Tariffs, what tariffs? Chinese e-comm giants more interested in AI adoption trends than threatened trade wars

You might reasonably expect that in the current macro-economic and geo-political climate that being achieved Chinese online retail behemoth would put the prospect of trade wars with the US high up on your list of talking points. But not if JD.com and Alibaba are anything to go by, with their respective CEOs more keen to talk about AI’s impact on the e-commerce business model.

AI is transforming the retail industry, declares JD.com CEO Sandy Xu: 

As the largest retailer in China, we see abundant adoption scenarios…We have continued to increase AI adoption to improve efficiency and the personalization of certain recommendations, AI shopping guide consultations, as well as delivery and after-sales services, among others.

Xu goes on:

We are actively embracing the tremendous opportunity presented by AI and automation. We firmly believe these technologies will profoundly transform the retail industry, not only by enhancing operational efficiency and reducing costs but also by significantly improving user experience and innovating business models. Currently, we are testing and applying AI technologies across numerous retail scenarios and the entire supply chain network.

On the demand side, we are leveraging AI to better identify and stimulate user demand, enhancing the precise matching between demand and supply. For example, we are using AI to reform the search recommendation system. In the meantime, we are actively exploring innovative AI applications, including more efficient AI-powered shopping assistants.

On the supply side, we are consistently upgrading a series of AI-powered tools for merchants to reduce cost and improve efficiency. Concurrently, we are enhancing the productivity of AI 1P procurement and self-operations through AI, optimizing efficiency during sourcing, product selection and pricing. Leveraging JD’s unique supply chain advantage and experience, we are developing AI agents to significantly boost productivity for ourselves and procurement personnel.

Of course on the fulfillment side, not only AI but also automation holds a lot of potential for efficiency gains. We are implementing robotic automation technology across standardized warehouse process to enhance operational efficiency at every stage, reducing employment workload and driving productivity, and reduce operational costs through our warehouse operations.

As it relates to the firn’s advertising business, there are also myriad applications:

Our advertising R&D team is leveraging AI and large language models to enhance algorithms and recommendation effectiveness, driving higher ad conversion rates and accelerating ad revenue growth. We are actively developing and implementing AI-powered advertising agents that can execute complex ad campaigns through a simple command from merchants, with particular focus on serving the over one million merchants who have joined JD’s platform in the past two years.

We believe AI agents can help merchants enhance ad efficiency and campaign effectiveness while significantly reducing operational costs and complexity for business. Currently, our advertising revenue has continuously achieved double-digit growth with accelerating momentum. We firmly believe there is significant potential for monetization, particularly through AI large language model-driven efficiency gains that will fuel sustainable long term growth.

He concludes:

In summary, we believe JD’s differentiated capabilities and extensive scenarios across the entire supply chain provides the most fertile ground for widespread AI adoption in retail and supply chain operations, presenting us with a unique opportunity to deeply integrate AI into every retail scenario, ultimately enhancing operational efficiency, enhancing user experience, and unlocking long term revenue and profit growth potential.

Cross-selling

Over at Alibaba, where the company has recently announced a breakthrough in reducing the cost of training AI  models for search by nearly 90 per cent, CEO  Eddie Wu points to revenue from AI related products boasting triple digit growth rates for the best part of the past two years.  As adoption of AI increases, two clear trends have emerged, he argues:

Among large and mid-sized enterprises, AI applications are expanding from internal systems to more customer-facing use cases. At the same time, adoption of AI product is rapidly extending from large enterprises to a growing number of small and medium-sized businesses…In addition to faster adoption across sectors like internet services, autonomous driving, financial services, and online education, we're also seeing strong momentum in more traditional industries, such as animal farming and manufacturing, which are actively exploring AI applications and have shown significant growth and demand. 

A lot of the companies that started out initially adopting AI were ones in the Internet space or Internet finance, education, autonomous driving, those early adopter kinds of sectors. But what we're seeing now is a lot of new scenarios and a lot of newer kinds of companies in other sectors that are taking up AI services.

And interest in AI is driving uptick in focus on migrating to cloud platforms, he adds:

A lot of these companies, before they adopted AI, they might have been able to access these services offline with IDC or internally with their own server rooms in their own company, but precisely because they're now adopting AI, they have powerful impetus to migrate onto the cloud…there are a lot of these kinds of companies that originally were handling [their] workloads offline. So when it comes time for them to implement AI and adopt AI applications, they're migrating these services onto the cloud. And when they migrate onto the cloud, they will probably have some simple applications where they can do API calls. But when it comes to accessing their company internal proprietary data or proprietary internal processes within the enterprise and integrating with those, then a lot of the time what they're going to be doing is post training on the basis of open source model in order to meet those enterprise-specific demands.

As for how AI will impact the e-commerce space, Jiang Fan, CEO of Alibaba E-Commerce Business Group, argues there is huge potential here:

Certainly in the present phase, one thing that we're paying a lot of attention to is leveraging AI to further enhance the user experience. We have an opportunity to re-shape the consumer experience with AI, for example, in terms of search recommendations and advertising, where we are operating these systems based on traditional algorithms. And I think that this is a high priority for us in the near term. We're already making many attempts on this front and are already starting to see results.

AI has the potential to enhance, of course, the search experience as well as to provide more precise recommendations, as well as to enhance advertising efficiency. So we're seeing AI already making a significant difference in those different ways.

Secondly, we're also thinking about how we can leverage AI to enhance working efficiency internally for our employees and beyond our employees also more generally for merchants. Because, as you know, when it comes to e-commerce apart from the platform, the other big player in the system is merchants. We also trust that with the deeper adoption of AI, we will be able to further elevate efficiency across our entire ecosystem.

And then the third point is that, we believe in the longer term that AI can create new forms of interaction and engagement. And we're working on innovation based forms of interaction and engagement for the future. We're piloting these things actively and we believe that AI will play a critical role in terms of driving long term enhancement in the user experience and equally in terms of driving enhancement in the efficiency of commerce.

My take

What tariffs?