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Suzy Davidkhanian: Hi, everyone. Today is Wednesday, September 16th. Welcome to eMarketer's weekly retail show, Reimagining Retail, an eMarketer podcast made possible by Bird. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Suzy Davidkhanian, and on today's episode, we're talking about what has changed heading into the holiday season, and whether AI could ease one of retail's biggest margin challenges or make it worse.

Suzy Davidkhanian: Joining me are podcast regulars, Principal Analyst Sai Kanabas. Hey, Sai.

Sky Canaves: Hey, Suzy.

Suzy Davidkhanian: And Senior Analyst joining me in studio, Arielle Fager. Hey, Arielle.

Arielle Feger: Hi, Suzy. I'm holly jolly happy to be here today.

Suzy Davidkhanian: Arielle, we're so excited- ... to have you too. Thanks- I love

Arielle Feger: the holidays.

Suzy Davidkhanian: Thanks for bringing that on. I can't wait for this discussion.

Suzy Davidkhanian: This summer, we forecast that US retail sales will surpass $1.4 trillion, growing about 4% over last year, and we've already started to see some holiday merchandise showing up in stores. We're moving from planning to really truly execution, and the holidays really is a unique time because people are buying products for others instead of for themselves, which inevitably contributes to a wave of returns throughout the season and well into January.

Suzy Davidkhanian: So today, we're gonna talk a little bit more about how AI could help shoppers make better decisions and mitigate some of the risk for retailers and anxiety for gift-givers. The holidays are unique because the person buying the product often isn't the person using it, which contributes to a wave of returns throughout the season and into January.

Suzy Davidkhanian: And yes, AI could help shoppers make better gift decisions, and even mitigate some of that risk for retailers, as well as anxiety for gift-givers. Or it could make comp shopping and deal hunting that much easier, leaving retailers with the worst of both worlds, selling an item on the cheapest in December and still taking it back in January.

Suzy Davidkhanian: So today, we'll look at what back to school tells us about the holiday shopper, who's really winning with AI, and the one move retailers still have time to make. But before we get started, I wanted to ask you each, have you noticed any holiday decoration or merch out in the wild? I'm gonna start with me 'cause you guys don't ever know this question ahead of time.

Suzy Davidkhanian: I actually went to a suburban Costco, and there were aisles in the middle, which is the impulse section, of both Halloween and holiday stuff, and I was surprised. One on top of the other. Sky, have you noticed anything or not yet?

Sky Canaves: Oh, yeah. Well, I live in suburban Costco land- ... so I go to several Costcos, and I'm almost inured to it.

Sky Canaves: And I think I was somewhere else with my daughter, and yes, there was Halloween on top of Christmas or vice versa. It's all become very normalized now. I definitely...

Suzy Davidkhanian: I was... I'm not usually in a Costco, so I was shocked. Ariel, have you seen anything in the city?

Arielle Feger: I haven't. I don't shop at a lot of very large retailers.

Arielle Feger: It's a lot of smaller New York City grocery stores and, uh, pharmacies, so not as much yet. Um, but it doesn't shock me that they're, they're rolling it all out together.

Suzy Davidkhanian: The, the h- the holiday creep is creeping in

Arielle Feger: even-

Suzy Davidkhanian: And you know what? ... it more in.

Arielle Feger: It kind of makes sense to me. Uh, if you want... You know, if you're gonna decorate your house for Halloween, you're probably gonna decorate your house for Christmas, so it's likely- That's true

Arielle Feger: you know, get it all at once.

Suzy Davidkhanian: That's true. Sky, since you did your report in July on the holidays, a lot has happened, and the holidays is the number one volume-driving season for retailers. So I thought instead of asking you guys lots of questions, we could do a segment, and we can start with if you were CEO for the day.

Suzy Davidkhanian: We're at this interesting point right now in the calendar in terms of the merchandise is starting to trickle in, but retailers still have a little bit of time to adjust some of their marketing, especially digital, and even their promotional plans. So at this moment, we're kind of, like, pre-season sort of.

