AI tools transform Christmas gifting as shoppers turn to chatbots

Rachael Dunfell knew two things about her husband's 21-year-old cousin: that he liked specialised racing bikes and that he was interested in the Vikings.

But those pieces of information yielded few ideas for a suitable Christmas gift. So Rachael, 33, from Manchester, turned to artificial intelligence.

She inputted his age, his hobby and his interest into Copilot, the Microsoft-owned chatbot, which led her to the website of a niche retailer that sells Viking-themed metal bike parts.

"It's just something that I really would never have known existed," she said, "but it was perfect."

AI is shifting the holiday shopping experience.

People are increasingly turning to AI tools, from Copilot to OpenAI's ChatGPT to Google's Gemini, for help with gift ideas and to compare prices, with implications for bargain hunters and retailers alike.

John Harmon, a senior technology analyst at Coresight Research in New York, called this year the first holiday season shaped by AI-powered shopping.

While there is not a great deal of data on spending directly linked to AI, Salesforce has said AI is expected to drive 21% of all holiday orders globally, for a total of $263bn (£197bn) in sales.

More than half of US consumers say they would probably or definitely use AI to help with their shopping, a Coresight survey found.

In the UK and Ireland, a survey of 2,000 consumers by technology company CI&T, released this month, found that 61% use or have used AI tools while shopping - most often to find where to buy an item or locate the best deal.

But more than two-thirds of respondents could not think of an AI-powered retail experience that impressed them.

Businesses are scrambling to make the most of AI channels to promote their products.

"Retailers feel the urgency because AI is already shaping what people buy," said Melanie Nuce-Hilton, senior vice president of customer success at GS1 US, an information standards organisation.

"If the product information the model learned from is outdated or inconsistent, the recommendation can miss the mark, and it's often small brands that lose visibility when that happens," she added.

The technology is starting to move beyond using AI tools to help find a product on a retailer's website, to letting shoppers buy items without even leaving a chat-bot.

OpenAI at the end of September announced an Instant Checkout feature. In the weeks since, the ChatGPT maker has announced partnerships with several major retailers and marketplaces to list some of their products directly on the chat service. Etsy and Shopify led the pack, followed by Walmart in October and Salesforce and Target in November.

Walmart, for example, said its partnership with OpenAI "allows customers and Sam's Club members to plan meals, restock essentials, or discover new products simply by chatting".

But at this stage, there are limitations for shoppers seeking to offload their holiday shopping entirely. Buying items without leaving AI chats is still a nascent phenomenon, only weeks in the making.

And AI companies hold the cards, analysts said.

Not every retailer is set up for direct purchases within ChatGPT, Mr Harmon said. Some have not yet received approval from OpenAI.

"It's OpenAI's game. They're in control of who is listed and how long it takes," he said.

"The smaller ones will be left out for the time being, until they're able to convert their data and get approved to have it listed on OpenAI."

Analysts said retailers could draw in shoppers by prioritising partnerships with AI companies.

The agreements have the potential to boost brand perception among consumers, said Yanliu Huang, a marketing professor at Drexel University. She noted the benefits for a company like Walmart, which is known for its low prices but is seeking to appeal to higher-educated and younger consumers, too.

Ms Huang predicted that other large retailers like Costco, as well as smaller brands, are likely to follow suit.

Burlap & Barrel, a spice company based in the US, sees AI-powered shopping as an opportunity to boost sales.

Ori Zohar, the firm's co-founder and co-chief executive, acknowledged that the company is better positioned than many other small businesses in his sector to draw in shoppers, given its robust online presence.

"That ended up being really, really good content to feed into the AI models," Mr Zohar said. He attributed the company's recent growth, in part, to AI searches that led customers to its website.

But Mr Zohar said Burlap & Barrel is not currently seeking direct partnerships with AI companies like OpenAI. Executives are instead focused on building out the company's own database of spices - information that AI tools can pick up and put on shoppers' radar.

Allan Binder, a teacher and sound engineer currently based in Hanoi, Vietnam, said he started using AI last year to brainstorm gift ideas for friends and family in the US.

Having already used AI tools for research purposes, using them to find niche presents felt like a "natural extension", said Allan, 35, originally from Detroit, Michigan.

Among his AI-powered discoveries: scissors from an artisan manufacturer in England and pottery from Indonesia, a birthday gift for his mother last summer.

This holiday gifting season, his AI searches have led him to historic prints.

"[Chatbots] have the potential to connect very targeted products with their audience," he said.

But he acknowledged the risks of offloading shopping to AI agents, especially for those who undertake less research on their own to supplement AI-generated results.

"I think AI shopping will help informed consumers become more informed," he said, "while making it easier for uninformed consumers to buy without much thought."