AI Agents Reshape Retail Power Dynamics

AI tools are quietly but decisively shifting power in the retail landscape. Consumers are increasingly relying on conversational agents like ChatGPT or Perplexity to evaluate options, summarize reviews, and even complete purchases. This shift challenges traditional intermediaries and redistributes influence between retailers and brands.

From Balance to Imbalance

In the early days of retail, brands and retailers shared relatively equal footing. However, the rise of e-commerce gave online retailers direct access to customer-level data, allowing them to optimize pricing, tailor recommendations, and build advertising businesses. This made retailers gatekeepers of both transactions and influence.

A Second Power Shift Begins

The rise of AI agents is making retailers less central to consumer decision-making. These tools can search across hundreds of sources, weighing options against consistent criteria like price, availability, and service quality. Unlike humans, they don’t default to familiar sites, leveling the playing field for smaller players and boutique designers.

Retailers like Amazon, with efficient logistics and user-friendly service, are well-positioned to meet the high standards of AI agents. However, mid-tier players offering neither standout service nor pricing will face increasing pressure.

Brands Face a New Visibility Test

For brands, this shift creates both risk and opportunity. AI agents are designed to detect equivalence, meaning generic products may be recommended over premium brands unless the latter offer demonstrable superiority. Brands must invest in AI Agent Optimisation (AAO), ensuring their product strengths are clearly measurable and machine-readable.

AAO will compel brands to shift from brand-first messaging to need-first positioning. Consumers and their AI agents are more likely to search for the best product for a given scenario, such as "What’s the best carry-on suitcase for frequent flyers?"

The Four Levers of Distinctiveness

In this new environment, four levers will matter most:

• Price: Competitive pricing or entry-level models to defend against generic substitutes.
• Innovation: Features, materials, or performance that are hard to imitate.
• Design: Aesthetics and usability that resonate with users and appear in feedback.
• Service: Support, warranties, or return policies that show up in agent-indexed forums.

For example, Ikea wins on affordability for wireless phone chargers, while Zens competes with better charging speed and more coils. Both can succeed if their value is clear to AI agents.

The Rise of AAO as a Complement to SEO

The path forward isn’t about abandoning brand building but about building brands that speak to the new gatekeepers of consumer choice. Brands must assume their first encounter with consumers may be through a machine’s logic. AAO will emerge as a new discipline, akin to search engine optimisation (SEO).

Brands offering little more than name recognition, without tangible value or differentiation, may struggle. Long-term success will hinge on being both discoverable and meaningfully distinct.

This is an adaptation from an article published in the Harvard Business Review.

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AI: Disruption and Adaptation

Delve deeper into how artificial intelligence is disrupting and enhancing sectors – including business consulting, education, and the media – and learn more about the associated regulatory and ethical issues.