Winners & Losers from ChatGPT’s Shopping Launch

0:04Travis Hoium:Are AI agents the future of shopping? Motley Fool Money starts now.

0:20Travis Hoium:Welcome to Motley Fool Money. I'm Travis Hoium, joined by Lou Whiteman and Rachel Warren, And we have to talk about the big topic of the week. That is OpenAI's announcement that they are going to allow shopping within ChatGPT. Don't even have to leave ChatGPT to buy your Etsy orders and stuff from Shopify. Rachel, there's a lot going on here. What did we learn about this? Is this something that people want? It seems like the industry and AI has been talking about this as a phenomenal use case. As I see kind of early examples, I'm a little bit skeptical, but I'm willing to be swayed. So what are your thoughts on shopping within ChatGPT?

0:59Rachel Warren:Yeah, this is honestly kind of fascinating to me. And I think particularly as we have watched online shopping and what that looks like for consumers evolve so much over the last few years, I do think we're going to have to see how comfortable users are actually using ChatGPT to shop. How many people are actually going to do that? I'm not convinced, but I do think we could see this become a new normal if the interest and adoption is there. But how does this work? So OpenAI has launched this new shopping feature. It's called Instant Checkout. It allows users to purchase products directly within a ChatGPT conversation.

1:32Rachel Warren:So let's say you put into ChatGPT best running shoes for under$100. Well, then ChatGPT would pull up a product that supports whatever you were looking for. You could see a buy button that would appear. And you could actually review shipping, payment information, complete the purchase, all without leaving the chat interface. As you mentioned, this is first launching with Etsy sellers.

1:57Travis Hoium:This is powered by Stripe, which is the same company that powers Shopify's ShopPay. So just to put some context, there is a playbook here from the quick checkout. Yeah.

2:07Rachel Warren:And I think it's a good point you raised because essentially they are relying on proven infrastructure. I do think it was an interesting choice that they chose to launch with Etsy sellers. They're soon also planning to be available to a really extensive number of brands on the Shopify platform, like Skims and Spanx. But as you mentioned, this offering, it's powered by a protocol that was developed by Stripe and OpenAI. And basically, it uses AI agents to act as purchasers on behalf of consumers. So, how is this monetizable? So, OpenAI is going to take a small fee from merchants. The service is free for users.

2:39Rachel Warren:Right now, you could only purchase one item using this service. But OpenAI has said they plan to expand in the future. So, I mean, it's very early days, but I don't know. I'm intrigued.

2:50Travis Hoium:Lou, you know, you and I are probably not the early adopters here with AI and shopping, but there does seem to be something to, you know, I'm looking for this kind of item. Tell me when it's under$40. There's value there, but do I want to, is this going to replace something like a Google search? I think that's the big question.

3:10Lou Whiteman:Well, I think at its heart, this is the long-awaited, you know, yeah, we've all talked about how is Google under threat from AI because searches will move to AI? This is that playing out in theory. I'm skeptical, though. For one thing, for now, at least, it is a closed garden. You're only going to get access to the retailers that partner with ChatGPT, the ones that accept their open protocol. Little names like Amazon and Walmart, at least for now, aren't involved. So, it's only going to be as good as the choices that are there. The bigger thing, though, and this is the big AI problem. It's garbage in, garbage out.

3:58Lou Whiteman:Or, you know, how good is... I mean, if you ask for the best running shoes under$100, the AI isn't going to test running shoes. They are just going to find the reviews. Now, I know, like, if you right now do a Google search, like best gifts for an 18-year-old girl going off to college or something, you're going to get a pretty generic clickbait list 300 times coming up. You know, like girls like flowers or just something silly like that. If that is what is feeding these models, if it's kind of just that clickbait that's all over the web anyway, is this really going to be your personal assistant or is it just going to be another sort of disappointing option?

4:41Lou Whiteman:I don't know.

4:43Travis Hoium:The incentives are interesting, too. You know, Google, the incentives are who is going to pay for the ad placement. You know, now when you do a Google search, whether you're on a mobile device or whether you're on a computer, the first things you're going to see are all ads. But generally, those line up with what the top search results are from an organic search perspective, too. They're just kind of squeezing more margin out. Same thing happens with Meta. I think that's a company I want to touch on in a bit. But that's a discovery tool, you know, for things that I didn't know that I wanted. There does seem to be some sort of tension here in the way that people naturally shop and the way that people have learned to shop online and how this is going to work.

5:28Travis Hoium:So, Rachel, how do you think that that is there going to be a learning curve sort of with using something like ChatGPT to shop and where it's useful and where it's not?

5:38Rachel Warren:I do think there's a learning curve and it is interesting because you sort of see it taking what we as shoppers and consumers are used to with, say, doing a Google search for a particular product, clicking on an item we like, and then going to checkout. I think it's taking that process sort of a step beyond what consumers are used to. And I think that's where it remains to be seen. You know, is that something that really resonates with people when they're shopping for various products? I think it could be very possibly the next evolution in retail and what shopping looks like. But I don't think that that's something that would necessarily be exclusive to OpenAI's ChatGPT, which I know we're going to talk about more in a bit in terms of how other companies are integrating these AI features.

