Why Walmart’s Rapid Success in AI Search Should Worry Google

Planning purchases for a special occasion like recent Super Bowl parties or Valentine’s Day celebrations can usually require consulting more than one online source — or the primary source of Google — but if Walmart has its way, that will change in the future.

Walmart is discussing its ability to use generative AI as a one-stop shop when you need to plan an event, instead of an online destination to search for individual items. On a post-earnings call with analysts in February, Walmart CEO Doug McMillan talked about the app’s AI search capabilities.

“The thing that we’re most excited about that has already happened is the way that search has improved and the way that generative AI has helped us really improve the solution-oriented search experience for customers and members,” McMillan said on earnings call time. “And it happened pretty quickly.”

It also adds to questions about the future use of a search engine like Google.

Walmart has long since established itself as a major tech player, successfully fending off years of turmoil Amazon and remaining the leader in retail space, whose shares are now trading at record highs. The technology narrative is one the company has been spinning since it bought Jet.com, which was started by former Amazon executive Marc Lore, noted Forrester vice president, principal analyst Sucharita Kodali. As a technology company, Walmart has to experiment a lot, and in the case of adding AI demand generation capabilities, there is a very low cost of failure, she said.

“It establishes them as an innovator in the space,” Kodali said. “They are better off being leaders than followers in their place. They operate from a position of strength.”

However, experiments can go wrong, as they did Alphabet recently when it released the Gemini gen AI to the market before it was ready. In a rare public appearance, Google co-founder Sergey Brin said the company was “confused” about the launch, but dismissed concerns about the company’s prospects.

“I expect business models will evolve over time,” Brin said. “And maybe it’s still going to be advertising because advertising can work better, AI is able to tailor it better… I personally think as long as there’s massive value being generated, we’ll understand the business models.”

AI and search, the shopping business model is changing

Walmart isn’t the only one investing in this type of search in the retail sector. Instacart AI Enabled “Ask Instacart” allows customers to search by topic, such as dinner or meeting, rather than by item. Amazon’s AI shopping assistant Rufus allows people to have a conversation with the platform about what they need instead of just searching for items directly. Powered by Shopify’s AI “Semantic Search” helps sellers find the right items to sell to potential customers, ensuring their search results are more accurate.

“We’re going to see this become the norm for online retailers,” said Jacob Bourne, an analyst at Insider Intelligence. “Google is worried about search in general, and the question it raises is, is it going to be death by a thousand cuts for Google Search?” Bourne said.

Kodali sees the threat in terms that are less existential. The world still relies heavily on Alphabet’s core search business for many things, and some early-generation AI successes from retailers aren’t going to change that.

“You build a habit of using Google because you use it for everything,” Kodali said. “You use it for everything else (outside of shopping) and everything else is like 90 percent of the searches you do. So unless Amazon and Walmart come into the business with the other 90 percent of searches, it’s not going to happen.”

Alphabet continues to invest heavily in Gemini, as well as more specific AI tools to build into other commerce ecosystems, such as Google Cloud’s Vertex AI Search for retail and its Conversational Commerce tools, which allow companies to place virtual customer service based on AI agents on their websites and apps. Customers of Google Cloud AI products include Victoria’s Secret, Macy’s Ikea, Lowe’s and Rainbow Shops.

Alphabet lists more than 35 billion product listings from retailers globally on Google and its own AI-based tools that make it easy to find the right one. “People shop with Google more than a billion times a day, and we’ve invested in improving shopping on Google, as well as providing retailers with generative AI tools to create great experiences for their customers,” a spokesperson said.

Traditional search engines need to change. They offer thousands of results based on a prompt that people have to sort through to find the right answer. Because content production is at a high level, there is more information than ever before, and not all of it is accurate or relevant. Advertising, especially in search products, is also the main way companies like Google make money.

Instead of researching what to buy on a search engine like Google and then heading to a retailer’s website for those items, retailers’ generative AI can find specific answers, narrowing it down to a few choices and saving people time , while allowing companies to own the experience and build direct loyalty instead of having to appear at the top of search results.

“Creating great customer and member experiences is our top priority, and AI-powered search makes online shopping even more intuitive and convenient,” a Walmart spokesperson told CNBC. “A single query for a theme party can provide relevant recommendations for different categories, replacing the need to individually search for each item. This can significantly save time, resulting in a more positive experience.”

That’s something Google should least worry about, said Stefano Puntoni, a professor of marketing at The Wharton School who is also co-academic director of an executive education course on generative AI and business transformation. “Maybe when a retailer has a powerful generative AI engine on their platform, customers don’t feel the need to go to Google at all,” Puntoni said. “Maybe they can learn what they need directly on the retailer’s platform.”

It also gives companies a chance to offer more products. Brands like L’Oreal use AI to have people try on makeup virtually, which can show the buyer items they may not have been in the market for. Digital celebrities could theoretically sell products to customers through personalized AI-enabled conversations with customers instead of a pre-programmed chatbot.

“What generative AI search does is it democratizes many of the opportunities now for brands and the companies that can now also create them,” said Elav Horwitz, McCann Worldgroup executive vice president and head of applied innovation.

Alphabet also owns many brands that people rely on every day and many valuable advertising properties where results will be more relevant than ever.

“Technology companies continue to experiment with new features every day,” Horwitz said. “Google is open about it. The model of SEO and SEM will change. But I think we’ll probably see a lot of generative search or recommendations in other Google products like Gmail, Google Drive, Google Photos, and YouTube. ”