China’s New Retail: Artificial Intelligence at the core
(Above pic caption: The New Retail bandwagon in China)
Dot Connector’s inaugural CIO Summit in Malaysia concluded last week after IT and decision makers gathered at Le Meridien hotel, for an almost full day of knowledge and experience sharing.
The China-based organiser Dot Connector group, has organised nearly 200 professional summits and training, since being established in 2011. During this time, nearly 500 senior executives and industry experts from the fields of Technology, Marketing, Finance and Banking, have come together to share their experiences.
According to Dot Connector representative, Joy Xu, the group offers services like tech scouting, digital transformation and management consultancy, as well as incubation services.
“We want to bring Chinese technologies and best practices to share with CIOs in Malaysia. We also want to welcome Malaysian brands to go to China market,” Xu said.
One of the main highlights of the conference was when Xiaomi Technology’s MI HOME IT Director, Zhang Beiping, came on stage to talk about New Retail and how China is leveraging technologies to implement cashless transactions and cashier-less stores.
According to Zhang, the phrase ‘New Retail’ was first coined by Alibaba founder Jack Ma, when he described that pure e-commerce will reduce and eventually be replaced by combined offline and online channels.
“It is a hot topic in China… that e-commerce will die and physical retail will die. I think it will transform instead and bring lots of opportunities and challenges.”
Zhang also observed, “China is entering the second half of the Third Wave of its retail sector. This is at a time when traditional retail is reducing and e-commerce is approaching a bottleneck.”
He says this even though the total Chinese consumer spending online was USD750 billion, last year, because the speed of growth has slowed down a little.
This signals an opportune time for New Retail or offline-online channels multi-businesses integration, to become more prevalent.
Opportunities of New Retail
Zhang shared that the New Retail trend addresses changing consumer behaviour in China – they are increasingly shifting their buying focus from factors like price and brand, to their experience of the entire purchasing process.
“China has set the pace for the rest of the world,” Zhang also said about the way that mobile and cashless payments has permeated parts of China. “We use WeChat and AliPay for everything in China.”
It is this trend coupled with other technologies like facial recognition and Internet of Things (IoT) which is driving the New Retail phase China is entering into now.
E-commerce’s advantages, which Malaysians are also acquainted with, are time-saving and efficiency. But physical stores have their roles to play as well, and the general consensus is that an omni-channel approach – offline, online, mobile – offers a seamless shopping experience, and is an important strategy for most retailers.
Key to New Retail’s success, is the use of technologies like big data, IoT, and facial recognition at physical stores.
Less than three years ago when capture of data via WiFi and Bluetooth became more prevalent in stores, retailers discovered that they had collected unprecedented data. For example, they had information like age and gender of the customer who walks into the store, analysis of foot traffic, heat maps and customers’ buying behaviour. Facial recognition also enables authentication and identification of recurring customers.
You may notice that some of these metric data can be obtained when visitors go to an online website as well. Some of the data is also unique to physical retail and couldn’t be captured online, for example real authentication and authorisation of a customer.
These technologies also refined operations management, with intelligent optimisation of goods on display, based on time of the day, season and geographical area, for instance.
Zhang suggested that the data from physical stores can be exchanged with data that is collected via Internet platforms. When these two types of data are looked at simultaneously, it could even yield a more complete ‘picture’ of a retail brand’s customer.
Zhang had pointed out that WiFi as the communications channel to collect these data is becoming less popular as artificial intelligence and IoT generates more accurate data.
WiFi would capture the MAC address of every mobile device that enters the store, but these MAC addresses randomly change rendering any information generated inaccurate or invalid.
A new kind of retail in China
While cashless payment mechanisms like AliPay and WeChat in China are gaining recognition and being talked about outside of the country, brands like Xiaomi are working on the next big thing – cashier-free retail stores.
Imagine entering a store, picking up the items you need, scanning their QR codes (and paying for it simultaneously), and then going through a facial recognition check as you walk out the store with the goods you have purchased.
Not only is there no exchange of cash, but there are no queues as well.
Notably, these physical stores are about 600 sq metres in size each, and carry about 100 product SKUs. According to Zhang, Xiaomi does not own these products, but instead they invest in the companies that do as a separate legal entity.
Zhang described how Xiaomi had entered the offline retail market over three years ago, with the MI HOME brand. “It is one of our retail brands, and the key (differentiator) is efficiency of each single store. We are currently ranked second globally, after Apple Stores,” Zhang claimed.
Perhaps another unique differentiator is artificial intelligence algorithms which power their facial recognition software. Zhang was especially enthusiastic about Xiaomi’s new flagship store which is slated to open in Beijing by end of 2018.
It will be the first store to use facial recognition software powered by their own created artificial intelligence.