6:21Rachel Warren:I think that's important to note. It's not just OpenAI. I think they're just probably the most prominent example right now.

6:27Lou Whiteman:The other real question here is, I think this is incremental. It doesn't feel like a new paradigm. It feels like, again, like I say, a different form of Google search, or maybe if it's done well, a better form of search. How do you, even if it is better, how do you change consumer behavior on something like this? And I mean, as far as how, even if you've built a better mousetrap and the jury's out on that, how do you stop me from doing what I've been doing for 10 years? That, to me, is the big challenge they face. They are really going to have to have a wow product, I think, to do that. And we'll see.

7:05Lou Whiteman:Maybe it is.

7:07Travis Hoium:Well, we're going to see who Lou and Rachel think are the winners and losers of this announcement and how this is going to play out in the tech industry in just a second. You're listening to Motley Fool Money.

7:18Rachel Warren:But what I wanted to tell you is that my daughter is a very good study. Semesterbeitrag, laptop, books, software, phone, internet. So a master is really expensive. Oh, tell her, she can get it back. Yeah, you mean from the tax to set up, right? But she doesn't pay. No, the word, the word, the contract. She does it very simply with Visa, and if she works, it's called, That's it? Safe. Visa, the tax. Get back your money. Now, try to get out of it.

7:45Travis Hoium:Welcome back to Motley Fool Money. I want to get to the positive side of the OpenAI Shopping announcement and who we think the winners are. And Lou, I want to start with you. This is going to potentially be disruptive to a lot of companies, but there are going to be companies who are going to be able to take advantage. And maybe it's that long tail of retailers who are having, you know, it's tough to find consumers if you're not in a big box retailer. Is that where there's opportunities for investors today with this kind of announcement and maybe other AI shopping agents coming on the way?

8:16Lou Whiteman:I can see why retailers would want to do this because, yeah, you're right. I mean, right now, I mean, Google AdWords searches the ways they're doing it. There's no perfect way out there right now. So why wouldn't you try to extend things? I think juries tell out whether or not they are actual winners over time with this. Because, again, a lot has to go right. I think there's a lot of ifs there. If this catches on, if it drives more traffic, if it converts, there's a lot of potential. There's not a lot of clear things. The real winners for me here are the consumers. Because I think if these agents do give you better ability to price shop, I don't know if that's great for the retailers, but I do see a world where a pretty simple thing for agents to do is to just monitor prices and to let you know when something that you looked at is cheaper.

9:06Lou Whiteman:That's great for me. It might crush margins elsewhere, but it's great for me as a consumer.

9:12Travis Hoium:Lou has the consumer as the winner. Rachel, where do you think there's opportunities?

9:16Rachel Warren:I think there's opportunities in a few different ways. Obviously, the first companies that come to mind here are the ones that were mentioned in this announcement, Etsy, Shopify. I'm quite a lot more bullish on Shopify just as a business as a whole and as a direct beneficiary of these trends than Etsy, really for a variety of reasons. And we also saw shares of Etsy go up really significantly, about 16 % after this announcement, and then sort of plunged down by the end of the day. I do think that there's a lot of opportunity here for really traditional retailers too. I mean, There was a study that came out this last month that showed that generative AI platforms are already driving a lot of referral traffic to some of these companies.

9:54Rachel Warren:So, ChatGPT accounted for about 21 % of Walmart's incoming traffic in August. You could think of companies like eBay that could benefit here, maybe Target, right, that could foreseeably be winners from adoption of this technology on the back end, right, helping to really, I think, automate some of their infrastructure behind the scenes. You know, there's a payment angle to this, too, right? Companies like PayPal, Visa, MasterCard, they're developing a lot of specialized infrastructure and toolkits for AI agents to process secure autonomous payments. So for me, and maybe this is where I differ from Lou a little bit, I think there's a real benefit here to improve the infrastructure of retailers and payment processors.

10:30Rachel Warren:I don't think we're living in a world where most consumers want, for example, an AI agent to do their shopping for them. But if you want to automate that core infrastructure or make maybe shopping easier, there's a value proposition there.

10:41Lou Whiteman:But is this winning, or is it just a shift? For the payment people, MasterCard, Visa, and PayPal, are they going to get more business out of this? They're already getting a ton of business. It seems like same volumes from a different source. Similar to the retailers. Right now, the source of traffic is shifting. Is the traffic higher quality? Does the traffic convert more? Or is it just that, yeah, this is a story of maybe simple search losing share to AI. To be a winner here, I think there has to actually be incremental gains either in volumes, in conversions, something like that. It could be that AI just gives you better recommendations, so therefore they convert to sales better.

11:27Lou Whiteman:Again, I think a lot of that's going to be the data that it's training off of. That is sort of what the search data, so there's a fine line there. Etsy was up 16 % on the news, but then gave up most of that the next day. Shopify was on that same press release, went up less. I don't think that is because Shopify would benefit less. I think it's more just Etsy investors are more desperate to hear they're involved in this. I think there's a lot of hype here. There's a lot of potential, but I think we just have to see.

