How Alibaba leverage machine learning to disrupt retail and create pathway to reimagine online-to-offline shopping experiences

Alibaba has leveraged Artificial Intelligence (AI) to disrupt China Retail Industry for the past 19 years. Nevertheless, 81% of retail consumption in China still comes from the offline channel [1]. Realizing the importance of offline presence, the giant online e-commerce shifts its gear towards Omnichannel strategy. In 2017, Alibaba opened futuristic groceries stores, Hema, offering 30-minute deliveries and facial-recognition payment. In the same year, T-mall pop-up stores are introduced in collaboration with over 100 domestic and international brands, promoting inventive "Retailtainment” shopping experiences [2]. While offline stores around the world are suffering, the giant e-commerce leveraged AI and made a brave move to enter the physical world in an innovative means. Or this will be another significant retail disruption, reinventing offline shopping experiences…

Alibaba at the early stage

Founded in 1999, with a mission to make it easy to do business anywhere by leveraging innovation and technology, Alibaba created an online B2B marketplace platform (Alibaba.com and 1688.com) to match Chinese suppliers with businesses and later expanded its services to C2C and B2C via Taobao.com and T-mall.com, which are now two biggest e-commerce websites in the world. [3]

Exhibit 1: Alibaba’s Platforms [3]

The Use of AI

Alibaba’s principle of “Customer-First” [4] has allowed the company to focus on understanding customer’s behavior, identifying their latent needs and create value for them. Alibaba has put AI at the center of its e-commerce operations, helping to extract customer insights and enhance their customer journey, while empowering merchants to operate efficiently [5]. Alibaba platform’s key features are as follows:

  • Prediction for Personalization [6]Common pain point during the pre-purchase process for consumers is “Overloaded Information”, which complicate customers’ decision process. Alibaba’s smart product search and recommendation algorithm (“E-commerce brain”) use customers’ browsing data to predict consumer’s shopping preference, suggesting relevant product based on their interests to resolve the pain point. For merchants, the algorithm also suggests product assortment, recommendations, pricing strategy, and inventory management enhance merchant’s performance on the website
  • Accessible Customer Services: One of the issues on online shopping experiences was access to customer services. Alibaba has developed “AliMe” [7], a 24/7 chat bot for customer support, which now serves over millions of customer queries per day. AliMe understands more than 90% of customer inquiries and has significantly improved merchant’s effectiveness, cutting half of the merchant’s time on answering chats and spending more time to boost sales. [8]

Exhibit 2: Example of Alibaba’s AI-powered Chatbot in different languages [9]

  • Automated fulfillment operation: Fast and reliable delivery are top of mind concerns for online shoppers. 700 robots at Cainiao, Alibaba’s logistics arm, are processing orders from load to unload, running by zero employees. The process is so efficient to allow delivery without 72 hours. [10] In term of delivery, Alibaba also used drones for some deliveries. Meanwhile, the company is also testing a delivery driverless vehicle (G Plus) with a built-in navigation system that relies on LIDAR to create a 3Dmap. Alibaba expects the G Plus will begin commercial production by the end of this year [11].

Exhibit 3: G Plus, Alibaba’s Deliver Driverless Vehicle [9]

According to Jack Ma “Large-scale computing and data are the father and mother of AI.” [6] AI at Alibaba is, therefore, very effective as the company has unlimited capital to invest in large-scale computing, supporting with huge sets of transaction data from the platforms.

Alibaba’s next move:

Alibaba’s next step is to sustain existing value and expand globally. The company has the ambitious target of creating 100 million jobs, supporting 10 million profitable businesses and serving 2 billion consumers across the world – one-third of the global population – in the next 20 years [12].  I agree with Alibaba’s strategy to enter offline retail as it embraces more opportunities to pursue the company’s mission, creating more spaces for SMEs to grow. Alibaba will continue to thrive by leveraging data and AI as its competitive advantage over typical brick and mortar store.

In this next move, I would recommend Alibaba to continue their investment in AI for omnichannel retail experiences, yet what is more important is to also invest in AI talent management. As AI becomes increasingly beneficial to every industry, the world is now facing AI talents shortage [13]. According to Exhibit 4, Alibaba is not yet among the top companies, investing in AI talent. To succeed in the long run, AI talents will be keys to advance innovations. Alibaba should start to invest in people from now on – attracting, developing and retaining AI talents.

Nevertheless, this becomes a challenging mission as the employment market is very competitive among giant tech firms. In this case, what are possible solutions for Alibaba to attract AI talents to sustain its omnichannel mission?

Exhibit 4: Global AI Talent Pool Heat Map [14]

Exhibit 5: Top 20 Companies investing in AI Talent [15]

(800 words)


Citations

[1] Team, CIW. 2018. “Total Retail Sales In China Hit US$5,781 Bn In 2017, Over 19% From Online”. China Internet Watch. https://www.chinainternetwatch.com/23364/retail-2017.

