AI Agents and the Future of Holiday Shopping

SPEAKER_1 (0:00)

Do you want to bring Sam back into the conversation, though, and welcome in our next guest to take a closer look at the holiday shopping season. Joining us now, Tony D'Onofrio, the president of Sensormatic Solutions. Tony, thank you for taking the time to be with us. Now, you sent us over some great data, your headline data saying that US holiday store traffic is actually expected to fall by about 3.5% this year. Now, I know that there are several forecasts, Bain included, say we're going to top a trillion dollars in spending for the first time, but overall traffic will actually be up. So with this decline in in-store traffic, should we view that as a warning sign for holiday spending, or is it simply showing us that in-store traffic is becoming a less important indicator of consumer health?

Tony D'Onofrio (0:45)

Stores and online are going to play both an equally important role.

Stores are going to be fulfillment centers for online in a lot of cases. So you see companies such as Walmart, for example, using stores as distribution centers. Stores are going to play a big role. It's shifting. There is a blur between what is physical retail and what is digital retail. The two sectors are really merging as we evolve forward.

Sam (1:16)

So how should we be tracking some of the online purchases then? I mean, particularly with the growth and acceleration of all these AI agents running around, obviously, agentic artificial intelligence now doing our shopping for us. How is that likely to reshape this holiday season?

Tony D'Onofrio (1:36)

That is a very good question, Sam.

What is happening is I write a lot about the mega trends that are shaping retail. The smartphone was a mega trend that shifted the power of retail in the hands of a consumer. AI is shifting it again.

Again, it's going to put it into the hands of the consumer. It's going to make the consumer even stronger as they walk in store. Specifically, to e-commerce, AI agents are going to drive up about 20 percent of the holiday commerce. Thirty-eight percent is going to be hybrid, where you're going to do homework online using AI, where you're going to show up and do a physical purchase somewhere. That's again the blend of physical and digital. That's a trend that's going to continue to accelerate. AI is driving greater and greater consumer power going forward.

SPEAKER_1 (2:26)

Tony, what are you seeing in terms of the conversion rate and the sales per shopper? How much people are spending now that we know that a lot of shoppers are better researched and better informed when they're walking into the store?

Tony D'Onofrio (2:39)

So conversions rate was slightly down last year, but in terms of the traffic we're seeing, especially the wealthy shopper shop more, the top five holiday season are your traditional type of holidays like Black Friday, Super Saturday, the second day in December, which is December 12th, the day after Christmas and then Wednesday before Christmas. This year for the first time, Christmas falls on a Friday since 2020 So it's going to be an extremely busy week of shopping. The conversion rate to me may be lower, but the consumer are wealthier, especially if you've invested in the stock market and high-end consumers are actually spending more.

Actually, that was reflected in a headline from the Wall Street Journal this morning. The headline says, the American consumer is crashing to inflation and driving growth. So the consumer keeps spending.

Sam (3:39)

I've got a bit more of a macro question for you, Tony. I've been looking at these PMI numbers that we've been getting over the last few weeks. The manufacturing and the services we got today both show the same heat in prices.

The prices paid component ticking up to the 70s on both of those surveys from ISM. I'm wondering as we enter the holiday season and we are looking at a very sticky inflation picture. If you're more worried about demand destruction from the consumer or margin destruction from the corporate side, these retailers out of fear of not wanting to pass it on to the man on the street.

Tony D'Onofrio (4:23)

I am worried about inflation. Inflation is a headwind to the holiday season. It is impacting in terms of both the retailer and the consumer. But I do think the wealthier shopper will continue to shop and fight exactly as Wall Street Journal to the trends and to keep buying.

But I am worried that inflation is a factor, especially gasoline prices in terms of where they're at and what leaves into the wallet for the rest of the shopping activities that the consumer is available to them.