Suzy Davidkhanian: What's the one thing keeping each of you up at night for this holiday season? Sky, I'm starting with you.

Sky Canaves: So one of the wrinkles that's emerged since I published my report a few weeks ago is listening to the retailer earnings calls the past few weeks, and they're all talking about these tariff refunds that they received.

Sky Canaves: And some of the big ones, like Walmart- Got $2.7 billion. So it's got this enormous tariff refund war chest, and a lot of these retailers have made very clear that they're going to use this money to lower prices for consumers that are under increasing stress, um, which is one of the trends that we had noted in, in my, in our report that, you know, the, the holiday season sales are likely to not accelerate at all for many categories.

Sky Canaves: Um, so I'm thinking, you know, how much more promotional is this holiday season going to be compared to the last couple of years, which have already been pretty promotional? Um, how strategic are the big retailers going to be about saving some of their tariff refund money to use it where it makes the most sense and where they can, you know, drive the most sales from it and steal share from others?

Sky Canaves: Um, I think we saw that happening with back to school, and I think they'll do it again during the peak holiday season.

Suzy Davidkhanian: Arielle, what's keeping you up at night?

Arielle Feger: Um, AI visibility. You know, I think the world of the way consumers are discovering and buying products is changing every single day. The platforms, the AI platforms and chatbots themselves are changing every single day.

Arielle Feger: And so if I were a brand, I would really be scrambling to try to figure out how to stay on top of all of those changes and really, like, be able to be everywhere at once. Um, and I think, you know, th- the most interesting part is, you know, we're still kind of, uh, I think early in the game of, like, making purchases through AI.

Arielle Feger: I, I don't think we're, we're quite there yet, but there is... it is becoming such a big part in the discovery process that it's, it's gotta be part of your plan. And if it's not part of your plan, then I, I think it's, it's... you're gonna miss out.

Suzy Davidkhanian: It's interesting 'cause you guys are worried about two completely different things, right?

Suzy Davidkhanian: One, on the one hand, it's like margin and making sure you keep your margin as intact as possible, and on the other hand, it's like, will they even find me for me to put myself on sale for them to purchase me? It's tricky, right? There's so much to think about. I would throw in, I would kind of worry about the consumer health even.

Suzy Davidkhanian: Like, will they even have enough money to buy as many gifts- Yeah ... even if you put them on sale?

Sky Canaves: And that, that's what, that's what drives, I think, the concern about how promotional you have to be to get those consumer dollars. I, I, I was driving my daughter to school this morning, and I bought gas on the weekend that was already more expensive than I remember.

Sky Canaves: And this morning, it was more than 10% higher than what I paid a few days ago. Wow. And that's not just gas, but if anybody wants to or has to travel during the holidays, they're looking at much higher airfares this year. Um, and During that peak season. So that's gonna cut into the budgets for everything else for a lot of consumers.

Suzy Davidkhanian: Oh, yeah. And electricity, right? So from the diesel, it's like the flood gates open around how much is being spent on non-gifts out of your budget that typically your, your fixed costs are changing, so that means your variable costs will also inevitably have to change. Yeah.

Arielle Feger: Lot of pressure on the consumer.

Suzy Davidkhanian: Okay. Well, that brings us really well to segment number two, who wins? This is a new one. I'm really excited about this one. I'm gonna give you guys several ways that AI could show up during the holiday shopping season, and for each of these, I want you to tell me who benefits the most, the shopper, the retailer, or both.

Suzy Davidkhanian: So my first one, Arielle, I'm starting with you, gift discovery and recommendations. Who wins?

Arielle Feger: Okay. So if it's done well- Both, right? I would say the shopper wins because they're personalized, they're more targeted, they're things that they're looking for already. And then of course, the retailer wins because that hopefully is driving a sale.

Arielle Feger: Done badly, neither. Um, and- and that's kinda the inverse. Um, you know, if- if you're seeing, um, recommendations that don't make any sense to you at all, um, certainly you're not gonna buy them. And, uh, it's- it's kind of a- a either win-win or- or a lose-lose.

Suzy Davidkhanian: Lose-lose. Sky, is there a world where it could be win-lose?

