IBM Part 2: What Their New Research Says About the Future of Shopping

0:00All the product data that you have, you're now going to have machine and algorithm reading it, verifying it, right? So if, let's say, you have a supplement that you guarantee people will grow one inch taller after one year, you better have proof for it. I think what the evolution here is, is around personal AI shoppers. The top use of AI is to research product, is to compare, review, and to look for deals. I read something this week around, you know, AI is kind of the brain and the brick and mortar business is the body. Welcome back to Retail in America Season 2 for a limited series sponsored by IBM.

0:43Today we're exploring a major shift in commerce. AI is no longer just assisting shoppers. It's beginning to join you along in the shopping journey. New global research from the IBM Institute for Business Value reveals that consumers are more comfortable than ever using AI tools to research, validate, and even make decisions on their behalf. To unpack these insights, I'm joined today by Jane Chung, Global Research Leader for Retail and Consumer Products at IBM. Jane, welcome to the show. Thank you, Ron. It's nice to be here. It's good to see you again. Likewise. We've done it. This is our second time having these conversations about just the impact that you're seeing as leading this research on AI.

1:37Hi. So I wanted to jump in just around first the consumer shift and some things that you've seen. So what you've reported on is over the last two years, consumers' use of chatbots and AI shopping tools has jumped 62 percent. And even more for Gen X at 82 percent and boomers like me at 92 percent. And you now report that one in three consumers want AI-powered features inside their ideal shopping journey. So tell us more about what this means, what you've seen is driving this acceleration. What's the story behind the story, Jane? Yeah, so first the facts, right? So I conducted a consumer study in two years, two years ago.

2:27And now I'm revisiting the same topic. So what I saw was the increased use of AI, not just for shopping, but also for learning, development skills, side hustles, you know, this AI to create music, for example. So basically all around a consumer's life, people are increasingly using AI and it's not slowing down. Now, what I found really surprised was the older generation when I first looked at the number. But when you think about it, Ron, it all started with conversation commerce. It's so much easier when you can talk and get assistance. It's almost like you have a buddy that you ask to do the research to compare prices.

3:17And then I think the third layer of it is the availability. so you know people start using chat gpt and now you can even make your purchase all within the same app so overall it's just easier the usage is spreading and the older generation are definitely catching up because of the ease of use yeah so it's really interesting and i think you're right maybe some unexpected numbers but it but what you described makes sense and i i wanted to also ask how the things like economic pressure and this kind of maybe price comparison that you met, how is AI impacting this? Because it's certainly on everybody's mind right now.

4:03Well, thanks for asking that because we also try to find out what's impacting not just shopping, but also spending and lifestyle choices. So what we find out is over 50 % across all countries, people are feeling the economic pressure. But when we ask more questions about how their behavior have changed, how their selection, how their purchasing and spending habits have changed, it boils down to almost like two groups of people. There's about 30 % of them say, oh, I have to trade down, I have to maybe buy more store brand, just more affordable options, right, to stay within the budget. However, we do find about 20, 25 % of consumer, they're saying that, okay, so I'm under pressure, but I'm still buying the brand that I trust, even if it costs more.

4:59Then we find about 20 % of people that says, yes, I'm being careful with some category, but occasionally in other category, I do splurge. And then we find that the 20 % of people that says, I buy less, but focus on more high quality product. So how does AI come in and help, right? So different people are looking for different criteria. They are looking for price comparison. Some of them are excited and want to inspire with smaller brand with unique niche product. So what we find in our study is that the top use of AI is to research product, is to compare, review, and to look for deals. So these usage just support what our findings are, and AI can help our consumers.

5:50And at record speed. Yes. Which is so interesting, you know, that you could do your homework. Any time of the day, Ron. Any time of the day. Any time of the day. Well, which kind of leads me to this idea that you report on around converged commerce, which I love this term, you know, that this world of like omni shopping, but converged commerce plus AI assistance and how shopping, you're right, happens everywhere all the time. That's become really commonplace. But I think what the evolution here is, is around personal AI shoppers and blending store and digital and social and all channels. And so I think we're well beyond what we used to just call omni-channel.

6:42We've moved well past that. And so what are you seeing? What are the trends on this topic? Because this is a massive one. Right. So first of all, people do still go to store. And when we ask the question, Yes, they do. When we ask people, where do you typically shop? Store came up to be over 70%. So it's almost catching up back to before COVID time. So people do still enjoy the store. What people are doing in the store is that they are equipped with digital device. So they still use mobile shopping. They are almost doing it like a live verification, validation. So this Converge Commerce is just expanding.

7:29So instead of going into different apps, like if you're in the store, you want to look at Amazon prices, maybe you can just talk to ChatGPT and over a conversation with commerce and just get things quicker, like you said, right? and more comprehensive information. So the difference this year that we see is, like you said, you have an assistant joining your shopping journey, very actively providing you advice, giving you information, answers that you're looking for, all at your fingertip. Yeah, and it's true. And what that really does is change the way we have to think about the front line and brick and mortar businesses and how we hire, how we train and develop.

