How AI-powered merchants are set to transform gameplay

From the unnamed merchants in early video games to Resident Evil 4’s infamous Merchant, merchant NPCs have been a central part of video games since their inception. While they were initially static, transaction-focused characters with limited dialogue and interaction options, advancements like better graphics, more complex dialogue trees, and more dynamic NPC behaviors have led to richly developed merchants that are more deeply integrated into gameplay and game narratives. 

A great way to see how far merchants have come in the last three decades alone is to look at their evolution in a popular franchise like Zelda. From the Magic Shop in 1991’s A Link to the Past to the wandering merchant Beedle in 1998’s Ocarina of time and Cece Shop in 2023’s Tears of the Kingdom, you can clearly see an evolution from transaction-focused NPCs with little personality to fully realized characters that are crucial to the game. 

Video game merchants are now poised to become even more important to gameplay. Our Future of Game Development with AI NPCs report found that game devs believe merchants are the most likely NPCs to be powered by generative AI in the next 10 years. 

Generative AI via AI Engines are expected to allow merchants to adapt in real-time to player actions, support the ability to answer questions dynamically about inventory and the game worlds, and even allow them to learn player preferences from interactions over time. But, generative AI-powered NPCs also hold the potential to dramatically advance gameplay, boost game metrics, and increase revenue. In fact, the CEO of Electronic Arts, recently spoke on how AI will be key to increasing microtransactions and revenue in games. Expect merchants to soon offer players personalized buying recommendations, suggest customized quests, and even increase in-game purchases by optimizing offerings. 

In this piece, we’ll take you through just some of the ways game devs will reimagine merchant NPCs – and create novel forms of gameplay. 

Why the first AI NPCs will be merchant NPCs

Wondering why game devs think that video game merchants are prime candidates for generative AI integrations? The crucial but limited role merchants play in games makes upgrading them relatively easy but extremely impactful. 

Early adoption potential

Merchant NPCs often play very specific and defined roles, such as buying and selling goods or sending players on quests. These roles lend themselves well towards initial AI tests and integrations because they involve relatively straightforward interactions with clear goals. 

Economic significance

With studios trying to optimize their game monetization strategies, video game merchants present one opportunity to do that. After all, they directly influence in-game economies and revenue, an increasingly important source of income for gaming companies. In fact, in-game spending via microtransactions has overtaken game purchases to represent the biggest source of gaming revenue globally.

With AI NPC merchants, developers can enhance the complexity of in-game trading systems, better match players with items they’re willing to buy, and dynamically show inventory based on player interest. 

For example, an AI NPC merchant could pick up on cues in the conversation via the character’s Goals and Actions functionalities to better match players with items. They can also answer questions about functionalities of different items so players feel more confident making in-game purchases. 

Player engagement

AI-powered merchant NPCs have the potential to offer more dynamic and personalized gameplay, enriching player immersion. 

Imagine a fantasy RPG where a merchant remembers the player's preferences via a Long-Term Memory feature and adjusts their offers accordingly or a merchant who can remember and ask how they liked the last item they bought, creating a more engaging experience that increases immersion in the game world. AI merchants allow for more personalization and player agency in gameplay, something known to boost flow and playtime. 

How AI will transform merchant characters

What will it be like to interact with AI NPC merchants? Here are some ways AI will transform how players interact with merchants. 

Interactive and contextual dialogue

Well-crafted video game merchants contribute significantly to the depth and immersion of game worlds by reflecting the cultures, economies, and societies within them. Generative AI allows players to interact with merchants and ask them anything. Merchants in video games can become a source for in-world lore, gossip on other characters’ backstories, customized gameplay tips, and funny personalized repartee. 

They’ll shift from being just a character who you go to when you need a new potion to a character who remembers you from your last interaction, is interested in your gameplay updates, and can even give you a tutorial on how to use your purchases if you ask. You can even set merchants up to have already ‘heard’ about a player’s performance on a quest the next time they see the player by connecting AI NPCs to the game state and player logs. That kind of personalization will make players feel more connected to the game world. 

