On August 7, Reuters reported that 41% of U.S. consumers used generative AI for online shopping in June, according to Adobe Analytics. The traffic also appeared unusually valuable. Visitors referred by AI services generated 41% more revenue per visit than those arriving through traditional channels. Ulta Beauty, Inc. (NASDAQ:ULTA) said shoppers arriving through Gemini and ChatGPT showed roughly twice the conversion and purchase intent.

The more important development is where those purchases are being completed. Reuters reported that OpenAI ended its standalone Instant Checkout tool in March and shifted toward product discovery followed by merchant-owned checkout. Etsy, Inc. (NYSE:ETSY) said shoppers may discover products through ChatGPT but generally return to Etsy to transact.

That creates an attractive arrangement for retailers today. AI platforms can narrow the shopper’s choices and deliver a higher-intent visitor, while the merchant still processes the order and retains the opportunity to build a direct relationship. The question is whether Ulta Beauty, Inc. (NASDAQ:ULTA) and Etsy, Inc. (NYSE:ETSY) can preserve that balance as Google, Amazon and other platforms move closer to the transaction.

AI IS BECOMING A HIGHER-INTENT DISCOVERY CHANNEL

A shopper who asks a chatbot for a moisturizer suited to sensitive skin or a personalized wedding gift has already done more work than someone clicking a generic search result. The AI can narrow the field before the shopper reaches the retailer, which helps explain why the resulting traffic appears to convert better.

That is particularly useful for Ulta and Etsy because both offer assortments that can overwhelm conventional search. Ulta Beauty, Inc. (NASDAQ:ULTA) sells beauty products whose suitability depends on skin type, shade, price, and routine. Etsy, Inc. (NYSE:ETSY) connects buyers with millions of distinctive listings that are often easier to describe in natural language than to locate through keywords and filters.

Conversational discovery can match a detailed request with a smaller set of products, sending the retailer a shopper who is closer to making a decision. In OpenAI’s current merchant-checkout model, that makes AI resemble a high-intent referral channel rather than a replacement storefront.

The missing figure is AI’s share of total retail traffic. Revenue per visit can be strong while the channel remains relatively small. The early data establish the quality of the leads, but not yet the scale or long-term cost of acquiring them.

BULL CASE: RETAILERS STILL CONTROL THE MOST VALUABLE PART OF THE SALE

The constructive case is that merchants can benefit from AI discovery without surrendering the transaction.

When checkout occurs on the retailer’s platform, the merchant retains access to the final basket, payment process, order data, and post-purchase communication. A signed-in or loyalty-linked transaction also gives the retailer a customer identity that can support personalization and repeat purchases. Guest checkout produces a more limited relationship, but the merchant still controls the order and the customer-service experience.

Ulta Beauty, Inc. (NASDAQ:ULTA) is particularly well equipped to turn an outside referral into an identified customer. Ulta Beauty Rewards had more than 46 million members at the end of fiscal 2025, and members generated approximately 95% of sales in its U.S. business.

That loyalty base changes the economics of AI referrals. If a shopper arrives from Gemini or ChatGPT and connects the purchase to a rewards account, Ulta Beauty, Inc. (NASDAQ:ULTA) can link the visit to purchase history, personalize future offers, and encourage the customer to return directly. The retailer does not need to control the first product query if it can still own the repeat relationship.

Ulta is also building its own shopping tools. The company launched Ulta AI on Ulta.com on April 22, giving shoppers a conversational way to search its assortment within the retailer’s website. The April announcement also said Ulta’s products would become shoppable through Google AI Mode and Gemini over the following month, while an Ulta app rollout remained planned for a later date.

The partnership illustrates how retailers may try to meet shoppers inside and outside AI platforms without giving up their existing commercial infrastructure. Eligible Ulta Beauty, Inc. (NASDAQ:ULTA) purchases can be completed within Google’s conversational surfaces. As of August 7, however, integration with Ulta’s cart and rewards program was still being developed.

That work is strategically important. If an embedded transaction can still connect to Ulta’s cart, rewards account, and fulfillment systems, the retailer may preserve much of the customer relationship even when Google controls the interface. Without that connection, Ulta Beauty, Inc. (NASDAQ:ULTA) risks receiving a sale without gaining the same ability to turn the buyer into a repeat customer.

