<\/p>\n
Retail has officially entered its AI era. Some 91% of retailers are now actively using or piloting AI in their operations, according to Nvidia\u2019s 2026 State of AI in Retail and CPG survey. <\/p>\n
For most of them, AI has increased annual revenues (89%) and lowered overall costs (95%), materially impacting bottom lines.<\/p>\n
But some retailers, like Etsy, are taking a different, more old-school approach to improve profits.<\/p>\n
Generative AI remains the most popular application of the technology, providing services such as customer analysis and personalized marketing. However, agentic AI is rapidly expanding in the retail space. <\/p>\n
Close to half (47%) of the companies that participated in the survey say they are now using or assessing agentic AI in their regular operations.<\/p>\n
\u201cFor the first part of the AI era, the business conversation around AI was about efficiency. How do we improve a single step or a single use case? How can I make small changes to recommendations or improve my forecasting?\u201d Carrie Tharp, vice president of Global Solutions & Industries at Google Cloud, told Forbes.\u00a0<\/p>\n
\u201cWe are shifting from the digital first era in retail to the agentic commerce era,\u201d she continued. \u201cThis is where AI moves from a passive tool that offers prediction, to active, autonomous resources \u2014 an agent that can execute complex, multi-step, prescriptive actions across every consumer and operational touchpoint.\u201d<\/p>\n
Why AI is backfiring in commerce<\/p>\n
Reliance on agentic AI may simplify operations for the company, but it can have a decidedly negative impact on the customer experience. Consumers report increased levels of algorithm fatigue and frustration with AI agents, factors that can actually deter them from engaging with a company.<\/p>\n
Data from Akeneo reveals that just 45% of consumers trust AI recommendations. In addition, 38% are satisfied with AI agent interactions, and only 43% believe brands that tout their AI use are being transparent. <\/p>\n
Overall, less than half (49%) say they are “somewhat likely” to keep shopping with brands that use AI to \u201cenhance the experience.\u201d<\/p>\n
\u201cAI will continue to deeply integrate into the digital shopping experience and eCommerce platforms, but it must be done cautiously and purposefully,\u201d Akeneo CEO Romain Fouache said in a statement. \u201cAs businesses focus on delivering strong experiences and support, it\u2019s essential that trust and transparency are built into the product experience as the foundation of a strong and loyal customer relationship.\u201d<\/p>\n
In light of the growing skepticism surrounding AI\u2019s place in commerce, some retailers like Etsy are taking a different approach \u2014 betting on authentic human connections, not automation, to grow their bottom lines.<\/p>\n
Etsy is prioritizing human connection to drive sales on its platform.<\/p>\n
Getty Images<\/p>\n
Etsy\u2019s loyalty struggle<\/p>\n
From the beginning, Etsy has positioned itself as an alternative to the traditional e-commerce market. Its focus on handmade and vintage items appeals to a certain demographic of customer \u2014 one who is more interested in making a meaningful purchase than a quick one.<\/p>\n
Among other things, meaningful purchases are often defined as those that align with a buyer\u2019s principles and core values. As a marketplace for small businesses, it should have been incredibly easy for sellers to promote their values and find customers who share them.<\/p>\n
However, Etsy\u2019s reliance on its algorithms and AI suggestion tools haven\u2019t always allowed for this, creating a sizable gap between the humans behind the products and those purchasing them.\u00a0<\/p>\n
\u201cHistorically, our systems prioritized what was most likely to convert in the moment, often favoring popular items over the ones that were truly tailored to a specific buyer,\u201d Etsy CEO Kruti Patel Goyal told investors during the company\u2019s Q1 FY2026 earnings call.<\/p>\n
This focus on making a quick sale rather than building connections between like-minded buyers and sellers has kept Etsy from developing the loyalty that translates into repeat buyers.\u00a0<\/p>\n
In 2024, the platform reported a 6.8% decrease in general merchandise sales year-over-year, as well as a 2.6% decrease in active buyers. In 2025, things improved slightly in terms of sales, with year-over-year numbers increasing by 2.4% to $3.59 billion, but the number of active buyers dropped again by 3.4% to 86.5 million.<\/p>\n
Etsy\u2019s human-centric turnaround<\/p>\n
The years-long drop in sales and shoppers is an issue Etsy is addressing in its turnaround plan.<\/p>\n
\u201cPart of our strategy\u2026 leans into what makes Etsy fundamentally different, human connection,\u201d Patel Goyal told investors last month. <\/p>\n
More retail:<\/p>\n
Bed Bath & Beyond CEO sends stark warning about AI to workersAfter major changes, 157-year-old candy company returns to the stageWalmart makes key in-store change to serve growing market<\/p>\n
\u201cBuyers come to Etsy not just for what they buy, but for who they buy it from. This is one of our most defensible advantages and one that we haven’t fully delivered on.<\/p>\n
\u201cWe’ve begun taking a more structured approach to understanding how seller identity, craftsmanship, and stories influence behavior,\u201d she continued. \u201cWe now have early evidence that when we make those things more visible, buyers engage more deeply and make decisions with greater confidence.\u201d<\/p>\n
While this shift in approach is still in the early stages, Etsy says it\u2019s already seeing benefits.\u00a0<\/p>\n
In the first quarter, the platform saw a 7.6% increase in revenue, year-over-year. It also saw a slight increase in active buyers, a 6.6% increase in reactivated buyers, and a 1.5% jump in amount spent by active buyers.<\/p>\n
\u201cFor all the inventory we show them, we want to consistently highlight what makes that inventory really unique and valuable, really the human touch behind it that gives buyers confidence to purchase more,\u201d Patel Goyal said about the company\u2019s strategy going forward.<\/p>\n
Etsy executives are, essentially, proposing a return to the company\u2019s craft-fair style roots that made it a household name in the early 2000s. They\u2019re banking not on AI and algorithms showing shoppers what to buy, but on human stories showing them who they\u2019re buying from and what they\u2019re buying into.<\/p>\n
Related: Bankrupt tween retailer stages comeback with new campaign<\/p>\n
#Etsy #betting #oldschool #methods #drive #sales<\/p>\n","protected":false},"excerpt":{"rendered":"
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