Woman sitting on her sofa in her living room smiling at her phone and laptop while shopping.
This year, tech firms Meta, Shopify, and Google released new AI tools designed to help merchants sell and to help consumers shop. — Getty Images/Natsarin Kanna

Why it matters:

  • New AI commerce tools are expected to drive $194 billion in sales this holiday season, with accelerated growth next year.
  • More than 70% of U.S. consumers said they believe AI will make it easy to discover new products, and 30% said they regularly use AI to get personalized product recommendations.
  • AI e-commerce tools have the potential to save small businesses time and money and help level the playing field for small companies.

This holiday season marked the beginning of a new retail era — the era of artificial intelligence (AI)-enabled commerce.

For the first time, merchants, in large numbers, used AI tools to create new connections with customers, manage inventory, and predict trends, while consumers used AI to discover products and businesses.

Heading into the biggest selling season of the year, e-commerce software company Salesforce predicted AI would drive $194 billion in online holiday sales. During the five-day Black Friday/Cyber Monday period alone, AI influenced $51 billion in global sales through targeted offers, recommendations, and AI-powered chat, Salesforce reported.

Investment firm Wedbush Securities, in a note to investors in early December, called AI “the most transformative technology trend since the start of the internet,” and said its use by businesses and consumers is exploding.

This year, tech firms Meta, Shopify, and Google released new AI tools designed to help merchants sell and to help consumers shop. Merchants and consumers embraced the new tools, and their use is expected to continue to shape commerce in 2024, executives from the three tech firms told CO—.

Here, executives from Meta, Shopify, and Google offer insights about how they are using AI to reinvent commerce, and the impact it will have next year and beyond.

Meta: AI-improved Facebook, Instagram ads

Meta, the parent company of Facebook and Instagram, has been investing in artificial intelligence for years and is now seeing AI “coming to the forefront of our business,” Justin Osofsky, Vice President, Head of Online Sales, Operations and Partnerships at Meta, told CO—.

“We are thinking of this as the first AI-powered holiday,” Osofsky said.

This holiday season, nearly all of Meta’s 10 million active advertisers were using one or more of the AI tools the company has launched.

Meta has a portfolio of AI-powered features, including tools to automate the targeting and delivery of ad campaigns and personalize ads to specific audiences, as well as generative AI tools that allow advertisers to create engaging ad content more easily.

In September, Meta created a guide for small- and medium-sized businesses on how they can use the AI tools to drive sales, and also held AI webinars.

Some of the feedback Osofsky has heard from small business owners has focused on the importance of being able to easily tailor your ads to specific audiences.

“One thing that is coming up in a lot of my conversations with small businesses is how in many ways creative is the new targeting,” he said. That is, “figuring out how to rapidly identify and adapt your creative to reach the right audiences is an important tool.”

Business are using AI to help understand the customer better, Osofsky said, citing the example of Bylt Basics, a California-based direct-to-consumer menswear company that learned through AI-powered data that many of the customers responding to ads intended to appeal to men, were women purchasing clothes for the men. Bylt used this insight to create ads targeting a female buyer shopping for their husbands, sons, or boyfriends.

Meta is rolling out tools for creating content such as a feature in Reels, Facebook and Instagram’s video platform, that can suggest background music for a video. [The company plans to introduce more video-related options this year.]

Those tools, along with the AI-ad targeting tools, are designed, Osofsky said, to equalize the playing field for small businesses.

For consumers, AI is helping deliver ads to the right customer at the right time, he said. “We want the ads that you see on Meta to be delightful, to be relevant to your interest, and to help you discover new products that you’re excited to buy,” he said.

[Read more: Meta VP on Why Its Messaging Apps Hold ‘Huge’ Growth Opportunities for Businesses Large and Small]

The transformation of the search bar into a sales associate is a noteworthy change in consumer behavior we are seeing as a result of AI.

Russ Maschmeyer, Product Lead, Shopify

Shopify: AI as a sales associate

Shopify, the company that launched to make it easier for small businesses to sell online and has grown into an e-commerce platform used by millions of merchants, large and small, in 175 countries, rolled out a number of new AI tools this year.

