Summary Bullets:
- Deployment with leading Spanish retailer El Corte Inglés represents the potential of Alibaba Cloud’s ‘New Retail’ solutions beyond China (and beyond Alibaba’s own e-commerce business).
- Retail is just one of many industries where the company is positioning to deliver integrated AI-driven digital solutions.
Ahead of its annual Apsara Conference in Hangzhou, China, Alibaba Cloud announced a key enterprise customer engagement in Europe. While the deployment of its AI-driven retail solution with leading Spanish retailer El Corte Inglés is described as a pilot, the two companies were already working together, having signed an agreement last year that covers commerce, smart payments, cloud computing, and retail-specific digital solutions.
The cloud unit of Alibaba Group, Alibaba Cloud has been a force not just in IT services, but in the digitalization of key industries in China including retail, financial services, logistics, and manufacturing. In its fiscal year that ended in March 2019, the business generated $3.7 billion in revenues while serving an ecosystem of two million developers.
Often described as a Chinese Amazon, the similarities of the two e-commerce and cloud platform giants aren’t superficial, but they aren’t identical either. China is a very different economy and society than the U.S., and as a result, Alibaba has developed differently as a company.
A key factor has been the highly developed manufacturing sector in China. Retail businesses have easy access to manufacturing suppliers, whether they are e-commerce giants like Alibaba or individual designers. E-commerce, in turn, is not limited to the B2C model, with B2B markets part of the same dynamic. Retailers sell online to businesses, and manufacturers often sell directly to consumers. As a result, there is a high level of collaboration between manufacturers, retailers, and their distribution partners.
With a 43% share of the public cloud market in China (according to the company), Alibaba Cloud has played a primary role in the digitalization of these sectors. Complementary businesses within its parent company, in logistics and payment systems, have also played a major role. With deep industry expertise in-house at Alibaba Group, the cloud business is no longer just a cloud infrastructure supplier. Today, it is marrying that expertise together with its Apsara data intelligence platform to provide global enterprises with true digital transformation solutions.
AI and other innovative technologies are a big part of Alibaba Cloud’s international strategy. Outside of China, the provider is not going to compete on just IaaS or PaaS because it won’t have a particular advantage. It has been attractive to enterprises with a presence in China, however, because of its footprint there and because international companies are increasingly looking to access and evaluate Chinese technology innovation with the view to potentially using it for differentiation back home.
El Corte Inglés is trialing its advanced AI-powered image search and recommendation engine functions with the goal of improving the user experience. Customers can benefit from a more precise search, enabling more accurate results by using an image rather than vague and potentially misleading keywords. The solution also improves the browsing experience with customized discovery, with shoppers benefiting from seeing personalized recommendations based on their interests or needs.
But Alibaba Cloud’s ‘New Retail’ kit extends beyond these point solutions for customer experience in e-commerce and includes many innovations for physical as well as online stores. Over a period of 10 years, Alibaba identified key obstacles of online trading, including customer communication. Its deep language model supports translating many different language pairs, with machine learning generating accurate chatbot answers. Smart PoS machines, anti-shoplifting solutions leveraging video scanning at self-checkout kiosks, and connected product displays and smart phone apps leverage the company’s AI and deep learning capabilities to deliver personalized customer shopping experiences that both drive and protect revenue.
Whether Alibaba can replicate its digital transformation expertise in other industries remains to be seen, but it is central to its growth strategy. The cloud provider intends to use AI and deep learning enabled by the real-time compute capabilities of its platform to deliver digitalization in many more verticals beyond retail. The whole AI portfolio is not available outside of China yet, and solutions are still very customized, but it has been successful in generating lots of customer-specific developments from which it can learn and perfect business digitalization scenarios. While AI on its own is still a small business, it couldn’t be more strategic, given its role as a hook for selling other services (public and hybrid cloud, IoT, and data storage and analytics). Counting the heavy lifting AI performs internally to run Alibaba Group’s own operations, it would be a billion dollar business today, and is primed to drive multiples of that in 2020 and beyond based on current growth rates. Alibaba does not have the same industry expertise outside of retail, however, so the digital industry strategy alone shouldn’t be taken for granted when it comes to delivering on those growth expectations.
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