AI on the Horizon: November 27, 2025

Canada’s latest AI news on the economy, society, and policy. Just in time for the holidays and Black Friday, we examine the influence of AI in retail and shopping. The behavioural shift to online shopping continues to have a profound impact on how consumers purchase products and provides online platforms with a gateway to influence, predict, and sell using algorithms and data. From ads to delivery methods, purchasing your cart before a horse has never been easier.

Buying Local

The Canadian Federation of Independent Business (CFIB) found that the growing number of e-commerce options is both good and bad for Canadian small-to-medium enterprises (SMEs). In Canada, e-commerce sales have more than doubled from August 2019 to 2025, increasing from just under $2 billion to approximately $4.3 billion per month.

Retail sales have steadily accounted for over 5 per cent of GDP since 2019. Approximately 1 in 5 Canadians purchased retail goods from international retailers, and the use of Electronic Funds Transfers such as PayPal (EFTs) has grown by over 160% between 2018 and 2023, accounting for more than 60% of Canadian transactions in 2023.

While the growth in online shopping has allowed domestic SMEs to expand past local borders, it also has diluted the ability for some businesses to flourish in local markets as pricing and availability have become increasingly competitive with global sellers. With the introduction of AI-powered agent shoppers, as offered by Amazon, these services prioritize speed and price, often favouring U.S. sellers.

Consumer Experience

The majority of Canadian retail executives believe that AI has fundamentally changed the retail shopping experience, citing customer experience and operational efficiencies as the primary benefits of AI adoption. On the US side, some are even predicting that AI-traffic will be up 520 per cent year-over-year in the run-up to Thanksgiving, building on 2024’s unprecedented 1300 per cent increase. Even Canada’s Shopify has struck a partnership with OpenAI so Shopify merchants can sell their products through ChatGPT.

However, this transition hasn’t been seamless. There have been multiple accounts of bad experiences with AI chatbot support, with consumers expressing dissatisfaction with solutions offered by Canadian household names such as Shopify and Rogers. For high fashion in Canada, AI has been used to create fraudulent reviews, ads, and websites to falsely represent higher-quality products from independent retailers. Regardless of these shortcomings, Canadians are cautiously optimistic about AI’s potential in customer service, provided it improves service and reduces the frequency of being put on hold.

Impact on employment

Canada’s retail sector employs over 2 million people, accounting for over 1 in 10 workers nationally. In 2025, Statistics Canada reports businesses are slightly more likely to reduce employment with AI adoption. Our own research found that AI adoption was most likely to reduce entry roles. Among adopters, marketing automation and chatbots are the most commonly used applications for Canadian firms.

Retail sector workers are most likely to face automation from AI applications, some of which we have seen in the downturn of youth employment in 2025. Similarly, large firms at the core of online retail are increasingly turning to AI to streamline processes, with Amazon laying off more than 14,000 corporate workers globally.

On the Horizon: AI’s Next Steps

While EFTs and online purchases are growing, they are also more likely to be subject to dynamic algorithmic pricing changes. Coupled with the increased deployment of AI shopping agents, these systems could bias hidden coordination, further undercutting similar or equal-value Canadian goods and services.

The CFIB finds that local SME purchases retain 66 cents of every dollar in the local economy, compared to 8 cents from online platforms. All this to say, when in doubt, give your local mom and pop shops a shout.

If you are interested in knowing more about Canadian innovation and technology, read our take on Canadian AI, emerging technologies, and innovation in the 2025 Federal Budget.