Back-to-school shopping brought to you by AI — how Amazon, Google are positioned to win

For Alexander Lee, back-to-school shopping used to mean hours spent comparing prices, reading reviews, and figuring out where to buy a growing list of supplies for his two kids. "The pens and pencils are not that big of a deal," Lee said in a CNBC interview ahead of the Labor Day weekend. Things like "calculators, locks, back-to-school clothes, and if they're playing sports, you have to get the sports gear … when you have 30 different items, that adds up quickly," he added. Lee is an accounting professional. His wife is an elementary school teacher. They have a 5-year-old going into first grade and a 3-year-old preschooler. This year, they outsourced much of their back-to-school shopping to artificial intelligence. Instead of "rifling through all the different reviews, all the different forums, and Reddits," Lee said he used AI tools like OpenAI's ChatGPT and Anthropic's Claude to figure out which products offer the best value for their budget. Perhaps the biggest benefit is that AI can consolidate a shopping process that once required searching across numerous retailers. "There's less stress of having to go to Target , Home Depot , and Costco ," Lee said. "We don't have to do any of that because AI has been so much easier and has even helped adjust the shopping list." Lee, who lives with his family in Brooklyn, said the chatbots even told him when to buy to get the best deals. "I'm not going to wait until the month before to buy, if it's going to save me 20% or 30% [sooner]." While most public schools across the nation started school before Labor Day, which falls on Monday, Sept. 7 this year, Lee's first-grader will start after the holiday. New York State public schools go back Sept. 10. Lee's experience is increasingly becoming the norm. Artificial intelligence is playing a much larger role in how consumers prepare for school this year, particularly as families look for ways to stretch their budgets. According to the National Retail Federation's latest survey , 61% of shoppers said they used generative AI and other AI-powered shopping tools this year to find the best prices and discounts and ask for shopping recommendations and ideas. "What's different this year isn't that parents are using AI for discovery — it's that they're using it to delegate their decision-making," said Kristina Coughlin, senior vice president and general manager of creator marketing agency Trevant. "Almost 70% of shoppers are asking AI to find the deals, compare products, and summarize the reviews for them," according to Coughlin. People have been using the internet to compare prices and research products for decades. But increasingly, they're asking AI to do that work for them. For consumer-facing companies, AI is a gateway from product discovery to the completed transaction. That evolution — consumers using AI to simply search for products to now using it to delegate parts of the shopping process — is where the opportunity for Google parent Alphabet and Amazon gets interesting — especially since leading AI labs OpenAI and Anthropic are not publicly traded stocks, yet. (Both are planning initial public offerings — maybe before the end of the year.) "Shoppers are spending 30% to 40% more per order when they're shopping with AI, and they're seeing an exponential increase in AI-assisted shoppers," Aniket Deosthali, co-founder and CEO of agentic commerce company Envive, told CNBC. That's why Deosthali has been seeing "a big spike" in companies looking to expand their use of AI "so that they become more discoverable" to shoppers. Before Envive , Deosthali led the creation and launch of Walmart 's generative AI-powered shopping experiences. Google has the advantage of understanding consumer intent through its Search business and its AI model Gemini, while Amazon leans on its massive product catalog, with years of purchase history from its Prime members — and more recently, its Alexa for Shopping AI assistant. Both Club names have been building AI tools that can take complicated requests and offer consumers ways to make purchases, which puts them at the most critical points of the shopping journey. Google's Gemini Alphabet's opportunity starts with something Google has been working on perfecting for decades: understanding intent. The difference today is that as AI continues to get smarter, consumers no longer have to narrow their queries to a few search terms. Think about Lee's experience. Instead of separately searching for school supplies, children's clothing, sports equipment, calculators, and the best sales at different retailers, parents can give an AI assistant a much more detailed request such as: Here's my child's age; here's the school list; here's my budget; here are the products I still need. Find me the best options; and tell me when to buy them. Gemini AI models are improving their ability to understand precisely those kinds of longer, more detailed tasks. Google Chief Business Officer Philipp Schindler said on Alphabet's latest earnings call that Gemini "completely supercharges" Google's ability to decode nuances of longer searches that historically were more difficult to monetize. The company said Gemini has driven a 20% improvement in showing relevant ads, helping shoppers more quickly find products that match what they're actually looking for. Google is moving closer to the transaction itself. Back in January, the company launched its open-source Universal Commerce Protocol, or UCP, designed to establish a standard for agentic commerce. Retailers including Target and Walmart already live on the platform. Just over four months later, Google introduced Universal Cart, an intelligent shopping cart that allows consumers to add products from different retailers and purchase them through a single checkout. OpenAI rolled out a similar idea a few months earlier than Google, called Instant Checkout. However, the AI lab pulled back the offering in March, saying "Instant Checkout is moving to Apps, where purchases can happen more seamlessly." At the time, Bob Hetu, an analyst at research and advisory firm Gartner, told CNBC in an interview, "OpenAI underestimated how difficult the enablement of transactions was going to be." Gemini surpassed 1 billion monthly active users in August, which CEO Sundar Pichai called the company's "fastest-growing product ever." OpenAI's ChatGPT topped 1 billion back in June. Amazon's Alexa While Google knows what consumers are searching for, Amazon already knows a tremendous amount about what they buy via decades of purchase histories, product reviews, and pricing information. Amazon's Alexa for Shopping, its personalized agentic assistant, aims to personalize product discovery through a conversational AI interface. The back-to-school case demonstrates the opportunity well. Through Alexa for Shopping, consumers can snap a photo of a school-supply list and shop the items on it. They can tell Alexa for Shopping their total back-to-school budget and ask it to recommend products that balance price and quality. They can also set price alerts — and for certain big-ticket items, use auto-buy to purchase an item when it reaches their desired price. Evercore ISI's 14 th annual Amazon online retail survey found the company wins on price, selection and convenience. According to the survey, published Aug. 17, 57% of Alexa AI users bought a product they previously weren't aware of. This suggests that Amazon's use of AI should increase how much consumers discover and purchase on Amazon. Evercore sees agentic AI "as a discovery and wallet-share unlock." Bottom line The rise of AI-assisted shopping during this year's back-to-school season may be an early window into how consumers evolve their buying habits using the latest technology. For Alexander Lee and his family, AI has been a game-changer. As AI continues to get smarter, we want to own the stocks of companies best positioned to build the technology and ecosystems. Right now, those are Alphabet and Amazon. (Jim Cramer's Charitable Trust is long AMZN, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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