OpenAI and Perplexity are launching AI shopping assistants, but competing startups aren’t sweating it

As the holiday shopping season approaches, major players OpenAI and Perplexity have unveiled new AI shopping features integrated into their chatbots. These innovations aim to enhance the shopping experience by assisting users in researching potential purchases. The functionalities offered by both companies are notably similar, allowing users to query for specific items, such as a gaming laptop within a certain budget or similar clothing at a more affordable price point. Perplexity is emphasizing its chatbot's memory capabilities, which can tailor recommendations based on existing knowledge about the user, including personal details like location and profession. In contrast, OpenAI offers a straightforward approach with its ChatGPT, which allows for detailed inquiries. According to Adobe, the impact of AI on online shopping is set to explode, with predictions of a 520% growth this holiday season. This surge could benefit emerging AI shopping startups like Phia, Cherry, and Deft. However, the question arises: will these startups be overshadowed by the advancements of OpenAI and Perplexity in the AI shopping domain? Zach Hudson, CEO of Onton, a tool designed for interior design shopping, believes that startups focusing on specialized niches will have the upper hand. He argues that the effectiveness of any AI model hinges on the quality of its data sources. Currently, both ChatGPT and Perplexity rely on existing search indexes, limiting their effectiveness to the top results returned by platforms like Bing or Google. Julie Bornstein, CEO of Daydream and an expert in e-commerce, has echoed Hudson's sentiments, stating that the fashion industry presents unique challenges that general-purpose search tools fail to address effectively. She noted that shopping for fashion items involves emotional nuances that require a deeper understanding of various factors, such as fabric types and outfit coordination. Startups like Onton are developing proprietary datasets that enhance their shopping tools by ensuring they are trained on more relevant data. This specialization may be crucial for competing against larger companies. Hudson warns that startups using generic language models without a focused approach may struggle to stand out in a crowded market. OpenAI and Perplexity also benefit from established user bases and partnerships with major platforms like Shopify and PayPal, allowing for seamless transactions within their interfaces. In contrast, many startups merely direct customers to retailers’ websites to finalize purchases, often relying on affiliate revenue. While these large AI companies explore profitability avenues, such as advertising in search results, the potential for further complicating the shopping experience remains a concern. Bornstein asserts that businesses specializing in vertical markets, whether in fashion, travel, or home goods, are likely to outperform due to their alignment with genuine consumer preferences and decision-making processes.