DAILY ISSUE The AI Shopping Shift Separating Retail Winners From LosersVIEW IN BROWSER Tom Yeung here with today’s Smart Money. We are all well aware of the risks artificial intelligence adds to investing. Just look at the recent “SaaSpocalypse” that rocked the software sector earlier this year. But it’s also important to focus on the investing benefits of artificial intelligence. This world-changing technology has already helped America’s economy become remarkably efficient, especially relative to those less focused on software. Median household incomes in America are now roughly 60% higher than those in Germany. Over the coming years, we believe AI will continue to help humanity in ways we never thought possible. Safer self-driving vehicles… New scientific discoveries… Breakthrough drug therapies… Not to mention the hours of custom-made video made by AI. (Personally, I’m looking forward to a 2001: A Space Odyssey remake with HAL 9000 played by MS Word’s “Clippy.”) So today, I’d like to detail a perhaps unexpected winner of the AI Revolution. It’s a cyclical sector that investors often hate for its unpredictable returns – but that is performing remarkably well in today’s wild markets…
AI Is Changing the Way We ShopNew technologies have long upended retail business models:
- The rise of railroads in the 1890s enabled national mail-order firms like Sears and Montgomery Ward, which ended up breaking a system of cozy local monopolies.
- Refrigeration and national freight networks (plus regulatory changes) allowed The Great Atlantic & Pacific Tea Co. (A&P) to trounce local grocers in the mid-20th century.
- The internet established e-commerce giants like Amazon.com Inc. (AMZN), eventually turning Borders, Circuit City, and, yes, Sears into corporate footnotes.
The development of AI shopping agents is now changing retail once again… and in ways that are surprising. On April 16, Adobe Analytics released a new report showing that web traffic to retailers from AI sources surged 393% year-over-year in the first quarter. In a study of 1 trillion visits to U.S. retail sites and a 5,000-person companion survey, the firm found that 39% of consumers now say they have used AI to help with online shopping. Eighty-five percent of them said AI helped improve their experience. Even better, Adobe found that AI traffic improved outcomes for retailers themselves. This included a wide variety of metrics, including:
- Conversion rates: 42% better than non-AI traffic.
- Time spent on websites: Increased by 48%.
- Pages per visit: 13% more viewed.
- Revenue per visit: 37% higher sales.
In other words, AI bots have become so good at understanding user intent that e-commerce websites are now gaining from better-screened customers. This stands in contrast to last year, when AI traffic converted 38% worse. 
AI conversion rates are now higher than non-AI rates That’s having a stabilizing effect on retailers with strong brand recognition. Take Birkenstock Holding plc (BIRK). Birkenstock has already announced some excellent financial figures. In February, the footwear seller said revenue grew 18% on a constant currency basis, ahead of its full-year guidance range of 13%-15%. Lower inventory levels likely helped boost wholesale B2B (business-to-business) sales, which rose 24%. In Asia-Pacific – where Birkenstock has fewer physical stores – direct-to-consumer (DTC) sales surged 37%, growing about twice as fast as wholesale. This matters because DTC allows brands to sell directly to customers, bypassing middlemen. And that model is becoming even more powerful as AI changes how people shop – shifting users from passive consumers of ads to active seekers of information. As Adobe puts it:
Consumers are engaging with large language models (LLMs) to find specific products or locate the best deals, while receiving links to relevant retail websites.
AI-powered consumers are simply more motivated than those seeing the same online ads for the 20th time. (Studies have found that ad retargeting gets less effective over time.) There’s also an “intelligence” element. AI Turns Trust Into ProfitsAI has become far smarter… not to mention better trained on user data. That means conversion rates are naturally rising; Alphabet Inc. (GOOGL) notes how advertisers using AI in its Google search campaigns see 14% more conversions at similar costs. Ultimately, AI may transform how people shop, but it does not change what they are looking for: products and brands they can trust. If anything, a world filled with fake AI-generated content will make that trust more valuable than ever. And for companies like Birkenstock, its logo is not just a branding advantage, but also a lasting competitive strength. In Fry’s Investment Report, Eric recommends several other retailers whose earnings have steadied in recent months, despite continued risks of tariffs and a consumer slowdown. That ends a downward trend that began in early 2025 after the White House began warning of broad import taxes. And a lot of that is thanks to AI. To learn more about these companies, click here. Regards, Thomas Yeung, CFA Market Analyst, InvestorPlace P.S. The retailers we just covered – and dozens of others quietly thriving right now – are what I call AI Appliers. They’re not building the technology… they’re using it to grow faster, operate smarter, and pull ahead while others fall behind. I’m putting together a free broadcast soon to break down exactly how this shift is creating a new class of winners — and the specific event on May 19 that could send them even higher in the months ahead. Keep an eye on your inbox next week for a direct link to that broadcast. |
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