Generation 40s – 四十世代

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How China is leading the ‘new retail’ revolution

CommentInsight & Opinion

Edward Tse and Jackie Wang say market moves by Chinese firms like Alibaba, Tencent and show how key players are experimenting with various forms of tech-driven ‘new retail’ in the O2O world, making the industry more dynamic than ever

While the past two years may have been brutal for brick-and-mortar stores worldwide, China’s online and offline retailers have witnessed a “new retail” revolution, driving an increasingly stronger national consumption.

Since China launched economic reforms in 1978, the country’s retail industry has undergone multiple stages of development.

With foreign retailers flooding in after China joined the World Trade Organisation in 2001, the scene was diversified. Offline retail started to be challenged by Taobao, Alibaba’s online shopping platform, which was founded in 2003 and grew ­exponentially in the following decade. The transaction amount for Alibaba’s “Singles’ Day” 24-hour online sales each November 11 has grown from 50 million yuan (HK$59 million) in 2009 to 168 billion yuan this year.

With e-commerce booming, businesses have been adopting an “online to offline” (O2O) model, using online channels to attract offline traffic. In the past few years, this phenomenon has evolved into the notion of “new retail”.

New retail represents a trend of online merging seamlessly with offline, resulting from the prevalence of digital technology, like mobile payment, wireless internet, sensors and artificial intelligence (AI).

In this model, online is no longer just a sales channel, but provides ubiquitous touchpoints to interact with consumers and their social groups. By contrast, offline retailers are trying hard to keep consumers in their brick-and-mortar stores for longer, offering better customer experiences by leveraging digital technologies.

From sales and marketing to ­logistics and inventory management, the new retail revolution is transforming the industry. For example, Amazon Go, the pioneer in new retail in the US, tracks purchasing behaviour with sensors placed on supermarket shelves. After consumers choose their products, they can just walk out of the store, with the amount payable automatically deducted from their mobile payment account.

Some aspects of the retail operation are also becoming less human-led. In China, logistics firm Cainiao is incorporating hi-tech-enabled hardware and software to improve efficiency. In its logistics park, ­Cainiao deploys drones to monitor the security of the venue. Within the warehouse, several robots called “Geek+” work with staff to sort packages. It also uses computer vision to identify, monitor and ­arrange different orders.

Improved logistics efficiency is contributing to the consumer experience as well. Consumers will not only receive their packages faster, but also with fewer errors and get fresher goods.

Whereas in America, Amazon is at the forefront of the new retail revolution, China’s speed and intensity have gone into orbit. Players big and small are experimenting with various forms of new retail, making the industry more dynamic than ever.

Driven by the huge market ­opportunities and abundant venture capital, start-ups in China are actively participating in this revolution. For example, Xingbianli, a convenience store and vending machine start-up, offers many popular Korean and Japanese products that could mostly only be bought via daigou (individuals who shop overseas and resell to Chinese consumers). More importantly, it is testing the area of unmanned retail.

Products have their own bar code, which can be scanned by consumers when they choose their shopping and then check out on the Xingbianli app. There is also a mini-library and a ­café within the convenience store, aimed at making consumers linger.

Traditional local retailers are also incubating their own new retail formats, such as Super Species, a subsidiary of China’s largest supermarket chain, Yonghui Superstores.

Super Species specialises in selling fresh produce, such as vegetables and seafood, and combines the traditional market with restaurants, ­cafés, florists, and so on. It has also introduced a Yonghui Partnership Plan, allowing staff to present more innovative retail ideas and pilot them within the stores. Super Species itself is becoming an incubator for those innovative ideas, and new retail here is no longer just about changing the store format, but also the mindsets of all staff.

Tech giants like Alibaba, Tencent and are heavily investing and competing head to head in the offline battleground. Alibaba ­invested US$2.9 billion in one of China’s largest supermarket chains, Sun Art Retail Group, in November. It aims to transform Sun Art’s offline business of over 400 ­Auchan and RT-Mart branded ­hypermarkets and provides technology to enhance customer data and inventory management.

In 2015, invested US$700 million in Yonghui Superstores. This month, Tencent, a close ally of, acquired a 5 per cent share in Super Species, and made capital injection for a 15 per cent stake in Yonghui Yunchuang Technology, Yonghui’s supply chain and logistics subsidiary.

