging Shopify to make that checkout happen. So in terms of where we're at in the overall development, I think we're a long ways off from this idea that people are going to be going to ChatGPT and ignoring retailers altogether in their checkout experience. Retailers have the trust. We see that in our consumer surveys. By and large, across the world, consumers say, you know, I trust the retailer more than I do the platform, the AI platform to Make a purchase. So I think you have that playing into it obviously, sort of like those privacy and security concerns come into this as well. And we've seen the business models from these AI platforms evolving as well. So ChatGPT, soon after they backed off of that, sort of shifted and pushed monetization more through advertising. So they may be backing away entirely from that still early days, so we'll see what the twists and turns bring. But I don't think this idea of autonomous checkout is going to be mainstream in the coming years in the most, in the more near term.

Speaker B: I agree. I think to your point, the discoverability aspect of it is likely where most retailers should be leaning in. It's where the growth is coming from and at fully fully aligned diving deeper into gen AI and then kind of bringing that back into social media influencers as more and more kind of sources of traffic come through. Have you seen retailers struggle with like true attribution? For example, you find me through ChatGPT, go on the website, don't purchase, you're retargeted through social. Maybe at some point I send you an email like how are people going to be able to actually truly understand attribution? Especially because a lot of these platforms are just, they're not owned, like they're not owned data, uh, sources that you have.

Speaker A: I think the reality is, is that the picture is getting muddier really as we go along for sure. Because I think even I've had the experience from the standpoint of experimenting with ChatGPT and trying to then go to the retailer website where that experience becomes clucky. So I may just go directly to the retailer. So that right there breaks it, of course. So I think things are going to probably become messier before they become any clearer in these coming years.

Speaker B: I agree, especially because everyone's taking credit for everything with larger attribution windows. So it's being double counted. I, uh, know you spend a good amount of time talking to Europeans. How are Europeans thinking about this like AI approach versus the US and North America?

Speaker A: So I think a lot of people in the industry would say the US is uh, six to 12 months ahead. It's interesting in our data and our AI referral data, if you take like the six largest European markets, which would put them on more equal footing in terms of population to the States, we do see that AI referral traffic a bit higher in Europe. We're also seeing it replace search engine traffic faster. So in some ways that movement is happening there. Where you see the big difference is in Terms of sort of the commercialization of AI. So in the US obviously, uh, a lot of these tech giants are here, A lot of these models are based here. You're seeing a lot more partnerships here between AI platforms and retailers. Obviously Amazon's chosen more walled garden, but Walmart is partnering. Players like Target are partnering. That's what you don't see, see in Europe as much. So carre 4 out of France has one of the most advanced partnerships where they brought their grocery catalog into ChatGPT. But other than that, most players are trying to figure this out on their own, build on their own. So maybe taking more of a wait and see approach, but I think they're a lot more cautious about what this is and what it might be.

Speaker B: No, it makes sense. And it's cool that you mentioned Carrefour. They're uh, a customer of ours and they're actually, to your point, very innovative on this. Not to say that it surprises me, but to your point, European pen retailer, like you don't think cutting edge of technology typically in my experience. Right. So it's really cool to see that. And looking ahead, you said one of the open questions is kind of like, who claims the doorway? Do brands still control demand and what platform? What do you think retail leaders should be building today so that they're not entirely dependent on someone else's algorithm? Because ultimately like it could end up being a. I know these models are probabilistic and not deterministic, but at the end of the day, like if you're a, uh, I don't know, startup for growing plants in your house, and then there's like an entrenched monopoly that returns 99% of the queries, 99% of the time. Like, how are you really going to break into that front door? So how do you think retailers should be thinking about this?

Speaker A: Obviously this is creating somewhat of a different ecosystem and I think we've seen it in retail before. Like in Asia, super apps are very common, kind of have that closed ecosystem. They didn't really take off in the States probably because we're a lot more competitive here, have a lot more players. So no one can get that kind of consolidation. But I don't think any of these players want to be overly dependent on someone else's ecosystem. So I think it is about building those assets that compound regardless of who controls the doorway. So having those strong brands, having first party customer relationships, clean proprietary data, good content, genuine consumer trust, all of those things help. And those are what, you know, help to retain and drive value for shoppers. At the same time, I think retailers need to ensure they're visible inside these systems, especially if they start influencing where your shoppers are making decisions. And that means some data cleaning, right? That you have to make your data machine readable. You have to have trusted reviews. Really, this idea of reviews and ratings has gotten more of a promotion in the last year. More authoritative content, uh, and then just expertise to understand how these AI models work. So I don't know that the goal is necessarily to predict who's going to win this doorway, but it's about becoming so relevant and so trusted and so discoverable that whatever doorway consumers use to get to you, and I don't think there's probably, there's not just one doorway, there never is. But regardless of who maybe takes control of certain doorways, that consumers still want to go to your retailer, that they still, you know, want to buy your products, have your customer experience, um, and if they're able to find you in this new world.

Speaker B: Very cool. Well, Michelle, this was an awesome conversation. Thank you so much. I always love seeing your takes online on LinkedIn and really appreciate you taking the time today.

Speaker A: Of course. Thanks for the invite. I enjoyed the conversation today.

Speaker B: Awesome.

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