Alibaba leans into AI to draw shoppers beyond China

Alibaba has been facing slowing growth amid fierce domestic competition, a weakened Chinese economy and changing consumer appetites. PHOTO: /BLOOMBERG NEWS
Alibaba has been facing slowing growth amid fierce domestic competition, a weakened Chinese economy and changing consumer appetites. PHOTO: /BLOOMBERG NEWS

Summary

China’s e-commerce juggernaut Alibaba Group is reigniting a yearslong effort to expand overseas as it seeks to offset a weakened grip on online retail at home.

SINGAPORE—China’s e-commerce juggernaut Alibaba Group is reigniting a yearslong effort to expand overseas as it seeks to offset a weakened grip on online retail at home. This time, it’s adding artificial intelligence to the mix.

Alibaba’s family of generative AI models and new teams focused on AI applications are beginning to support the company’s drive to expand well beyond China, including by helping small sellers overcome language barriers and take on more complex tasks like negotiating refunds, said Zhang Kaifu, head of AI development at Alibaba’s international e-commerce unit.

For China-based merchants that haven’t sold overseas before and may speak only Chinese, “going to our platform may make the most sense, because we have AI and other services" to promote both, he said in an interview.

The technology “can play a particularly big role in cross-border e-commerce" for smaller-scale businesses, he said.

Hangzhou-based Alibaba has been facing slowing growth amid fierce domestic competition, a weakened Chinese economy and changing consumer appetites. International e-commerce, while a smaller component of the company’s overall revenue compared with its main Chinese retail operation, has been its fastest-growing division for five quarters running, expanding 45% from the year-earlier period, against Alibaba’s overall 7% growth in the quarter ended March.

Zhang, an engineer by training, was tasked a few months after OpenAI launched ChatGPT in late 2022 to head up a team of more than 100 engineers and others to develop generative AI tools for the overseas e-commerce business.

“My main work for the first year was about identifying the use cases of AI," Zhang said. Internal tests showed that some were able to help merchants increase orders by up to 30%, including by helping sellers communicate in foreign languages, he said.

Today, around half a million merchants use Alibaba’s AI tools to create marketing materials, select merchandise and interact with customers, Zhang said. Sellers also use the tools, which are built on Alibaba’s Tongyi Qianwen model, to negotiate refunds and returns for faulty products, or to handle customer disputes of bank charges, he said.

Most merchants on Alibaba’s global e-commerce platforms are small sellers lacking staff and expertise to handle complex services, he added.

The growth of Alibaba’s overseas e-commerce business has been helped by shopping site AliExpress’s move last year to launch a new service allowing sellers to ship products to Alibaba and leave sales in the hands of the company, similar to Temu’s model and Amazon.com’s “Sold by Amazon" program. The service, known as Choice, has since become the main engine of AliExpress, contributing more than 70% of orders.

The unit still faces a host of challenges. Higher marketing expenses for international expansion was partly the cause of a plunge in Alibaba’s profit in the quarter ended March, said Zerlina Zeng, an analyst at CreditSights. The company will likely continue to spend more on AI and marketing to win back market share, which will weigh on profit margin in the coming quarters, she added.

Across e-commerce, Zeng said, “we don’t expect material [AI] monetization over the next six to 12 months."

And AI or not, Alibaba’s overseas e-commerce unit continues to face competition from the likes of Temu and other fast-growing rivals already popular in the U.S. and other overseas markets.

Xing Guangzhi, a merchant in the southern Chinese city of Liuzhou, said he has used Alibaba’s AI tools for the past three months to help generate descriptions for the food containers he sells on AliExpress.

The technology seems to have made his products more visible to buyers and boosted sales slightly, though he still receives twice as many orders from selling on Temu, he said.

“I’m not sure how much of a role AI can play," Xing said. “The sales figure is still the number one factor we consider."

Alibaba’s Zhang said the question of when new AI technologies can become truly productive remains one of the biggest concerns across industries seeking to tap AI to boost business.

“For us, the increase in cost efficiency made me believe that AI is really useful," he said. “And I think that down the road, the investment will be justified."

Write to Raffaele Huang at raffaele.huang@wsj.com and Kimberley Kao at kimberley.kao@wsj.com

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

topics

MINT SPECIALS