Alibaba Hints at New Retail Experience Driven by AI

Alibaba Singles' Day continues to shatter records and expectations.

Part of the magic was creating a single online mega-fest that is not tied to any holiday or period. The other part is sustaining this fascination for perpetuity. According to Forrester’s AI And Offline Retail: Alibaba’s Recipe For Another Smashing Singles’ Day report, AI and data analytics is helping on the second part.

In 2017, Alibaba used AI to deliver 400 million customized ads, generate 60 billion personalized pages and handle 3.5 million customer inquiries. AI also worked with offline retails on new initiatives like smart pop-up stores online and augmented reality for a visual shopping experience.

The result: a whopping USD 25 billion in gross merchandise value in just 24 hours and an increase of 39% over the 2016 event.

“Alibaba is not the first to effectively use AI and intelligent agents, nor is it the only online retailer expanding into offline retail. However, the speed and elasticity of its business applications are unrivaled. With its ecosystem play and global expansion strategy, Alibaba will quickly expand its disruption initiatives to adjacent industries and other countries,” Xiaofeng Wang, Senior Analyst at Forrester said.

AI At Your Service

One of the key personalities that drove the online success was Lu Ban. The proprietary AI-based marketing design platform helped to generate 400 million customized banner ads. It also used machine learning to study human designers' work to create these banners, complete with personalized words, images, and design for each brand.

According to Alibaba, these AI-generated ads delivered better engagement. It helped to reach an average click-through rate that is 100% higher than those created by people, the Forrester study noted.

Another innovation was the real-time generation of personalized pages. AI generated over 60 billion of such pages for brands and merchants on Tmall and Taobao. For inspiration, it used data culled from searches, location, purchases, transactions, and content within the Alibaba ecosystem. The firm claimed that these personalized pages helped to drive 20% conversion rates.

When there is a question or problem, the Ali Xiaomi was at your service. It handled 95% of customer inquiries on Singles' Day. More than just a virtualized FAQ, it used human emotional cues through text analysis to tell staff if there is any problem. Alibaba noted that the chatbot was "10,000 times more efficient than human customer service."

Meet Hema

The Singles' Day offered a perfect platform for Alibaba to test their Hema model in traditional supermarkets. It combines a supermarket, restaurant and fulfillment center in a single location and offers 30-minute delivery to customers who live within 3 km of the center.

The Hema model is vital for Alibaba as it offers an offline solution to address online fulfillment pressures. By luring customers closer to fulfillment centers, it is looking to offload their supply chains across the nation--a perennial problem for retailers as they shift to an online model.

"Alibaba plans to franchise the Hema model to traditional supermarkets and scale up the business. So, on Singles' Day, Alibaba tested the model in 13 Sanjiang Supermarket stores in Ningbo with new services like staff-less express checkout and 1-hour delivery for customers who live within the 3-km range," Wang said.

Alibaba is not the only one studying and fine-tuning such a model. But Alibaba has an edge. “Tencent along with JD and Suning recently invested in Wanda and showed great interest in offline retail. The model itself can be replicated, but the scale, experience, and speed that Alibaba has are very hard to keep up with,” Wang added.

Hema Drives New Retail

The launch of the Hema model highlights part of the Alibaba’s New Retail vision. The firm is looking to blend offline and online models to create a new business value proposition--a move that Amazon is also experimenting in other markets.

“From opening its own digital-enabled Hema physical stores to converting offline retail outlets into smart stores to digitalizing mom-and-pop convenience stores, Alibaba's New Retail vision aims to use technology and data to transform offline retail experiences,” Wang said.

However, it is still early days. Alibaba still needs to work closer with offline retailers to fine-tune this model further. 

"Alibaba knows technology and online operation very well, but they still need to gather offline operation knowledge and experiences. That's why it started with pilots like Hema and Smart Stores on Singles' Day. Besides, Alibaba needs to closely work with offline retailers to learn and experiment," Wang added.