What's Happening?
Retailers are rapidly digitalizing and integrating AI into their commercial processes, from pricing to negotiations, to enhance efficiency and effectiveness. This shift is compelling consumer product companies (CPGs) to accelerate their own AI-enabled
commercial transformations. By 2035, nearly half of all retailer profits are projected to originate from 'beyond trade' activities, including retail media networks, marketplaces, payments, and data. Agentic commerce, which involves AI agents influencing consumer spending, is expected to impact approximately $1 trillion in U.S. consumer spending by 2030, representing 16% of total U.S. retail sales and about 56% of total U.S. e-commerce. Retailers have gained a significant advantage in data and technology, enabling them to make millions of segmented pricing, promotion, and assortment decisions instantaneously and leverage AI agents for negotiations. This trend is particularly advanced in the U.S. compared to other regions.
Why It's Important?
This transformation is critical for U.S. consumer product companies as it fundamentally alters the competitive landscape and consumer engagement models. CPGs risk becoming irrelevant if they do not adapt, as retailers now possess superior consumer data and AI agents increasingly mediate between brands and consumers. The shift towards 'beyond trade' profits for retailers means CPGs must rethink their partnerships, focusing on data sharing, retail media, and category growth rather than traditional pricing and promotion discussions. The rise of agentic commerce also means that brand equity, as traditionally understood, may diminish, with AI agents prioritizing concrete, review-backed attributes over vague positioning. Companies that fail to integrate AI into their commercial strategies and adapt to these new 'shelves'—which are often algorithms or digital platforms—will struggle to maintain market share and profitability.
What's Next?
Consumer product companies are expected to make significant investments in AI and technology to adapt to this new retail reality. This includes shifting resources to rapidly growing digital channels, reinventing their relationships with retailers to focus on data-driven strategic partnerships, and reimagining frontline operations with AI. For instance, companies like L'Oréal are treating creator and social content as full-funnel commerce channels and using AI for generative engine optimization. Procter & Gamble has shifted to data-driven strategic partnerships with retailers in Mexico, capturing 60% of category growth. The focus will be on building proprietary intelligence through first-party data collection and leveraging AI to gain consumer insights, as exemplified by AB InBev's digital route to market and P&G's connected devices.
Beyond the Headlines
The deeper implications of this retail transformation extend to the very nature of brand loyalty and consumer choice. As AI agents become central to purchasing decisions, the traditional influence of brand advertising and marketing may wane, replaced by algorithmic recommendations based on data and reviews. This raises ethical questions about algorithmic bias and transparency in consumer choices. Furthermore, the increasing data advantage held by retailers could lead to a power imbalance, potentially marginalizing smaller CPGs that lack the resources to invest in advanced AI and data analytics. The shift also highlights a broader trend of technology-driven disruption across industries, where companies that embrace digital transformation and AI are poised to gain significant competitive advantages, while those that resist risk obsolescence.