Etsy, Inc. (NYSE:ETSY)’s current arrangement with ChatGPT is also favorable. Shoppers can discover an item through the chatbot and then return to Etsy to complete the order. Etsy retains the transaction, associated order data, seller relationship, and the opportunity to recommend additional products. When the buyer signs in, Etsy can also connect that activity to an existing account. Guest purchases retain the transaction but provide less continuity around the shopper’s identity.

Etsy, Inc. (NYSE:ETSY) also has supply that general-purpose AI platforms cannot easily reproduce. A chatbot can organize and recommend Etsy listings, but it does not recreate the marketplace’s seller base, product reviews, transaction history, or trust systems. Etsy still owns the infrastructure that turns a recommendation into a completed order.

For both companies, the opportunity is clear. AI can improve discovery without replacing the merchant, provided the retailer retains enough customer information and post-purchase access to build a relationship beyond the first transaction.

BEAR CASE: CHATBOTS COULD BECOME THE NEW RETAIL TOLLBOOTH

The skeptical case is that the current referral model may be temporary.

Etsy, Inc. (NYSE:ETSY) is already an intermediary between buyers and independent sellers. A chatbot positioned in front of Etsy becomes an intermediary in front of an intermediary. If the AI platform controls the shopper’s query, selects the products shown, and directs the buyer to a specific listing, Etsy may retain the transaction while losing much of the browsing behavior that helps it understand demand.

That matters beyond personalization. Etsy’s latest filing identifies on-site advertising as an important seller service, and second-quarter advertising growth was driven by higher click volume on Etsy Ads. A shopper moving directly from a chatbot recommendation to a product page or checkout may generate marketplace fees but fewer paid discovery clicks inside Etsy, Inc. (NYSE:ETSY).

AI referrals could therefore improve conversion while weakening some of the economics attached to marketplace browsing. Etsy would still complete the sale, but the chatbot could capture the earlier and potentially more valuable signal of what the customer wanted, which alternatives were considered, and why one product was selected.

Ulta Beauty, Inc. (NASDAQ:ULTA) faces a similar risk, although its loyalty program provides a stronger defense. If shoppers increasingly start their beauty searches inside Gemini or ChatGPT, those platforms could gain influence over which brands and products receive attention. Ulta may keep the order while losing control of the recommendation process.

External platforms have historically charged retailers for access to demand through search advertising, affiliate commissions, marketplace fees and social-media advertising. Josh Friedman, Ulta’s head of digital and e-commerce, told Reuters that engaging customers on someone else’s platform has always carried a cost and that AI is unlikely to be different.

Chatbots could eventually charge for placement, referrals, or completed transactions. They could also limit which products appear, favor merchants with deeper integrations, or retain most of the pre-purchase conversation. The merchant might receive the order without seeing the customer’s full consideration process.

That would create a new customer-acquisition tax. The traffic may still convert better, but the retailer’s economics would depend on what the AI platform charges and how much customer data it shares.

INSIDER MONKEY’S HEDGE FUND DATA ANALYSIS

Insider Monkey’s hedge fund database shows that 56 hedge funds held positions in Ulta Beauty, Inc. (NASDAQ:ULTA) at the end of the first quarter of 2026, compared with 58 funds at the end of the preceding quarter.

The same database shows that 44 hedge funds held positions in Etsy, Inc. (NYSE:ETSY) at the end of the first quarter, compared with 49 funds three months earlier.

These positions were reported as of March 31, before the developments discussed in this article.

CONCLUSION

Ulta and Etsy can keep the customer, but only if they convert an AI-generated transaction into a relationship the AI platform does not continue to control.

Ulta has the stronger defense because its rewards program already connects most U.S. sales to identified members. Etsy, Inc. (NYSE:ETSY) retains checkout, seller access and distinctive inventory, but it is more exposed if chatbots replace marketplace browsing and weaken advertising activity inside its platform.

The next test is not simply whether AI traffic converts better. Investors should watch how much of that traffic becomes signed-in customers, connects to loyalty programs, returns without another AI referral and completes purchases through merchant-controlled systems. Customer-acquisition costs and future platform fees will determine whether these high-quality leads remain economically attractive.

For now, OpenAI’s product-discovery model and the behavior of ChatGPT-referred Etsy, Inc. (NYSE:ETSY) shoppers leave merchants in control of checkout. The catalyst is real, but the long-term winner will be the platform that controls both the recommendation and the customer’s next transaction.

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