More narratively relevant

Expect AI merchants to be more intricately woven into the fabric of a game's narrative, providing players with insights into the lore, characters, or plotlines. Through their interactions with merchants, players could uncover hidden secrets, unlock new story arcs, or forge alliances that shape the course of their gameplay. 

More personality

Expect game devs to craft memorable personalities for AI NPC merchants to make them fun to interact with.  That means more Beedles from Zelda, Crazy Daves from Plants and Zombies, Tom Nooks from Animal Crossing, and Porkrinds from Cuphead. 

The goal will be to make AI merchants funny or amusing to ensure players come back for more – thus driving things like in-game revenue.

Strategic gameplay & AI NPC merchants

Merchants in video games have significant but often unacknowledged impacts on gameplay. AI NPC merchants, therefore, offer a number of different opportunities to evolve gameplay in novel and exciting ways. 

Advanced negotiation roleplay

Many games allow you to negotiate with merchants but AI could allow players to sharpen their negotiation skills by creating more immersive and interactive player interactions in games that emphasize roleplay. Imagine a narrative-driven RPG where an AI NPC merchant engages players in haggling over prices or offering quests or valuable information in exchange for favors. Such interactions add depth to the game world and create more sophisticated kinds of gameplay. They also make players feel more invested in their exchanges with NPCs. 

Advanced strategic gameplay

In some games, merchants represent high-risk, high-reward opportunities where players must navigate complex scenarios and manage potential risks. For example, engaging with certain merchants may involve gambling valuable resources, navigating treacherous territories, or facing off against enemies, adding an element of excitement and uncertainty to the gameplay experience. 

In strategy-based games, players might need to more carefully consider their options when engaging with AI NPC merchants, carefully weighing the potential benefits against the associated risks or costs, thus adding depth to their strategic decision-making process.

Novel gameplay & AI NPC merchants

Relationship progression

AI NPCs powered by Inworld’s AI Engine allow for relationship progression which introduces entirely new gameplay possibilities. Imagine merchants who will give you a discount or better items if you gain their trust or develop a stronger relationship with them. Or ones who will heckle you and raise the prices if you make them your enemy. 

They also unlock the possibility of trust-based relationship mechanics. For example, you might need to gain the trust of a merchant in order to unlock some goal, secret, or item.  

Dynamic quest recommendations

Video game merchants often play pivotal roles as quest givers or facilitate player progression by offering unique items, upgrades, or services. AI-driven merchant NPCs will also have the ability to suggest dynamic quests and missions based on player interactions. 

For example, if the player asks about a particular part of the map, the merchant could suggest one of the quests available in that region. What about a player who liked fighting a particular kind of enemy on their last quest? The merchant can suggest a quest that’s similar next from the game’s list of main quest lines and side quests. This allows for more personalized and player-centric gameplay and could improve player retention and playtime by providing players with initial experiences optimized to their interests or curiosities.

Extended engagement

Well-crafted merchant systems also promote prolonged player engagement by optimizing for players to buy things either via in-game currency or in-game purchases. 

New items or customizations are known to encourage continued gameplay since they provide ongoing novelty (via new cosmetics/skins, expansions, or new playable characters) and are often designed to improve flow (via power-ups and time-saver). 

This extended engagement not only enhances player retention but also creates additional opportunities for monetization through a virtuous cycle of continued in-game spending. For example, studies of mobile games have found that even a 5% increase in retention can lead to a 25% increase in profits. 

AI merchants, in having a greater ability to respond to player preferences and customize recommendations, will help play into each player’s individual purchasing motivations much more effectively than current merchants simply by personalizing their pitch. 

Monetization & AI NPC merchants

While generative AI merchants don’t necessarily have to be leveraged to increase revenue, that’s one of their key use cases. In a recent talk, Electronic Arts' CEO, Andrew Wilson even claimed that AI holds the potential to increase spending on microtransaction by 10% to 20%. Here are some ways merchants powered by more advanced AI systems will transform how players make in-game purchase decisions and generate additional revenue for gaming companies. 

Personalized item recommendations

In an era marked by slowing gaming revenue growth, studios are looking for innovative ways to bolster their earnings. Merchants are channels for in-game purchases, microtransactions, and DLCs (downloadable content) and can directly contribute to revenue generation for game companies. 

