Future Department Stores Transform into Artificial Intelligence Controlled Shops
In the ever-evolving world of retail, a new paradigm is emerging - the Department Store 3.0. This modern iteration of the traditional department store is set to revolutionise shopping experiences, thanks to the integration of artificial intelligence (AI) and shopping agents.
Agents, acting as skilled associates, are poised to redefine the retail landscape. They can choose to emulate the marketplace model, layering prompts over ad spend, or reinvent the department store for an agentic age. The key to success, however, lies in monetizing their role as gatekeepers to a sale. Ad dollars and sponsored placements are no longer enough to make Department Store 3.0 reach its fullest potential.
The history of the department store offers a valuable lesson. Curation was once the solution to the problem of too many options, creating an enjoyable shopping experience and tailoring selections to customers' tastes. This principle remains relevant in the digital age, where the problem of overwhelming options is a significant challenge. Agents could potentially solve this problem, but their success depends on the playbook they use to curate and present products to consumers.
Consumers expect agents to filter, but they also expect what appears to be reliable, safe, and worth the price. Brands that wall themselves off from agents risk losing relevance, while those that open must do so in ways that protect trust. Agents can potentially offer the endless access of the marketplace with the curation of a skilled associate at scale and in seconds.
Online marketplaces have played a significant role in pulling department stores into the digital age. Access to a vast array of products has become a key selling point. However, as models diverged, department stores lost ground to marketplaces and direct-to-consumer brands. Brands, therefore, need a front door for consumers to discover trusted labels, and agents can reset the rules, with curation becoming the currency instead of spend.
The prompt given to the agent determines what goes on the curated rack. The agent shows what fits, the right mix, the right budget, and the right timing. Marketplaces like Amazon and Walmart will stay powerful due to their scale, but their own agents must deliver curation as well as convenience to maintain share.
Interestingly, some brands are putting their products on a waitlist to position themselves within the agents' algorithm to be considered for purchase mediation. Companies like Urban Outfitters offer a waitlist feature for sold-out products, which could be used strategically. However, no direct identification of brands from "Department Store 3.0" placing themselves on a waitlist for algorithm positioning is found in the search results.
The shopping assistants launched by OpenAI and Perplexity have garnered interest from half of millennials and Gen Z, who would let an agent plan and book their next trip, build their grocery list, and even handle gift buying. The convenience offered by connected devices and apps has led to shopping becoming transactional again, prioritising speed over experience and curation.
However, uncertainty about how agents decide and whether trusted brands will appear in the mix is a concern for many shoppers. Brand strength matters more in an agentic commerce world, as only brands strong enough to be remembered, requested, or demanded will make it onto the curated rack. More than a third of shoppers would trust agents to pick the right items from their prompts, indicating a promising future for this new retail model.
