As Amazon and Walmart look to generative artificial intelligence (AI) to improve their businesses and capture more of consumers’ total spending, Amazon is stepping up its investment in the space by the billions.
The eCommerce giant announced Wednesday (March 27) that it has made an additional $2.75 billion investment in AI startup Anthropic, an OpenAI competitor, bringing its total investment in the company to $4 billion. As part of the deal, the AI company will use Amazon Web Services (AWS) as its primary cloud provider.
“Generative AI (GenAI) is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next,” Dr. Swami Sivasubramanian, vice president of data and AI at AWS, said in a statement.
The companies’ work together boosts Amazon’s B2B offerings, enabling the eCommerce giant to offer Anthropic’s Claude AI to AWS users.
Investments in GenAI can have a significant impact on retailers’ consumer-facing businesses. For instance, GenAI can analyze vast amounts of customer data to generate personalized marketing content, such as product recommendations, targeted ads and customized email campaigns. By tailoring marketing efforts to individual preferences and behaviors, retailers can significantly increase engagement and conversion rates.
Plus, GenAI can automate customer service. Retailers are also using GenAI to develop virtual try-on solutions that allow customers to visualize how products will look on themselves before making a purchase. Additionally, GenAI algorithms can analyze market conditions, competitor pricing and customer behavior to dynamically adjust prices in real time.
As Amazon steps up its investments in GenAI, Walmart is looking for ways to keep pace. Earlier this year, the retailer introduced new AI features into its app, and it is using large language models (LLMs) from Microsoft’s Azure OpenAI Service, as well as retail-specific models Walmart has built itself to improve search functionality.
“The thing we’re most excited about that’s already happened is the way search has improved and the way generative AI helped us really improve a solution-oriented search experience for customers and members,” CEO Doug McMillon told analysts on the company’s most recent earnings call.
As the two retail giants compete for consumer spending, Amazon holds a commanding lead, according to data from the latest installment of the PYMNTS Intelligence “Whole Paycheck Report” series.
The study estimates each of the two retailers’ market shares in various categories based on their earnings reports from Q1 2019 through Q4 2023, in conjunction with national data from the U.S. Census Bureau and Bureau of Economic Analysis. Findings showed that, as of Q4 2023, Amazon’s share of total consumer spending hit 4.4%, while Walmart captured 3%.
GenAI is gaining ground both in the retail spaces of these two key players and in retail overall.
According to research highlighted in PYMNTS Intelligence’s December report, “Generative AI Tracker®: What Generative AI Has in Store for the Retail Industry,” 70% of consumers and executives identify retail marketing and sales as areas for further AI disruption. Plus, 77% of business leaders rank GenAI as the most impactful emerging technology.
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