Sky Canaves: N- not that I can really think of, although sometimes I think the retailer might come out on top, especially if you're a big one that has a lot of data about your customers and you know, like, how much they might be willing to pay. Or if you have advertising in your AI conversations showing up, it could steer shoppers in one direction or another.

Sky Canaves: And, you know, ultimately that could erode loyalty and trust in the retailer. But I think it's more moving towards the retailers because I think when I think about last year, everything was about the platforms that were launching AI shopping assistance or capabilities like ChatGPT with instant checkout and Perplexity, and this year it's all about the retailer assistance.

Sky Canaves: Um, we saw that Claude just launched its commerce toolkit for brands and retailers. Um, and it's very clearly positioned to win the holidays and be up and running within a few weeks. But I- I do think the retailers maybe have a little more of an edge because ultimately they wanna get loyalty and get the consumers to come back through that relevance and personalization.

Suzy Davidkhanian: Item number two, price and promotion comparison. Who wins? Sky, I'm starting with you.

Sky Canaves: So I think this is where the shopper ultimately comes out ahead, but I think retailers and other players in the retail space can gain in the short term by playing this game. You know, like Google has long had its shopping price graph, and Amazon has rolled one out more recently, and part of that was a response to consumer complaints and media attention around sellers who were inflating their prices ahead of big sales like Prime Day.

Sky Canaves: So there was some growing distrust. Um, so Amazon's strategy to rebuild that trust is kind of- Bring back the price comparison tool. But it's actually AI now. So I clicked on this button that says Price History, and it launches a conversation with Alexa for shopping, um, with the graph and prompt, like, "Find me a better value alternative."

Sky Canaves: So for a brand, it's a little rough if a shopper is considering your product, seeing if it might go down in price, and you're prompted to look for an alternative that would be a lot less expensive in some cases.

Suzy Davidkhanian: It's true that it does help with conversion potentially, but it's at a big price- Mm-hmm ... for the brand or retailer.

Suzy Davidkhanian: What do you think?

Arielle Feger: I mean, I also agree. I, I think this is where the shopper wins, um, more. But, you know, as w- as Sky was just talking, I was thinking about, you know, okay, the retailers, like, like the Amazons, the Walmarts, the ones that have those third-party marketplaces, they're gonna be also winning. I mean, because no matter what, if, uh, Alexa for Shopping is still offering you cheaper things, it's still transacting on the Amazon platform.

Arielle Feger: And so no matter what, I think that's still a win for them because they get that data. Um, and I'm sure, you know, kind of whatever it is. So I think, i- it's mostly the shopper, but some of the bigger retailers who can afford to do those really, um, crazy pricing moves, um, I think might benefit.

Suzy Davidkhanian: Here's another one that, for me, the jury is out in terms of who benefits more.

Suzy Davidkhanian: AI can show up in terms of helping with fit and product. Who wins? Arielle?

Arielle Feger: I'm gonna say both. It helps retailers cut down on the inevitable return side of things, um, and it helps consumers find, um, better, uh, products and better fits. Um, so I think it should be both. But, you know, do retailers have enough data to really help them do this right is, is a question I have.

Suzy Davidkhanian: I mean, I, I agree 100%, right? Yeah. If you don't have the right data, it's gonna be a botch for everybody. What do you think, Sky?

Sky Canaves: And that's the part that's so hard to get to from the consumer perspective because for it to really work and have that true perfect fit match requires a level of intimacy with the body that is very hard for consumers to share with retailers or AI assistants.

Sky Canaves: Maybe the AI assistants, once they become personal and close enough to us, will be able to capture our measurements and all of that. But that's, that's really where the challenge is. I mean, cons- the retailers can, can share so, try to put together so much data from their end about different products and how they're sized and the customer who wears this, your size.

Sky Canaves: typically also buys this size for this brand- Mm-hmm ... or this product is frequently returned, and this one is frequently kept, that can kind of give you indications. But there's, it's still no match for trying something on in person.

Suzy Davidkhanian: And we've been talking about, like, AR, VR to try and help with fit. I mean, we've tried a lot of different solutions in AI.

