Why Alibaba’s ‘New Retail’ revolution is all about AI

Why Alibaba’s ‘New Retail’ revolution is all about AI

Artificial intelligence (AI) is increasingly being implemented as a part of Alibaba’s New Retail strategy, blending the online and offline worlds to create seamless experiences for consumers, says Scott Thompson.

“New Retail is instrumental to our strategy in providing consumers with more choice and experiences that benefit the traditional shopping model,” says Alibaba. “By using AI technologies, we are able to enhance New Retail offerings and lead innovation across the global retail sector.”

The Chinese ecommerce giant’s Ali Smart Supply Chain taps into AI to help merchants predict regional demand for certain products – something that is vital for same or next-day delivery services. Building on this is the company’s logistics affiliate, Cainiao, which uses AI to speed up parcel deliveries.

Through a specially designed computer model and other AI techniques, the Cainiao platform is able to determine the fastest and most cost-effective delivery routes, and also to predict what size box should be used to ensure that orders are efficiently packed.

The platform delivers up to 42 million orders a day, with AI helping to decrease travel distances by 30 percent, as well as reduce the number of vehicles by 10 percent.

Singles’ Day

AI also played a key role in the 2017 11.11 Global Shopping Festival, aka ‘Singles’ Day’, the world’s biggest e-retail event. Alibaba posted a running sales counter on its Alizila news website, showing the gross merchandise volume for which it was fulfilling orders.

The company breezed past the previous year’s sales with over $25 billion in merchandise flying out of the door, about $7 billion of which happened in the first 30 minutes of the day. In total 812 million individual orders were placed, 90 percent of which were via a mobile device.

AI is helping to create engaging consumer experiences and empower merchants to operate efficiently, says the company.

“This was done through experiences such as our ‘smart fitting room’, where consumers were able to try on RFID-embedded clothing and have similar items recommended to them based on style,” explains a company spokesperson. “This was powered by our ‘Fashion AI’ technology, which uses over 500,000 sourced pieces of data on fashion and dressing tips from stylists on the Taobao and Tmall platforms.”

Merchants themselves were able to adopt Alibaba’s AI-powered ‘Store Xiaomi’, a virtual customer service robot designed to respond to both written and spoken queries, give answers to questions about delivery status, and help users find products when provided with a text, voice description, or photo.

“In China, shopping is more than just a transaction – it’s a social experience, and we used our technology to deliver just that. AI has enabled us to do this,” the spokesperson explains.

Alibaba unmanned retail store

Friend not foe

Concerns have been raised about AI’s potential impact – for example, that it could kill traditional retailers and put people out of work. These are certainly tough times for the High Street. In the UK, nearly 650 shops and restaurants, run by a handful of major chains, have shut in the UK since the start of 2018 alone, or are at risk of closure – a run rate that suggests closures of over 2,000 stores by the end of the year.

Maplin and Toys R Us sites account for half the total to date, according to BBC analysis – two major brands that have failed in recent months.

But Alibaba believes there is a huge opportunity for online and offline ventures to work alongside each other, ensuring that consumer demand for seamless, frictionless, and/or omnichannel experiences is met.

“Although the number of physical stores is decreasing, both shoppers and brands still see traditional offerings, such as bricks and mortar stores, as a crucial part of the retail experience,” says Alibaba’s spokesperson.

We don’t see that changing: we believe in a future where technology enables retailers to create a seamless experience between the physical store and the internet. To thrive, the physical store simply needs to adopt technologies in order to provide consumers with more of an experience.

“We are already seeing the success of using technology to significantly enhance the in-store shopping experience in China,” the spokesperson adds. “Our goal is to help operators, brands, and smaller High Street businesses to streamline and enhance their operations, including customer experience, inventory management and retail spaces – and to succeed in the digital era.”

The New Retail strategy is driving this trend and helping merchants to better understand and target Chinese consumers. “We believe this is the future, a world where physical and online stores coexist, powered by innovative technologies to meet ever-changing consumer demand,” explains the spokesperson.

R&D and key trends

Last year, Alibaba announced a commitment to invest $15 billion in global research and development over the next three years. This includes the creation of the DAMO Academy, a global research institute that will focus on areas such as data intelligence, the Internet of Things, and human-machine interaction, in an attempt to attract world-class talent, build partnerships, and open research laboratories in cities around the globe.

The ultimate aim of the Academy is to help 100 million companies create opportunities and make technology more accessible and inclusive in order to improve people’s lives.

As for key trends in 2018, AI chips will be a major player – advanced processors that are optimised for machine learning tasks across a whole range of hardware. For example, Alibaba’s AI Lab has partnered with Taiwan-based chipmaker MediaTek to design Bluetooth chips allowing home devices to pair automatically with the Tmall Genie smart speaker.

The use of AI chips, besides improving connectivity for consumer devices, will also benefit the automotive industry, with specially designed processors and System on Chips (SoCs) set to power the self-driving aspect of autonomous driving technology. Alibaba is developing its own chip for this purpose, Ali-NPU, and has acquired Hangzhou C-SKY Microsystems, a Chinese supplier of embedded CPU cores.

Machine learning will also see the further development of computer vision, the technology set that enables computers to process visual data and gain understanding from images and videos.

This will have many benefits, from accurately and quickly recognising patient health problems in the medical sector, to enabling consumers to be automatically billed based on the items they are carrying when leaving a store – a technology that Walmart has filed patents for this year.

“We believe there will also be significant developments across natural language processing, which enables computers to process large and complicated amounts of human language data,” says Alibaba’s spokesperson.

“This will further drive virtual customer service and – among other things – enhance both New Retail experiences and the global retail industry more widely.

“Moving forward, machine learning and AI – alongside developments in blockchain and IoT also – will become the backbone of technology across all sectors and industries, delivering benefits like never before.”

Plus: TMall Genie comes to luxury cars

Alibaba’s Tmall Genie smart assistant is coming to Chinese Mercedes, Volvos, and Audis, according to a report this week. The cars are among the most popular high-end marques in China. Genie will connect drivers with information or controls, and can also connect with smart speakers in the home. 

Internet of Business says

China’s tech titans, such as Alibaba, Baidu, and investment giant Tencent hold up a mirror to the West, with the same fight for dominance in connected services, AI, deliveries, driverless cars, robotics, and frictionless shopping taking place in China as in the West among companies such as Amazon, Google, and Walmart.

But while the struggle and the prize might be the same, China has a signal advantage over the US in particular: an internal market of over one billion people, and few restrictions on how citizen data can be gathered, analysed, and used to train AI systems.

As trade tariffs rise and the war of words with the US intensifies, that internal market may be the real bargaining chip.

Coming soon: Our Internet of Supply Chain conference.

  • There is a strong market for the inclusion of AI in the retail business, even though this technology is still in its infancy. Latest innovation comes from Alibaba (which is not quite a surprise) in the form of a “FashionAI” concept store. Opportunities are huge, but it depends on retailers` resources and openness towards the idea. Large brands, such as Netflix and Amazon, already use AI to provide personalized recommendations to users based on previous habits.