Target announces partnership with OpenAI as it aims to reverse sales slump

Target (TGT) is the latest retailer to announce a partnership with OpenAI (OPAI.PVT) as Americans switch out traditional search engines for ChatGPT this holiday season.

The partnership, set to launch next week as a test, will enable customers to tag Target in ChatGPT and share what they’re looking for.

For example, customers can ask ChatGPT: “Help me plan a holiday movie night.” Customers will then be able to access Target’s assortment right on the AI platform and add items to their cart based on the recommendations ChatGPT provides. When customers are ready to purchase items from the cart, users will be taken the Target app.

Prat Vemana, chief information and product officer at Target, told Yahoo Finance in an exclusive interivew that this integration makes Target the first to do, “conversation curation in a retail space.”

Vemana said the new product needed to be a part of the “natural conversation” that shoppers are already having with the ChatGPT platform.

Data from PwC suggests 15% of Gen Z and millennial shoppers said they plan to use AI to find gift ideas this holiday season.

Vemana said the company worked with OpenAI to ensure this offering gives customers a feel for the company’s core DNA as it looks to reclaim the “Tar-jay” vibe that once defined the retailer.

Target also needs to ensure it keeps in stride with America’s biggest retailer, Walmart (WMT), which made a partnership announcement with OpenAI back in mid-October, yet those exact details of how it will work have yet to be announced.

This announces comes as Target continues to struggle to lure in consumers, reporting another quarter of sales declines, with same-store sales falling 2.7% during the quarter and net sales dropping 1.5% from a year ago.

Incoming CEO Michael Fiddelke, looking to strike an optimistic tone, told reporters on a call, “We believe there is a path to win regardless of how the macro environments will continue to evolve around us.”

Target did report a 2.4% rise in digital comparable sales during its most recent quarter. Going into Wednesday’s report, Target stock was down 34% this year.

At the same time, the company warned that fourth quarter sales, which cover the heart of the holiday shopping season, will see a low-single digit decline, even after the company shared plans cut prices on 3,000 food and household essential items last week.

At the start of the fourth quarter, Target eliminated 1,800 corporate roles.

Asked how the company’s AI plans related to the recent layoffs, Vemana said, “structural changes are necessary for us to create the agility and speed.”

Vemana added that the future of Target is about creating immersive experiences for consumers like a store map and budget tool, similar to what Walmart offers on its app.

“We will continue to evolve….this is an area where we are learning a lot,” Vemana said.

At a media roundtable on Thursday, Mary Hines Droesch, head of consumer and small business products at Bank of America, said AI integrations are just the start of what will be a broader trend in retail.

“We see growth in the future as people get more comfortable using these tools,” Hines Droesch said. “We’re going to continue to track to see the growth and the usage of this emerging technology.”

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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