8:16And I know that's not the intent of your study, but the output then of 70 % of customers say, I'd love to go to the store and see it. We, in leading the front line, really have to think differently then of what does that mean? What's the customer expect? What have they already done research on how do they have an assistant and an agentic assistant on their phone in their hand as they're shopping along with a live sales associate so there's i think there's so much here that we have to pay attention to that the traditional way we've thought about brick and mortar from an ai perspective really has to change yeah and i think just to tag on to what you said is now everybody uses assistant and very soon these assistants are going to graduate, Ron.

9:06They're going to become an agent. So in many cases, they will have increased responsibility making more decisions for you if you can provide the rules for them and guardrail for them, right? So I think it's even more important for retailers and brands to recognize that. Right. And do you have any advice around how they should prepare How do they prepare for this world that is often kind of AI first? It's where I read something this week around, you know, AI is kind of the brain and the brick and mortar business is the body of this. How do you think about this evolution of an AI first world in our business?

9:48Yes. So I conducted multiple executive interviews for this study to verify the findings and also learn from an industry leader, you know, what's important for them, what's some of the practical things that people are working on. And what I find is, and also based on other IBV executive research study, 70 % of retail consumer product executives are saying that they need to really standardize AI integration. So what that means is you need to enable your AI model to securely connect and interact with your data that is ready to be readable and consumable and that the apps need to talk to each other.

10:35we focus a lot about consumer facing, using AI to improve the customer journey. But I think for brands and retailers, we also need to look within the organization. How do you make sure you can integrate your data and that your data is usable? Right. And I guess when I think about that and the data piece and the speed at which this is moving, because the customer expectations are changing very quickly. Are there things that brands can do today to prepare for themselves in this kind of agentic, autonomous world? What are some steps they can take today? Yes, so that's a great question. It's really, you need to, other than getting your pipe, your plumbing working, making sure people's information flow, is to really get your data ready.

11:34So because now think about all the product data that you have, you're now going to have machine and algorithm reading it, verifying it, right? So if let's say you have a supplement that you guarantee people will grow one inch taller after one year, you better have proof for it because AI is going to read it and going to call you out. Not the person, but, you know, because AI can process information so much quicker and faster. So you've got to make sure that your product data are ready and that it's transparent, it's accurate. Now, and then there's another layer of data, which is the consumer data.

12:13You need to earn their trust. Because in order for you to personalize, Ron, you know, retailers all collect data. But you've got to have customer intention data, the lifestyle data that they're willing to share with you. So in one of ours, in this study, in this consumer study, there's a pretty large percentage of consumer, 80 % plus, have multiple concern with data privacy. They worry that, you know, if that data is going to be sold. So you need to earn that trust for you to have the consumer share beyond the transaction data with you, if that makes sense. It does. And I guess I'm also thinking about what you had mentioned, shopping via ChatGPT, which is not today.

13:07You are not served ads. It's not paid to click. And so there's very much a lack of how do I attract new customers? There's a customer privacy concern. And do I even know who they are? And so I think that puts a real pressure on brands that have for years really led with customer acquisition via marketing channels and Google ads and all kinds of things. So how is that shifting the business here? Yes. So, you know, in our study, that's one thing that from our executive survey that all the executives are trying to figure out. And it depends on the brand, right? It depends if you're selling something that may be more of a grocery is replenishable, you will do it one way.

13:56Or if you are more high-end retailer, you need to have your value proposition out and clear so that it will be amplified. So what AI can do is amplify it quicker and faster for you. So for your brand value, I think for every one of us who worked in retail for a long time, you've got to remember what your brand stands for, what does the retailer stand for, and you've got to get the value proposition out there. Because like you said, with ChatGPT, you cannot yet pay your way. Yet. You cannot yet pay your way to get your brand into the shortlist, right? So that's why you need to make sure your brand value, your value proposition is clear.

14:45Because when an agent go look for information for the shopper, it has a set of criteria to look for. You want to make sure you get on that radar if you fit. So with the algorithm, with the machine, it's really all about the data to getting it right. But then don't forget the emotion connection with your consumer as well, right? So, yeah, it's a lot of work. It's tricky. It's tricky. It's tricky. Tricky. So, Jade, if there's one thing as we wrap up here that retail leaders could do today, as we were thinking about NRF, we're thinking about 2026 and beyond. and we've seen how fast 2025 has moved in this conversation, what's one thing that they could do today to start to be prepared?

15:39Well, they need to, this is not an afterthought. You have to make sure strategically you know where your brand stands for, and you've got to make sure the experience supports that, and also the data. data is really important because it it impacts your ability to get on the short list and also to have a better experience for your consumer right so you don't you want to win consumers trust so you got to have a strategy you got to think ahead think bigger picture who are you what does your brand stand what does your brand stand for and then have the data and experience to support that. Amazing. And where can people find the study to learn more about this?

16:28Yes, so the study is not yet launched. It will be launched on January 7th and it will be from the IBM IBV website. It will be available. Great, great. Well, Jane, thank you for your insights. As we continue to learn that AI is not just replacing the shopping journey, it's joining along with us. And consumers, I think, are more ready than we think based on your data. And I'll link the full IBM study in the notes available January 7th. Again, this is Ron Thurston for Retail in America with a limited series here sponsored by IBM. We'll see you on the next episode.