AI-Mediation in Retail Markets: Revenue Effects and Assortment Optimization
How AI shopping recommendations change which products stores should stock
When AI assistants filter product choices before customers see them, retailers need to rethink their entire product lineup. Stores that ignore this AI layer lose 2.5% to 11% in revenue, but a simpler strategy accounting for how AI ranks products cuts those losses to less than 0.5%.
As AI increasingly controls what products appear in online shopping flows, retailers face a new decision problem: optimize for what customers would choose if they saw everything, or optimize for what they'll choose after AI filtering. Getting this wrong directly reduces profits. The research provides a practical framework for the second scenario, which is already the reality in most e-commerce today.