12:01Travis Hoium:Lou, do you think there's an opportunity for a lower take rate from that discovery side of things? If you think about Etsy and Shopify in particular, they've grown a lot on things like Instagram ads. The problem is that Instagram is really good at monetizing their business and squeezing out a lot of that margin for themselves, leaving these smaller retails in particular with relatively modest margins. You can decide what your margins are going to be based on what your ad spend is going to be. The initial launch is going to have a relatively low take rate for ChatGPT and OpenAI, from everything that we've heard.

12:40Travis Hoium:That could help those margins short term. Then the question becomes, do we see the squeeze that we've had with something like Meta's family of apps over the past 10 years, where they just keep increasing that take rate over time? So is there almost like a short-term benefit, potentially, because this is a new distribution, new discovery model that's relatively low cost, and then maybe those dynamics change over the next decade?

13:06Lou Whiteman:That's very possible. I mean, I do think that what I feel more certain about is that if there is a margin expansion, it's going to be temporary, because that would imply that the Open AI product actually works. Open AI has what? Commitments to spend it, I don't know, a trillion dollars or so in the years to come. It's not like they can afford to let other people get fat off margins. So, yeah, I mean, maybe. But again, I think all this is premised on the fact that it is a good enough product that gets us to switch our habits. And that by itself is a big hurdle.

13:43Travis Hoium:We're going to talk about the companies that are going to be negatively impacted in just a moment. You're listening to Motley Fool Money.

14:21Travis Hoium:As shifts in shopping change, if we do move to more AI agents, whether it's in ChatGPT or another AI agent engine, there are going to be some losers out there. And we saw this with the shift to more online shopping over the past 20 years. Companies like Sears that used to be dominant are now effectively almost gone. Rachel, I want to start with you. Where do you see companies that could potentially be under threat because of something like open AI shopping?

14:51Rachel Warren:I think one of the things that we've been hearing a lot is that this could be a major type of disruptive technology to some of the big tech players, like Alphabet's Google and Amazon. I'll talk about that a little bit. I'm personally very bullish on these companies, but I do think as a long-term investor, it is good to look at the bear side of things. There's this concept that AI agents that handle foreseeably the entire search to purchase process, that could erode the search ad revenue that powers Alphabet's Google. Now, I will say, Alphabet has predicted this threat. Google has been developing a new shopping assistant experience using AI that's accessible within their search products AI mode.

15:29Rachel Warren:They have their Gemini AI that they've combined with their shopping graph, which indexes over 50 billion product listings that they have been working to develop their own feature. I think that's something to bear in mind when you're looking at that company. Another one, of course, there's this idea that agentic AI shopping could present really unique threats to Amazon's dominant position, maybe weakening the walled garden. This idea that maybe if external AI agents could crawl the catalog, compare prices without a customer even visiting Amazon, that they would lose control over their journey. But the argument I would say to the flip side of that is, first of all, Amazon has incredible economies of scale and they're building their own native AI shopping tools.

16:08Rachel Warren:And I think that that includes as well their agentic checkout feature. So, I think the issue will be that retailers or companies that lack robust AI strategies, they're going to struggle to compete. But you've got businesses like Alphabet, like Amazon, and others that have tremendous capital backing them up, incredibly well-known and trusted platforms. I don't think we need to be sounding the alarm that these entities are just going to go away because of OpenAI's ChatGPT rolling out new features.

16:37Travis Hoium:Lou, a couple of things that I want to just highlight that Rachel pointed to is, Amazon has been talking for years about the growth in their ad business. That is basically capturing a larger percentage of the shopping that's going on on the Amazon platform. So this could potentially, you know, you don't need an agent doesn't need to see ads. Google's entire business is basically ads. So is the, is that where the threat is, is we go from a world where advertising is really important to the agents don't need ads and it's how the, how the crawler works, how the, how the model works that's more important and some of these big tech companies do see pressure?

17:19Lou Whiteman:So, let's separate them because I think it's a different answer for both. For Google, Google's core business, yes, it's ads, but it's basically Google's core business is funneling consumers to a retailer or to a destination. I think that that can cross over into an AI world using Gemini, using Google's products. So I, you know, yes, right now that is in the form of ads. That's how they monetize it. It could easily be just kind of referral or whatever we're talking about.

17:49Travis Hoium:This would be the example of their, they were founded on just giving you the answer, not serving you ads. We're almost moving more to that direction. Hey, I want a great pair of shoes. Just go buy it for me. Maybe Google is the best place to do it.

18:01Lou Whiteman:At the end of the day, Google's about connecting someone who has a desire to someone who can fulfill that, right? And I think that can take different forms. Amazon, though, is interesting. As the name implies, Amazon is supposed to be that one-stop shop. Why do we use Amazon? Because I can get everything. I can get everything from roach traps to the new sweatshirt to the kid's new bike all at one place. And so, I do think that there could be a foundational threat here, just if your chatbot is that same Amazon. It has all of the world in there, and you can do a one-stop there. A couple other thoughts for retailers.