SHANGHAI | Chinese retail players have invested in generative AI to boost sales.
Singles Day could be the perfect opportunity, according to a new report by Bain & Company. Since 2023, big players such as Alibaba and JD.com have been investing ferociously in AI, with up to 40 percent and 50 percent of their acquisitions being AI-themed.
Generative AI is expected to feature more prominently in a backdrop of slowing retail and a more subdued Singles Day.
Bain & Company’s survey of over 500 merchants trading on China’s giant e-commerce platforms has embraced AI, as 52 percent have used at least one generative AI–enabled tool. Over half have used generative AI-powered customer service chatbot tools, and about one in three have used AI to generate content.
Crucially, 56 percent of surveyed merchants said AI tools had a high positive impact in improving productivity (time and effort), and 39 percent responded with a high positive impact regarding operational cost reduction.
In March, for instance, JD.com launched an enhanced suite of AI-powered solutions designed to cut merchants’ operational costs by as much as half. The solutions include an assistant that accelerates online store launches and a realistic avatar generator that enables round-the-clock interactive shopping live streams.
“AI’s increasing prominence across Chinese retail offers a timely boost to a maturing industry that is facing challenges including slower retail sales growth, price stagnation, falling property prices, youth unemployment, and fragile consumer confidence,” said Kelly Liu, partner at Bain & Company’s Greater China Retail and Performance Improvement practices.
On the consumer side, AI has slowly gained traction. Bain & Company’s survey of over 3,000 Chinese consumers revealed that only 12 percent of shoppers used AI retail tools in the last six months, with 23 percent penetration among Gen Z shoppers over the same period.
Across all ages, Chinese shoppers were most likely to have used generative AI in visual search (beginning a search with an image rather than a text-based query), customer service chatbots, and voice-activated search and shopping.
In the consumer survey, 49 percent of shoppers said they were excited about the upcoming Singles Day, down from 53 percent in 2023 and 76 percent in 2021. About three-quarters of respondents said they expect to spend the same amount or less on Singles Day promotions in 2024, broadly in line with last year’s findings.
Some shoppers have also indicated they want to limit their Singles Day spending to only household products. Shoppers who planned to maintain their Singles Day spending also hoped this year’s deals would be as attractive as last year’s.
“As expected, economic headwinds have caused a stagnation in Singles Day sales last year as gross merchandise value increased by a record low of two percent, supported by newer live streaming and short video e-commerce channels,” said James Yang, head of Bain & Company’s Greater China Retail practice.
“We have predicted this for some time now, and Chinese retailers must deepen their customer engagement. AI tools can energise customer retention efforts, enabling e-commerce players to hyper-personalize their engagement with consumers and create bespoke shopping experiences.”
The report said that retailers that master generative AI in three key areas—deepening customer engagement, turbocharging productivity and cost savings, and finding new growth beyond trade—could build a lasting strategic advantage.
Leading players have already deployed enhancements such as SEO-friendly automation of product pages, AI-written summaries of customer reviews and even virtual try-ons - through services such as Taobao’s AI fitting room.
Generative AI has massively expanded cost-saving automation possibilities in previously labour-intensive marketing areas, such as creating product photos and descriptions, merchandising, and software engineering.
A big part of the AI productivity opportunity involved helping frontline staff to be more effective through smart, automated assistance that gives them more capacity to get things done.
Bain & Company’s experience advising on generative AI globally suggested many retailers should be able to increase revenue by five percent to ten percent overall through AI-powered personalisation initiatives and achieve productivity gains of 30 percent to 40 percent in marketing, 25 percent to 30 percent in software development, and five percent to 25 percent from using generative AI to reshape the way employees work on the front line, in warehouses, and at HQ.
Chinese retailers need to transition faster from AI experimentation to deployment at scale. In the longer term, they must also consider how they can use AI to find new growth beyond trade as the technology starts to open up adjacencies to traditional buying and selling that could extend their already diverse activities.
“We have strong reasons to believe that Chinese retailers have what it takes to succeed in the AI race and win over customers,” said Melanie Sanders, Asia Pacific head of Bain & Company’s Retail practice.
“E-commerce penetration rates have been robust, and e-commerce infrastructure—particularly its vast ecosystems of consumers, retailers, and partners—should accelerate adoption as familiarity with AI builds. And finally, the market’s AI research and development is also notably strong, leading the world in AI-related patent filings.”