Suzy Davidkhanian: While it will be helpful probably to get more context faster, I do think for gift giving there needs to be one more element, right? It's not just enough that there's an AI tool. If I'm buying something for my mom-

Arielle Feger: Yeah ...

Suzy Davidkhanian: and the assistant doesn't know me well, it almost adds an extra layer of complexity.

Arielle Feger: And I think that really adds to the value of in-store shopping, right? Like, being able to see something in person. And maybe you don't know ex- the exact size, but you're like, okay, you can at least kind of eyeball what it looks like. And, and I think that's gonna remain important no matter what.

Suzy Davidkhanian: So my last one is will AI help shoppers, retailers, or both as it relates to returns and exchanges?

Suzy Davidkhanian: Sky, let's start with you.

Sky Canaves: Um, I think it, it helps both. One big draw for retailers, I think, the, the baseline is kind of flagging the return fra- fraud, the serial returners, authenticating returns and conditions. Um, but then you can get more into ways of meeting the consumer where they are in terms of their return expectations.

Sky Canaves: Because return policies that make shoppers pay when they're not aware of it really upset shoppers and can really turn them off to a brand or retailer for the long term. So that's something that I think retailers really want to avoid, and make consumers feel like they're at least getting a fair deal or not Having to pay for a return when they didn't think they would.

Sky Canaves: Um, and I think AI can be deployed to, you know, make more nuanced return offers, um, and revenue, offer revenue retention strategies that you can tie to a customer relationship. For example, through the loyalty program. So there are a number of loyalty programs that offer perks with membership, like free returns, longer return windows, things like you can still return a, quote-unquote, final sale item.

Sky Canaves: These kinds of things that I think can build goodwill with customers who need to return products. And maybe there's ... And there are ways to figure out what type of return would work best for a shopper. Even just helping them to find, like, the most convenient location, and track their refund, or how long it's gonna take to get a refund in a more conversational and personalized way.

Suzy Davidkhanian: That's the thing. It feels like AI's just helping potentially with more personalization that is really truly that one-to-one that we've been talking about for a long time. What do you think, Arielle?

Arielle Feger: I mean, I agree with Sky. I think both benefit. But I'm, I'm a little skeptical about, like, are we there? 'Cause, a- again, I, I'm not sure.

Arielle Feger: I haven't used AI to help me with the returns process. But it does feel like something that ideally could really provide you with a lot of information beforehand. But in terms of, like, okay, I, I have something I would like to return. How can I return it? I, I d- I'm not sure I'm seeing as much of the helpfulness there.

Arielle Feger: So, um, I, I think it could help, uh, it, prior to the, the purchase. But after the purchase, I'm a little skeptical if, if we're there yet.

Suzy Davidkhanian: Well, we've been talking a lot about this, Sky and I, because, um, I did a Grow New York and, and it was someone who was really talking about ... And we have a few folks that we work with that really think about the post-purchase.

Suzy Davidkhanian: Mm. And I think this is where it's the agents one day will come and help so that when you do have such a great experience getting to your product, and you convert faster. If you need to return it and it's not the same good experience, that you might abandon that brand or retailer. So it is really important.

Suzy Davidkhanian: I just think, like you said, we're just not there yet. Which leads me to think AI is good for everybody, but the underlying data and the underlying experience needs to, to hold whether you use an AI tool or not, and it needs to be transparent. And then I think from my perspective, one of the things that we kinda touched on was that who gets to be blamed-

Arielle Feger: Hmm

Suzy Davidkhanian: when the AI answer is wrong and the consumer expectation is not met? So that's the tricky part, and acute during the holiday season when everybody's already kind of stressed.

Arielle Feger: Yes.

Suzy Davidkhanian: Moving on to our last segment, the last move. You each get one last move before holiday shopping really accelerates. You can change one element of your digital marketing, promotional, or customer experience strategy.

Suzy Davidkhanian: What are you changing? Arielle.

Arielle Feger: I'm going in all in on free shipping. Um, I think that that is... That's okay, right?

