Why AI Chatbots Are the New ‘Must-Have’ for Online Retailers

The days of writing SEO-friendly copy that would be enough to bring customers to a brand’s website will soon be a thing of the past, as AI chatbots increasingly take over search queries.

According to David Hunter, CEO of SEO analytics company Local Falcon, Google’s new AI Overviews and AI Mode are transforming the rules of search.

“It is fundamentally changing the search engine optimization (SEO) universe,” Hunter said in an interview with PYMNTS. “It’s not just a little algorithm update. … The concept of being visible in a search engine is changing dramatically.”

Previously, businesses could optimize content for Google’s bots that crawl websites by building inbound links and populating pages with keywords.

But Local Falcon’s research showed that Google’s artificial intelligence (AI) now analyzes queries differently, using large language models to produce conversational results based on contextual understanding of user intent.

The findings show a “significant shift” in how Google determines which businesses show up and in what order, according to the company.

Its new study, which analyzed 60,000 search results across over 4,400 businesses in 20 countries, discovered that AI chatbots often bypass traditional SEO metrics such as link volume or page ranking, relying instead on relevance, prominence and authority.

That means brands that surface in AI responses are those that offer “citable evidence” of expertise, such as real data, FAQs, testimonials and contextual content that AI can easily access, the study said.

Read more: Google Unveils Sweeping AI Upgrades Across Search, Android and Cloud

It’s no longer about stuffing keywords and hoping for traffic, Hunter said. Brands have to write good content that has conversational relevance and provide proof that “you know what you’re talking about.”

The good news is that it means small businesses with proven expertise can land at the front of an AI chatbot’s search results.

For example, stores shouldn’t just say they are the leading retailer in a niche product but actually prove it by explaining why they’re the best. It also helps for the brand to be mentioned in places like social media.

For smaller businesses, it’s an opportunity to compete with larger players — if they provide genuine value and clear proof of expertise. “It gives smaller stores a shot at being found if they play it right and they’re really good at what they do,” Hunter said.

Search plays an important part for retailers, with nearly half of consumers globally shopping digitally on their smartphones, according to a PYMNTS Intelligence report, “The 2025 Global Digital Shopping Index: The Rise of the Mobile Window Shopper and What It Means for Payments.”

Six out of 10 consumers browse for goods on their smartphones several times a week — with a third browsing merchant websites daily or almost daily — and half used smartphones to make retail purchases.

Location Doesn’t Matter in AI – for Now

A key focus of Local Falcon’s research is the impact on localized search, which is the bread and butter of local mom-and-pop stores.

One surprising finding from Local Falcon’s white paper is that explicitly including a location in a search query can sometimes decrease the chances of being included in an AI Overview.

“There were fewer uses of AI Overviews if the location was mentioned,” Hunter said. “That just goes against everything that I thought to be true.”

Hunter thinks that Google transitioning from traditional search to AI-powered search is the cause of this surprise finding. Ultimately, location will continue to play an important part in search even for an AI chatbot.

Location-based marketing and messaging is a powerful tool that drives higher engagement, foot traffic and revenue, according to Radar CEO Nick Patrick.

Location is important not just for retailers but also for financial services — to do things such as find bank branches, real-time fraud detection and geo-triggered cash back promotions through retail partners, Patrick said in a recent interview with PYMNTS.

But instead of location, the AI appears to favor authoritative results from sources including social media, Reddit, and other community forums, which were previously not prioritized by traditional algorithms.

Google’s AI looks at sources such as TikTok, Reddit, Facebook and Yelp to build a response, said Hunter. So if someone on Reddit says a certain car dealer is the best place to find a Hyundai, it carries real weight.

In traditional search, Reddit isn’t generally considered a high-authority source because it is a collection of people’s opinions. But Reddit is authentic because anonymity lets people be candid, Hunter said.

Read also: When Chatbots Replace Search Bars, Who Wins at Checkout?

However, the rise of AI Overviews also poses a challenge to businesses that rely on web traffic. With AI summarizing content directly in its response, fewer users are clicking through to the website.

“You know what marketers are most worried about?” Hunter said. “I’m not getting clicks anymore because you see the answer right there. I don’t need to go to the website now.”

Instead, he said companies must prioritize visibility, tracking how often and where they are mentioned online, even if it doesn’t result in a click.

Despite the chaos that AI Mode might bring to marketers, Hunter remains optimistic. “The traffic [Google] is bringing is going to be much higher quality,” he said. “The value of the traffic is going to improve.”

For example, Hunter said that he had been looking for automatic shades for a half-circle-shaped window and struck out using Google Search. But ChatGPT found one manufacturer that made exactly what he needed.

Ultimately, Hunter believes marketers must embrace the new rules.

“It’s going to be very interesting to see what happens over the next couple of months as they introduce this AI Mode and make AI Overviews like an omnipresent thing,” he said.

Read also: Why Location Is Personalization’s Superpower for Merchants

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