AI-powered merchants can analyze player behavior and preferences to tailor their offerings via the Goals and Actions functionality of Inworld’s AI Engine, maximizing the likelihood of successful transactions and increasing overall revenue. In a simulation game, for instance, an AI merchant could suggest specific items or upgrades tailored to a player's gameplay style, previous purchases, skill level, conversational topics, or budget. Experiments have even been done to connect eye tracking software to merchant NPCs to optimize item recommendations and merchant interactions. 

Limited-time offers and special deals 

AI-powered merchants could introduce customized limited-time offers, sales events, or exclusive deals to drive player engagement and potentially increase revenue through impulse purchases. Or the NPC could notify the player of when they’ll be a deal on the item that they’re considering buying. 

AI NPCs offer the opportunity to better optimize pricing and item presentation and even to do things like offer retention based prizes or discounts to incentivize regular play and reduce churn. 

Customization and personalization 

Merchants often provide players with opportunities for customization and personalization, allowing players to tailor their gaming experience to their preferences. Whether it's selecting unique weapon skins, purchasing cosmetic items, or customizing character appearances, merchants empower players to express their individuality within the game world. 

AI merchants will be able to do this even better by connecting players more effectively with opportunities for personalization that fit with their past purchases or interests. They could even feed back information to developers about the kinds of personalization or customization options are desired among the player community. That would allow companies to prioritize the development and sale of items that will sell well thus optimizing their revenue potential.  

Subscription models

In games with subscription models, AI-powered merchants can play a pivotal role in incentivizing players to subscribe or renew memberships. By offering exclusive or even customized benefits, discounts, or rewards through merchant interactions, developers can foster a sense of value and exclusivity for subscribers, ensuring a steady stream of recurring revenue. 

Expansions and DLC integration 

Merchants help seamlessly integrate expansions and DLCs into the game world by providing access points for new content, expansions, or additional features. According to a 2023 report by Newzoo, downloadable content made up 13% of PC revenue and 7% of console revenue in the U.S. in 2022. But DLC and expansions also helped in other ways. It increased monthly active users (MAUs) by over 11% in both console and PC games and a Nielsen Holdings survey in 2023 found that game franchises that continued to engage their communities between releases saw a 50% improvement in player retention.

AI-driven merchant NPCs can promote and showcase these offerings with customized pitches that effectively encourage them to invest further in the game ecosystem. They can also answer questions about the expansions for players unsure whether they want to buy it, something current NPCs can’t do. 

By strategically leveraging AI merchants to promote expansion content, developers can extend the longevity of their games while unlocking additional revenue streams. Including the merchant character in the expansions in a key role also creates more seamless overlap between the original game and the expansions. 

Cross-promotion and brand partnerships

Increasingly, gaming companies are turning to brand partnerships as a way to generate additional revenue. For example, in 2023, Fortnite teamed up with LEGOto create over 1,200 outfits in LEGO Style. Similarly, Apple partnered with games like MONOPOLY GO!, Gardenscapes, and EA Sports FC Mobile in 2023 to sell limited-edition (RED) shields, avatars, and star soccer players for World AIDS Day. 

AI-powered merchants offer potentially lucrative opportunities for cross-promotion and brand partnerships, helping game companies collaborate with other brands or franchises to introduce or sell exclusive in-game items, experiences, or characters. 

By leveraging AI-driven merchants to facilitate these partnerships, developers can unlock additional revenue streams while enhancing player engagement. What’s more, AI-driven merchants could be more attractive to brands since if players aren’t responding well to an in-game brand partnership, the experience can be tweaked in near real-time by changing the character’s personality or objectives to optimize results and engagement. 

The future of merchants in video games 

These are just a few ideas of what the future of merchants in video games might look like. Expect game devs to come up with even more ways to integrate merchants powered by AI Engines like Inworld’s within the game narrative to create novel kinds of gameplay. 

Interested in playing around with the tech? 

• Contact us today to get started.
• And read case studies from other gaming companies who integrated AI NPCs.