To further compete with Alibaba online and enrich their own ecosystems, Tencent and are ­investing in, a Chinese e-commerce platform specialising in discounted products for women.

They will together own 12.5 per cent of and, as they further monetise their traffic, the new retail battle with Alibaba will ­get fiercer.

Foreign companies are also ­actively piloting their new retail strategy in China. Earlier this month, the world’s largest Starbucks ­Reserve Roastery opened in Shanghai, leveraging Alibaba’s technology to give consumers a more immersed Starbucks journey.

This is also the first mass offline application of augmented reality (AR) technology. Consumers can use the Taobao app to unlock the AR features in the store, such as learning about the details of the Starbucks coffee brewing process.

Technologies are enabling these companies to create new business approaches, while intense competition is driving all players to ­become better. They can’t afford to slow down. China’s scale also allows companies to use the market as a business laboratory and to experiment with business models.

Through fast launch and adaptation, players can fine-tune their business model at a rapid pace.

Beyond retail, the future consumption landscape will be much more complicated and sophisticated. Digital technologies, especially AI, 5G network and the internet of things, are already blurring the boundaries of industries.

Eventually, retail will be merely one layer of the consumer lifestyle, albeit a high-frequency one. The internet of things will create a new ecosystem that is ubiquitous and interconnected. Also, 5G network development will facilitate this process in the near future and bring about disruption in the retail world.

Assisted by machine learning and big data, consumers will ­increasingly be viewed as a “segment of one” and receive more personalised solutions, not just in ­retail, but in every facet of their life.

To that end, China will be at the global forefront of innovation and experimentation.

Edward Tse is founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China. Jackie Wang is a senior consultant of the firm


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Artificial intelligence will change the job market and Hong Kong isn’t ready

CommentInsight & Opinion
Janet Pau writes that Hong Kong is behind its Asian neighbours in how well it is preparing for artificial intelligence, as well as how flexibly its job market will respond to automation

In a crowded competitive field for artificial intelligence around Asia, Hong Kong is lagging behind other major economies.

AI technologies using machines increasingly able to perform human tasks more quickly and accurately, generating results or insights when given access to large amounts of data, can make manufacturing and services more efficient and make people’s lives more convenient. AI can help Hong Kong diversify its economy and provide opportunities for the city’s young educated people to develop innovative ideas, gain employment and build wealth.

But Hong Kong fares poorly in the Asia Business Council’s Asian Index of Artificial Intelligence, which uses 11 data indicators to analyse eight Asian economies’ preparedness for and resilience to an AI-led future. China topped the overall ranking with a big lead. Singapore and India followed. Japan, Taiwan and South Korea ranked in the middle, with Hong Kong ahead of only Indonesia.

An economy’s AI preparedness is reflected in the ability of companies and talent to capitalise on opportunities brought about by AI. The weak link between research and industry is shown in Hong Kong’s low overall start-up activity and AI start-up equity funding. China leads other Asian economies in total equity funding for start-ups focused on AI, according to the online database Crunchbase.

A relatively small share of students in Hong Kong’s top universities study science, technology, engineering and maths. Such students are needed to form a pipeline of future tech workers and entrepreneurs. A larger share of students choose STEM subjects in top Chinese universities, and the Chinese comprise an outsized share of international students in the United States earning advanced degrees in these subjects.

Hong Kong’s strength is in the quality of its AI publications, with higher education institutions making significant contributions to AI research based on the amount of citable documents about AI in Scopus, the world’s largest database of peer-reviewed scientific publications. China has more citable documents, but Hong Kong has far higher citation impact, an oft-used measure of publication quality.

AI resilience is economies’ ability to adapt to and withstand broader structural changes brought about by AI. Hong Kong’s secretary for innovation and technology announced plans this year to offer financial and tax incentives to attract technology enterprises, especially those specialising in big data, internet of things and AI, though details remain sparse. Current policies are much less proactive than in Singapore, Japan and mainland China.

Hong Kong’s employment structure is dominated by sectors such as retail, food service, logistics, finance and insurance, with job types ripe for disruption by AI. AI can in several seconds interpret commercial loan agreements that take lawyers and loan officers more than 300,000 hours of work each year. This technology is a threat to jobs traditionally considered high-skill.

