Southeast Asia's retailers are using AI to create to a new shopping scene

Amit Mangwani, Director of Retail Marketing, Intel Asia-Pacific/Japan

Amit Mangwani, Director of Retail Marketing, Intel Asia-Pacific/Japan

E-commerce is changing retail around the world, and Southeast Asian markets are no exception. But despite the success of giants like Amazon, China’s Taobao, India’s Flipkart, and ASEAN’s Lazada, many brick and mortar retailers continue to thrive using technologies like Artificial Intelligence (AI), big data, and virtual reality.

Online sales are still a fraction of the overall retail business globally, accounting for about seven percent of retail sales in 2016. In ASEAN, Singapore, Malaysia, Indonesia, Thailand, Vietnam, and the Philippines together accounted for US$14.8 billion in online sales in 2016, according to Digital in 2017. But that market is set for fast-track growth.

Plenty of growth opportunities will still be available for brick and mortar shops in ASEAN as e-commerce sales in 2025 will only account for about six percent of retail sales in the region. But retail managers will need to move quickly to prepare for a multi-channel and experience-oriented retail scene, as only three percent of ASEAN retailers currently have online operations. Traditional department stores and shops will find their future in a mix of online and in-store operations, but creating new, personalized, shopping experiences targeting millennial consumers will be the keystone of success. ASEAN retailers’ target demographic, the millennials, account for 70 percent of their region’s population.

While digital natives, they still seek out new in-person shopping experiences and are often motivated by FOMO – fear of missing out. Thailand’s largest department store and shopping mall operator, the Central Group, believes it has a solution in its “Store as Theater” concept. Central Group sees millennials as looking for the experience of touching and feeling products, and trying on clothes.

Southeast Asian retailers, following the example of the Central Group, will need to invest in linking their physical stores with online operations to meet millennials’ expectations. It’s important to understand that millennials are not typical window shoppers; they browse online to make purchasing decisions. But once website research is done, product reviews evaluated, and advice taken via social media, they are often go to the store for the purchase.

Making that in-store experience both personal and satisfying is the key to building customer loyalty and retailers are putting AI to work to meet expectations. As retail shifts from supply to demand-driven, brick-and-mortar stores are deploying a diverse portfolio of tech tools to meet customer requirements for choice, convenience, and high-quality service.

Opportunities will be available for retailers who know how to leverage and combine the best of the physical and online worlds

Step one for retailers is to develop data collection expertise. Big data is the key to generating actionable insights into customer preferences that deliver the optimum, individualized shopping experience.

AI is already playing a role in retail, with a presence so pervasive it typically goes unnoticed by shoppers. Consumers grown used to having questions answered by voice assistants on smartphones - and increasingly by home assistants – are relying on AI for their information. Unlike Baby Boomer and GenX shoppers, millennials are typically happy to go to smartphone’s voice assistant or a website rather than make a phone call and wait for an available human assistant.

Gartner Inc. forecasts that AI will handle about 80 percent of consumers’ questions by 2025, up from about two percent in 2015. Queries on everything from store hours, to locating merchandise, stock availability, product features, and much more will be answered by AI rather than human sales assistants.

Another AI tool retailers rely on for customer engagement is the chatbot: think of Starbucks using a chatbot to order coffee, Philips for information on lighting products, or Sephora for cosmetics. Among the most popular chatbot platforms are Facebook Messenger, WeChat, and WhatsApp.

Personalized one-to-one journeys through AI will be needed – taking engagement beyond the now taken-for-granted responses to customers’ queries via phone calls, emails, or Facebook messages. Successful retailers will reimagine customer service by anticipating what customers need before they even know they need it. With AI, retailers can predict and proactively address issues before customers reach out.

For big retail operations, efficient and intelligent inventory management is important. AI offers the ability to ensure stores have the right products at the right time. Visibility into the supply chain to generate insights into product trends is the goal. This enables predictive analysis for large supply chains. For large retailers, ROI in AI can be huge. Consider the volume of shipments needed for shopping events like China’s Single’s Day sales, or Black Friday in the US, Christmas and Valentine’s Day. AI algorithms have been able to deliver up to 426 orders per second. That turns into 36 million orders in a single day.

While there is little doubt that e-commerce will continue to see robust growth in Southeast Asia, the brick and mortar side of the business has reason to be optimistic. Millennials in the region view shopping as a desirable social experience that includes much more than the actual purchase. The shopping experience includes browsing, learning about new products and features, and while doing so, also meeting with friends and family, having meals or drinks, and spending time with friends “hanging-out” in air-conditioned shopping centers and stores.

In-store shopping is an integral part of local cultures across the ASEAN region and that is important for store operators to understand. Retailers who learn the lessons of effectively mixing online and in-store sales channels have a bright future. The new rule for retailers is that effective use of big data to better understand customers and potential customers, their consumer profiles, activity history, and behavior to generate customer insights and intelligent predictions for customer preferences.

Looking ahead, success for retailers in Southeast Asia will require new investment to link physical stores with online operations. Opportunities will be available for retailers who know how to leverage and combine the best of the physical and online worlds. Whether in online or in-store retailing, one thing seems certain: people will always want a personal, human touch in their shopping experiences retailers who best understand their customers will prosper.