It introduced Sidekick, an AI-enabled commerce assistant that Shopify merchants can use to identify top-selling products, schedule discounts and offers, make seasonal updates to their websites, or perform other tasks.

Sidekick is part of what Shopify calls Shop Magic, a suite of AI enabled features for merchants. Merchants can also use AI to recommend responses to customer inquiries, generate emails, write blog posts, and create personalized content, and even customize the tone of voice, or translate content into multiple languages.

These tools are designed to help businesses, particularly small businesses, boost productivity, Russ Maschmeyer, Product Lead at Shopify, told CO—.

“One of the biggest limiting factors to a small business’ growth is having enough time to get everything done,” Maschmeyer said. “You can’t create more hours in the day, but new AI-powered tools are helping merchants run their businesses more efficiently and get back time to focus on what matters most,” he said.

“The speed provided by Shopify’s AI features will give merchants a competitive edge.”

The integration of AI into the retail experience expanded during the holiday season, and Shopify expects to see that growth continue in 2024.

Ahead of the holiday season, a Shopify survey found that 85% of U.S. retailers were investing more in technology to boost sales.

“As a result, we’ve seen quick adoption of AI amongst merchants,” Maschmeyer said. Examples include streetwear brand NRML, which uses Shop Magic to create descriptions for its hundreds of products, and hair extensions wholesaler Private Label, which uses the AI tools to customize its content.

Shoppers also are embracing AI, according to a Shopify survey conducted in partnership with Sapio Research that found that 71% of U.S. consumers believe AI will make it easier to discover new products and brands.

“Consumers have come to expect better AI-enabled shopping experiences across all the platforms they’re using,” Maschmeyer said.

Shopify’s consumer-facing Shop app has an AI-powered assistant that provides product recommendations.

“Our new research found that 30% of U.S. shoppers say they regularly or always make use of technologies like AI-powered shopping assistants to get personalized product and brand recommendations,” Maschmeyer said. “The transformation of the search bar into a sales associate is a noteworthy change in consumer behavior we are seeing as a result of AI,” he said.

[Read more: Shopify Adds Features to Its Toolkit to Help Small Businesses Grow]

Google: AI as an ‘incredibly powerful’ marketing tool for SMBs

Google this year expanded its AI offerings to give merchants new ways to display and promote their products online, and to gain new insights into how to manage their businesses. It also is using AI to give shoppers the ability to virtually try on clothes, and see items in 3D, before making a purchase.

“AI is an incredibly powerful tool for small businesses looking to put their best foot forward during important periods like the holiday shopping season we are in right now, and also year-round,” Jeff Harrell, Senior Director of Merchant Shopping at Google, told CO—.

Tools such as Google’s Product Studio and its data insights dashboard save merchants time and allow them to focus on their core businesses, Harrell said.

The Product Studio lets sellers easily design creative backgrounds for their product photographs. For example, a merchant can edit a picture of a candle, or a bottle of hand lotion, by asking the Product Studio tool to place the image on a marble table, in front of a roaring fireplace, with a holiday tree in the background – saving the business the expense and time of an additional photo shoot.

Tony Ouyang, founder and CEO of Doppeltree, a brand that sells all-natural self-care and home products, told Google that Product Studio “allowed us to diversify our product imagery and produce high quality images in a fraction of the time it would usually take us to do it on our own or hire a photographer.”

Doppeltree has “already seen some increased engagement with our existing customers” thanks to campaigns using Product Studio images, Ouyang said.

Google’s AI-powered insights dashboard can be used to help merchants plan their advertising spend and their pricing strategy or compare their prices to other merchants on Google.

Google also is using AI to “create more lifelike online shopping experiences, helping to bring merchants and shoppers together in new digital ways,” Harrell said.

Virtual try on tools and 3D browsing are designed to replicate the experience of in-store browsing for online shoppers.

“We know 80% of online apparel shoppers say they’re more likely to buy a piece of clothing online if they feel confident about how it will look on them, and our 3D images get 50% more engagement,” he said.

[Read more: Unlocking AI's Potential for Small Businesses: Insights from Google's Matt Madrigal]

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