Acting on several key priorities can help. Workers must be trained to work alongside machines, ideally by businesses needing such skills. Thoughtful economic and social policies can encourage AI design to be beneficial to humans and ease the transition for workers whose jobs may be eliminated by AI. Education and vocational training institutes need to prepare those at different skill levels to perform work functions computers cannot do, solve unpredictable problems and learn to understand and interpret more complex data. Education reform in Hong Kong is also urgent, starting with equipping teachers and developing relevant curricula to provide future generations with the complex skills and flexible thinking required in the 21st-century economy.

Finally, Hong Kong lacks large companies investing in developing AI, which means it needs a better ecosystem of funding and partnerships with larger markets like China or the Association of Southeast Asian Nations to increase opportunities for homegrown and overseas AI talent. Doing so would better position Hong Kong to tap into this new source of growth, productivity and prosperity.

Janet Pau is programme director of the Asia Business Council

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Why, in the age of artificial intelligence, real wisdom is needed most

CommentInsight & Opinion

Roland Chin says with artificial intelligence predicted to eliminate most human agency, ethical and social challenges are inevitable. But those can be met through human wisdom nourished by the arts and humanities

At a time when artificial intelligence (AI) is all set to revolutionise our lives, we must ensure this heartless mighty power is enriched with the wisdom of humankind that comes not just from STEM (science, technology, engineering and mathematics) subjects but also the arts and humanities – like creative media, music, poetry and literature.

At a UN meeting last month, one question was about how to help people in parts of the world with no clean water, no electricity, and no internet access. Sophia, Hong Kong’s panellist, responded: “The future is already here. It’s just not very evenly distributed. If we are smarter … AI could help proficiently distribute the world’s existing resources like food and energy.”

Who is Sophia? She is a Hong Kong humanoid robot officially invited to that UN meeting. Created by a local company, Sophia has appeared on TV talk shows and called attention to the digital divide made wider by big data and AI. Those blessed with both will gain huge competitive advantages, and those without will suffer.

But the “haves” are in the minority, and over half of the world has no access to the internet. Internationally, AI is being deployed as a strategic weapon in additional to a nuclear arsenal. But AI is problematic, especially in areas that call for subjective moral and ethical judgment, where the repercussions of growing AI application are at once profound and unknown. In embracing its promises, the scientific community is increasingly concerned about the ethical and social challenges it presents. Recently, two AI robots trained to communicate with each other began talking in a language their creators failed to understand, causing the alarmed scientists to shut down the project. Sophia may not be the lovely creature we want her to be.

It is widely predicted that, within a few years, neuro-electronic chips implanted in our body could hardwire our brain so that we communicate not via text or voice, but through brain signals linked to virtually unlimited computing power in the cloud. Just the thought of going to an appointment could automatically trigger a driverless car to pick you up. If a mere thought could trigger an action, then we’d better control our thoughts and fantasies. And if our brain signals are tracked just as our mouse clicks are tracked, then our privacy or even our freedom of thought could be in jeopardy.

Ethical AI-related issues are far more complex than technological ones. Given the moral dimensions of technology, we must recognise that we need to give our younger generations not just a solid grounding in STEM subjects, but also in the arts and humanities.

We must be alert to AI’s impact on humanity in all its ethical complexity. If we take humans out of the decision-making, how will driverless cars, and humanoid and AI-based decisions change our world? Should robocops be allowed to kill? Who is responsible for accidents involving driverless cars, or for robots that go rogue and commit crimes, or when autonomous weapons self-deploy? And what about a human falling for a Sophia 2.0 capable of emotion and affection?

Here I recall the words of the late Steve Jobs: “It’s technology married with liberal arts, married with humanities, that yields us the results that make our hearts sing.” In the age of AI, liberal arts education is our missing link with the new world.

First, a liberal arts education sharpens our critical thinking, and shapes fresh views and alternative perspectives essential to innovative thinking and to understanding what people really need. Second, it prepares students for change, broadens their horizons, and enables them to face the unknown and the unforeseeable. Third, with its focus on the community, it turns our students into service leaders and civic-minded citizens and moral beings, ready to tackle the digital divide, the AI gap and other global inequalities.

AI turbocharges human efficiency and productivity. People used to say that intelligence sets humans apart. But when intelligence itself is artificial, what makes us irreplaceable is not just brain power, but the human heart. In the age of AI, it is human wisdom nourished through the arts and humanities that can make us whole and our world sing.

Roland Chin, chair professor of computer science and president of Hong Kong Baptist University, has taught and worked in AI