Retailers like Walmart are wading into AI-powered shopping, and their ads are coming, too.
Walmart’s chief growth officer, Seth Dallaire, said this new tech calls for a more strategic approach to advertising that can improve the shopping experience.
The retail giant has been testing ads in its AI-powered shopping assistant, Sparky, since last fall, but the company has said the presence of sponsored listings in the chat is significantly lower than what customers see in conventional search results.
“We’ll be careful to watch our customers and how they’re using these tools,” he said Wednesday during the Evercore ISI Consumer and Retail conference. “Advertising and retail media will have a role to play because it helps customers shop. It’s not an interruptive experience, it’s contextually relevant.”
Dallaire oversees Walmart’s ads business, which has become a significant revenue stream in its own right over the last few years. Its revenue grew 46% last year to $6.4 billion. Its latest moves are setting the company up to capture a slice of the growing pie of AI advertising dollars.
At the same time, Dallaire is in charge of growing Walmart’s e-commerce marketplace and Walmart Plus membership program, and said ads also have to improve merchandise sales and member experience.
If ads overwhelm a customer and cause them to abandon their cart without making a purchase, that doesn’t work for Dallaire.
He said advertising can help introduce shoppers to new products.
“I like to be exposed to new products,” he said. “Advertising plays a critical role in that. In fact, it’s very similar to merchandising.”
For now, Dallaire said Walmart is benefiting more from learning how people interact with its Sparky shopping assistant than it is from the ads it has included in the chatbot.
“The types of prompts that we get from customers in those agentic environments are quite different than what maybe historically we’ve seen,” he said.
For example, a customer might tell Sparky they’re concerned about allergies and are looking for a laundry detergent that could help. Previously, they would have simply asked for fragrance-free detergent. With these longer conversations, Walmart doesn’t have to make as many guesses about what shoppers want and risk serving up an irrelevant ad.
“If that’s how our customers are coming to us to shop,” he said, “we need to orient ourselves around that.”
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