[2] 11.11 Global Shopping Festival 2017. 2017. Ebook. China: Alibaba. https://www.alizila.com/wp-content/uploads/2017/11/Factsheet_11.11-Global-Shopping-Festival-Master-Fact-Sheet_finalfinalfinal.pdf?x95431.

[3] Anadiotis, George. 2018. “Alibaba: Building A Retail Ecosystem On Data Science, Machine Learning, And Cloud | Zdnet”. Zdnet. https://www.zdnet.com/article/alibaba-building-a-retail-ecosystem-on-data-science-artificial-intelligence-and-cloud/.

[4] “Customer First – Or Shareholder First? | CBMC International”. 2018. Cbmcint.Com. https://www.cbmcint.com/customer-first-or-shareholder-first/.

[5] Mitchell, Vanessa. 2018. “Alibaba: New Retail Model Goes Beyond E-Commerce”. Cmo.Com.Au. https://www.cmo.com.au/article/644175/alibaba-new-retail-model-goes-beyond-e-commerce/.

[6] “At Alibaba, Artificial Intelligence Is Changing How People Shop Online | Alizila.Com”. 2018. Alizila.Com. https://www.alizila.com/at-alibaba-artificial-intelligence-is-changing-how-people-shop-online/.

[7] “Chatbot Engine Behind Alibaba’S Alime Customer Service Bot”. 2018. Medium. https://medium.com/@alitech_2017/better-e-commerce-customer-service-from-alime-to-you-656e34934f66.

[8] Yu, Eileen. 2018. “Alibaba Smartens Up Chatbot Ahead Of 11.11 Shopping Festival | Zdnet”. Zdnet. https://www.zdnet.com/article/alibaba-smartens-up-chatbot-ahead-of-11-11-shopping-festival/.

[9] “Alibaba’S Customer-Service Bot Upgraded Ahead Of 11.11 | Alizila.Com”. 2018. Alizila.Com. https://www.alizila.com/alibabas-customer-service-bot-gets-upgrade-ahead-of-11-11/.

[10] Nathani, Komal. 2018. “This Firm Opens China’s Biggest Robotic Warehouse For Single’s Day Shopping Demand”. Entrepreneur. https://www.entrepreneur.com/article/322539.

[11] “Alibaba Made A Driverless Robot That Runs 9 Mph To Deliver Packages”. 2018. The Verge. https://www.theverge.com/circuitbreaker/2018/5/31/17413836/alibaba-driverless-robot-deliver-packages-speed.

[12] “Jack Ma Wants To Create 100 Million Alibaba Jobs – Inside Retail Asia”. 2018. Inside Retail Asia. https://insideretail.asia/2017/06/12/jack-ma-wants-to-create-100-million-alibaba-jobs/.

[13] “The AI Talent Shortage – Nikolai Yakovenko – Medium”. 2018. Medium. https://medium.com/@Moscow25/the-ai-talent-shortage-704d8cf0c4cc.

[14] “Global AI Talent Pool Report”. 2018. Jfgagne. http://www.jfgagne.ai/talent/.

[15] “Automation Jobs Will Put 10,000 Humans To Work, Study Says”. 2018. Fortune. http://fortune.com/2017/05/01/automation-jobs-will-put-10000-humans-to-work-study-says/.

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3 thoughts on “How Alibaba leverage machine learning to disrupt retail and create pathway to reimagine online-to-offline shopping experiences

  1. It’s a very well written article! It clearly elaborates the current AI application and future AI potential for Alibaba’s omnichannel development strategy. Anything I believe Alibaba could take serious consideration is how to make competitive advantages in the long run. I trust that the continuous AI investment will pay back in the near future, nevertheless, as demonstrated in the Exhibit 5, all the global companies, including Chinese companies, are investing in AI. How to make a differentiated investment in the field is quite crucial. For instance, the investment in Cainiao’s AI product development is a distinguishably competitive, since Alibaba controls the major market share of the Chinese online orders, which mean that Alibaba controls the majority of the logistic data in China.

  2. I think the previous post brings to light a critical competitive advantage for Alibaba, its data. The leveraging of existing data from the sheer volume of transactions and customers with AI should put Alibaba in a unique position; however, I agree this is only a competitive advantage if they can attract the right talent. Have you thought about the steps that Alibaba must perform to attract talent? Does the conventional way they have hired, trained, and retained employees work for AI experts? Would it be beneficial to open AI offices in countries with expertise in this field?

  3. Great article! Difficulties in talent acquisition in technology has been one of the main problems the industry faces today.
    Companies that invest in technology as a enabler, or as part of the operation have difficulties in attract talent overall. The strong value proposition and mission alignment of the big players in tech makes it even harder to compete for talent. Those companies often offer a strong compensation with a tech culture that is extremely valued for the professionals. Even though Alibaba invest in talent acquisition, they still have a long way to go to adapt the culture, create a strong mission and build a attractive career path attractive to tech professionals.

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