Will AI accelerate or disrupt Asia’s leadership in retail?

WITH the global retail e-commerce market expected to more than double in value between 2022 and 2032 to reach US$7.9 trillion, retailers are looking at an enormous and exciting opportunity.

A crystal ball to chart opportunities and trends in this fast-moving retail space would certainly be handy. Imagine the opportunities retailers could have unlocked a decade ago if they had known that e-commerce and then social commerce were going to take off the way they did. Lucky for retailers, they already have one – the insights that their own business leadership give them. After all, Asia is not just riding the retail revolution wave; in fact, Asia has been setting the pace for years now with super-apps and, most recently, the introduction of live-streaming technology for retail.

While the region is only growing wealthier and more digital, Asia still hasn’t reached its prime. And artificial intelligence (AI) might be the gamechanger for the region. From automating personalised advertisements to forecasting demand and even optimising pricing systems – growing AI adoption by retailers could propel Asia’s retail market to new heights.

Asia as the world’s retail future state

More than half of the world’s Internet population call Asia home. South-east Asia’s digital economy alone was projected to hit US$1 trillion by 2030, with its e-commerce sector as a primary engine for growth.

A myriad of factors are enabling retailers to monetise this growing digital base: more mobile and social media users than ever before; increasingly affluent consumers, with Asia accounting for over 20 per cent of the world’s millionaires by 2030; and new sales opportunities driven by influencer marketing.

Now, AI has entered the mix as the biggest disruptor in retail. Asia is one of the fastest adopters of AI globally, and we are seeing this translate to new AI-enabled retail experiences.

For example, AI-created avatars for live-streaming are changing the way influencers can be present on more than one platform while still allowing customers real-time engagement.

This is a trend expected to continue, with 85 per cent of Asia’s top retailers set on incorporating generative AI into their businesses by 2027.

Cracks within Asia’s thriving retail empire

Asia has a vast and incredibly diverse population who provide ample opportunities – and challenges – for retailers. For example, shoppers in Apac, like others elsewhere, are keen to try new things before a purchase, but whether they do this in person or online differs widely across the region. In Indonesia, 56 per cent prefer buying online while in Hong Kong it’s just 29 per cent.

Ensuring an optimal omnichannel experience alone is then simply not enough. Instead, growing a retail business empire will necessitate a deep and evolving knowledge of how their customers shop so as to target them effectively – whether for in-store or online discounts, for instance. This makes personalisation a business-essential for retailers here.

There are also many territories yet to be fully explored, especially by retailers with a lead in certain markets.

Carousell, a second-hand buying and selling platform, built its business in South-east Asia, but other parts of Asia – such as China – too show immense promise for second-hand retail.

For instance, while previously only 15 per cent of Chinese consumers have bought second-hand clothes, 40 per cent are now willing to try.

This indicates a shifting pattern, even in long-time luxury capitals such as Shanghai or Beijing, that retailers such as Carousell must be quick to latch on to to adapt their strategies to incorporate a growing mass of potential customers who can be successfully converted with the right strategies.

In any case, new changes in the digital retail scene mean that businesses have to rethink their strategies, especially when personalisation plays such a critical role in effectively targeting customers.

Solidifying Asia’s retail lead

Even in the retail sector, AI has more uses than just creating avatars for live-streaming. Using AI effectively requires thinking beyond just new innovations for retail but integrating the technology into the trade – from back-end operations to customer-facing platforms.

After all, the rise of AI presents bold new opportunities for retailers in the region to safeguard their market share and scale in a changing market. AI-powered demand forecasting can significantly improve inventory management for greater supply chain agility, leading to reduced costs, improved customer satisfaction, and increased sales.

This is particularly critical in Asia, a region that thrives on flash sales such as Singles Day that are important retail pillars that can bring in trillions of dollars.

With businesses using AI in their pricing enjoying an average return on investment that’s 2.6 times higher than those that rely on traditional methods, integrating AI from end to end could enable the region to unlock growth by leaps and bounds.

When used effectively, AI could even turn typical loss-makers, such as the returns process, into revenue-generators. From mining customers’ returns history data alone, retailers can use AI to prompt customers with options that match their preferences, minimising future chances of returns.

AI would also alleviate the logistical load on retailers by optimising the routing of returned goods by proximity which will save retailers resources while also helping improve their carbon footprint.

Furthermore, AI in itself is pivotal in bringing solutions like these to market faster. As an example, Qurate, a major retail group, is planning to leverage AI to expedite programming that will enable better semantic search processes, so customers receive relevant and quick responses to their queries.

After all, without the means to bring these AI-driven solutions to life, the possibilities are limited.

Ultimately – while Asia is still ahead of other regions in creating new retail experiences and touchpoints – AI can propel retail in the continent to an entirely new plane. Cementing Asia’s continued leadership in retail will undoubtedly require making AI its cornerstone.

The writer is chief business officer of SAP Asia-Pacific and Japan