Suzy Davidkhanian: Yeah, of course. You can pick whatever move you want.

Arielle Feger: I was like, is that allowed? Yeah, so going all in on free shipping. I think, uh, I was just looking at some data from impact.com. Um, free shipping was the top preferred type of deal for end-of-year holiday shopping by 46% of customers.

Arielle Feger: Um, and 54, 54% say free delivery would influence their choice when choosing between two re- retailers offering the same product. So I think it's, it's simple, uh, if you can afford it, uh, which I guess is part of the problem. But I think it's just such an important thing, um, that customers really appreciate it.

Arielle Feger: It feels like you're not adding another fee onto something that you were, you know, you want to gift. And I, I think that's just really gonna help go the extra mile.

Sky Canaves: And does that include free return shipping, too? Mm. That's a big one.

Arielle Feger: It could. I mean, ideally, yes. If you can make that work. Margin what? Yeah, exactly.

Sky Canaves: Yeah. It's the holidays.

Suzy Davidkhanian: Let's sprinkle some fun into your life. I love it. What do you have, Sky?

Sky Canaves: So I wanna run a live stream on TikTok Shop, because I think this is where growth will still be popping during the holidays. Um, for this year, 2026, we had forecast TikTok Shop's online sales growing by nearly 50%.

Sky Canaves: Um, and a good share of that is coming from live streaming. And we know that both of these accelerate during the holiday season, because TikTok Shop just becomes a lot more promotional, and you also have people spending more time looking for inspiration, gifts for others and themselves on the platform.

Sky Canaves: It really taps into its discovery e-commerce. So that would be my pick. Um, live streaming's starting to have a little moment in the US when it's, works to combine engagement with entertainment. So I think I would look at it not so much As simply a sales channel, but also look at its marketing impact and the halo effect in measuring its success.

Sky Canaves: Because we know that extends to Amazon and D2C and physical retail, but not everyone has the tools and teams to fully grasp that. So, you know, I would want my campaign to be kind of fun, behind the scenes with people and experience driving it, rather than just product focus. So it's more like telling a story that happens to sell products.

Suzy Davidkhanian: I love that, 'cause then you can also clip the videos and use them on your website or, like you were saying, on Amazon- Mm-hmm ... or anywhere else. Multi-use. I'm all in for live streaming. I'm waiting for it to get big here.

Arielle Feger: Yeah. If I had a second pick, uh, live stream was gonna be

Suzy Davidkhanian: one of them. Wait, what about me?

Suzy Davidkhanian: I have an idea too. Oh,

Arielle Feger: I'm so sorry.

Suzy Davidkhanian: Here's mine. It's a true story. I went to a men's D2C brand that now has stores, and they have in-store gift lookup. And I don't understand why everybody doesn't do that. If you have a loyalty program, I literally went and said the name of the person I was buying a shirt for.

Suzy Davidkhanian: Mm. They checked to see what the person already had purchased from the store, and their size. And so I didn't buy a duplicate, and I bought it in the right size, and it was a win.

Arielle Feger: That's

Suzy Davidkhanian: lovely. And I don't understand why more store... It was UNTUCKit. I think it's okay to say the name. It was UNTUCKit. And it was brilliant, and it made my life so easy that I don't understand why more companies don't do, like, some sort of way of helping you find the perfect gift based on everything they already know about that person.

Arielle Feger: Yeah.

Suzy Davidkhanian: That, that's mine. Yeah.

Arielle Feger: I think that's, that's so smart.

Suzy Davidkhanian: I wish we could keep talking about this. I love talking about the holidays. Thank you, Arielle.

Arielle Feger: Thank you, Suzy.

Suzy Davidkhanian: Thank you, Sky.

Sky Canaves: Thanks. This was great.

Suzy Davidkhanian: And thank you to our listeners and to our team that edits the podcast. Please leave a rating or review, and remember to subscribe.

Suzy Davidkhanian: I'll see you for more Reimagining Retail next Wednesday. And on Friday, join Marcus for another episode of Behind the Numbers, an eMarketer podcast made possible by VERVE.