Marketplace Briefing: Why ChatGPT checkout could take a bite out of Walmart’s $4 billion ad business
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
Walmart’s ad business went from being “tiny,” as CEO Doug McMillon once described it, to one of the retailer’s biggest profit engines. But its new partnership with OpenAI risks undermining that growth.
The retailer’s ad business, Walmart Connect, has helped turn its e-commerce arm into a profit engine, selling search and display placements that appear across Walmart.com and its app. Last year, Walmart Connect generated $4.4 billion in global revenue — up 27% from 2023 — and nearly one-third of the retailer’s operating income now comes from ads.
But Walmart’s newly inked partnership with OpenAI, which lets shoppers buy products directly inside ChatGPT, could eventually pull traffic and ad dollars away from the same website that made its advertising business thrive.
The partnership makes strategic sense in several ways. ChatGPT now drives roughly 20% of Walmart’s referral traffic, Modern Retail previously reported. It’s worth noting, however, that referral clicks account for less than 5% of total site visits. A working paper authored by OpenAI’s Economic Research team found that around 2% of all ChatGPT queries involve shopping, or about 50 million queries per day. Selling its wares within ChatGPT positions Walmart to capture sales if AI-powered shopping takes off.
If shoppers complete transactions inside ChatGPT, Walmart may miss out on opportunities to serve its lucrative on-site ads. “Roughly two-thirds of U.S. retail media spending still goes to sponsored search ads,” said Sarah Marzano, a principal analyst covering retail and ecommerce at at eMarketer. “If we see consumer behavior shift away from retailers’ owned and operated websites, the value of that ad inventory inherently decreases because there’s less traffic and fewer searches to monetize.”
This is likely why Amazon, which has a $56 billion advertising business built around shoppers browsing its site, has blocked AI agents from scraping its site, as Modern Retail previously reported. This means ChatGPT can’t provide real-time Amazon product links within its search results. Instead, Amazon has been laser-focused on growing its own consumer-facing AI chatbot, Rufus, among a myriad of other AI-related investments, including one feature that lets customers buy products outside of Amazon.
Still, Walmart’s decision reflects the calculation that the greater risk lies in being left out of the next big platform shift. Amazon can afford to wall off its marketplace from external AI systems — it controls nearly 40% of U.S. e-commerce spending, and 90% of its shoppers begin their searches directly on Amazon.com, according to Consumer Intelligence Research Partners.
While Walmart’s advertising margins are high, the business still brings in less than $5 billion in the U.S., compared with more than $100 billion in e-commerce sales. “If consumers start buying directly through chatbots, being absent from those platforms could put a real share of that e-commerce revenue at risk,” Marzano said. “Their ad business depends on traffic to their website, and if consumers start buying through chatbots, that traffic is going to shift either way.”
That’s still a big if. While ChatGPT drives substantial traffic, it has yet to prove itself as a sales channel. A working paper from researchers at the University of Hamburg and the Frankfurt School of Finance & Management found that referral traffic from ChatGPT converts far worse than traditional marketing channels like Google Search, email and affiliate links. Although conversion performance is improving, OpenAI will need to convince shoppers that buying through ChatGPT is as safe and intuitive as checking out on a retailer’s site.
Today, ChatGPT operates more like a search engine than a marketplace, and that model has limits. Google, for its part, tested similar embedded checkout tools before ultimately scrapping them. As a search platform rather than a one-stop retail destination like Amazon, Google excels at product discovery and price comparison — functions consumers increasingly use ChatGPT for — but struggles to turn that traffic into purchases. Its own “Buy on Google” feature was discontinued in 2022.
The same dynamic may play out with ChatGPT, according to Andrew Lipsman of Media, Ads + Commerce. So far, ChatGPT’s checkout feature has only been live for a few weeks, and it’s unclear how many people will actually use it to complete purchases. The feature currently supports only single-item transactions, so there’s no way to build a multi-item basket, as shoppers typically do on Walmart.com. (OpenAI plans to add a multi-item cart, though it has not provided a timeline for when this development will happen.) ChatGPT checkout also doesn’t appear to support retailer-specific loyalty programs or coupons, both of which are key parts of Walmart’s value proposition.
“I don’t think there are a lot of really good use cases where [ChatGPT checkout] could work,” Lipsman said. “You need a very safe, simple, low-consideration purchase, and in those cases, it’s already easy to just open the Walmart app, select the item and check out.”
What I’m reading
- Some delivery-contractor firms are pulling back from Amazon’s Delivery Service Partner program as rising insurance, vehicle-maintenance and wage costs eat into profits, according to Bloomberg.
- Amazon will increase fulfillment fees across its Fulfillment by Amazon, Buy with Prime and Multi-Channel Fulfillment services beginning January 2026, Retail Dive reported.
- TikTok Shop is pushing merchants to use a new ad tool that only links to in-app stores, angering sellers who prefer directing traffic to their own sites, per The Information.