How to break the situation in e-commerce and retail: thinking and transformation in the AI era
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The retail industry has never been an industry that sticks to rules. Especially driven by the wave of digitalization and intelligence, the market environment has become more complex and changeable. Today’s retailers not only need to face the impact of technological disruption, but also need to respond to the changing needs of consumers, from price sensitivity to personalized needs, and from traditional shopping experience to omni-channel integrated services.
Such changes are both challenges and opportunities. How companies break out of the old model and how to use technology in the AI era to innovate has become a question that every retail operator must ponder. I am very happy to have the opportunity to participate in the “Retail Development Reading Salon” this time. I have a discussion with Bearboss Chen Yangsheng and Shaumai Research Institute Zhou Zhenhua (Ryan), and learn from Liu Run’s “[Underlying Logic]” (https://www.books.com .tw/exep/assp.php/vista/products/0010919211?utm_source=vista&utm_medium=ap-books&utm_content=recommend&utm_campaign=ap-202501)” to further explore the key to the success or failure of digital transformation.
In addition to discussing the development trends of e-commerce and retail, we also mentioned the application strategies of technologies such as generative AI and QR Code in this lecture, and finally put forward specific practical suggestions, hoping to help retailers find a way to break the situation.
Discussing the fundamentals of retail strategy from the perspective of market structure
The foundation of retail strategy lies in the understanding of market structure. If a company cannot even grasp the characteristics of market distribution, how can it find its own position in such a pattern?
Taking the catering industry as an example, this type of market usually exhibits the characteristics of normal distribution, that is to say, the market shares of many participants are roughly even, and there is no absolute monopoly. This seemingly fair distribution model actually makes all participants face similar challenges: the service radius is limited, geographical location determines the customer source, and labor costs have become the main limitation to growth.
Boss Xiong mentioned Yum! (https://www.yumchina.com). Its success in the Chinese market is a case worth pondering. As a world-renowned catering giant, even if it has a strong supply chain and standardized service model, it is difficult to break through the ceiling of normal distribution. For those small and medium-sized catering companies with limited resources, differentiation has become the only rule of survival. For example, some brands choose to focus on specialty cuisines, while others target specific ethnic groups. These strategies are all ways to break through under resource constraints. I was also in the discussion and shared with you the operating secret of Liang Shehan Spare Ribs deliberately giving up side dishes in order to pursue fast meal delivery⋯⋯
In contrast, the [power law distribution](https://zh.wikipedia.org/zh-tw/power law) market is a completely different story. In such markets, a few leading companies often control the vast majority of the market share, while other players are forced to struggle to survive in the long tail. Taking the mobile phone accessories market as an example, UAG has quickly occupied the high-end mobile phone case market through its highly recognizable design and brand positioning. Not only that, it also relied on economies of scale to successfully reduce production costs, leaving its competitors far behind.
Such examples tell us that although the power law distribution market seems to be monopolized by leading companies, there are still opportunities in the long tail market. Those companies that can keenly capture the special needs of consumers can often find room for sustainable development in seemingly small gaps.
The core of digital transformation: returning to user value
At first glance, digital transformation is a large project with high technical content, but in fact, it should be a change with user value as the core. Many retail companies have lost their way in the process, focusing on the technology itself rather than the problems the technology is supposed to solve.
Ryan cited a real-life case, which is Louisa Coffee’s “cloud smart ordering”. This system was originally designed to improve efficiency, but it has not yet fully considered consumer needs. Users need to scan the QR code first, then jump to an interface and complete multi-step operations before placing an order. Such an experience is not only complex, but also leads to user loss and even damage to the brand image.
It can be seen from this case that digitization does not mean that the more cutting-edge technologies are used, the better. If the addition of technology does not improve the user experience, it will only become a liability. A truly successful digital transformation should be a manifestation of “subtractive thinking” - deleting all unnecessary functions and focusing on the core needs of users. This is also the key point that Liu Run mentioned many times in the book “Underlying Logic”.
So, what does a successful digital transformation look like? The answer is very simple: make the technology invisible to users. What users want is faster and more convenient services, rather than being bound by cumbersome processes. Taking retail self-checkout as an example, simple and intuitive operation design can greatly improve consumer satisfaction. This is the real value of digitalization.
Changes and opportunities brought by AI technology
AI technology is creating a revolution in the retail industry, but we need to realize that AI is not a panacea, and its application must be closely integrated with the company’s core business strategy.
Regarding the application of AI technology in various industries, I also quoted Dr. Luo Tianyi, an adjunct associate professor at National Taiwan University of Science and Technology, (https://sites.google.com/view/d9216903/首页)’s views on AI. In recent years, he has actively promoted the concept of “As the world is advancing, AI must have”. In other words, we start from the demand side, that is, think from the necessity of “survival”, the joy of “life” and the meaning of “life”. Dr. Luo Tianyi mentioned that AI can play different roles, such as enhancing human capabilities, replacing simple tasks, and even collaborating deeply with humans.
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If we take the e-commerce or retail industry as an example, we can look at the case of Amazon in the United States. The company actively develops smart inventory management systems. AI technology achieves accurate predictions of inventory demand through the analysis of historical data, thereby significantly reducing inventory costs and greatly improving distribution efficiency.
Of course, AI should not be viewed solely as a replacement tool. Truly successful companies are often able to use AI to innovate. For example, Hema Xiansheng combines the advantages of AI data analysis and offline stores to create a new retail model and provide consumers with an unprecedented shopping experience. The big data support system behind [Hema Fresh Products] (https://www.logisticnet.com.tw/publicationArticle.asp?id=1077), coupled with the 30-minute delivery algorithm, can ensure that the most marketable products are delivered to stores on time.
For most enterprises, the introduction of AI cannot be achieved overnight. It needs to start with small-scale experiments and gradually expand to the company-wide level. In addition, companies also need to establish a complete performance evaluation system to ensure that AI applications can bring substantial business growth.
The future of retail
The future of retail industry is a field full of possibilities, but it is also full of challenges. To find a foothold in this rapidly changing market, companies must have sufficient flexibility and innovation capabilities. From in-depth analysis of market structure, to practical experience in digital transformation, to application strategies of AI technology, every step needs to be consumer-centered and return to the essence of service.
As with every major change, the key to success lies not in the technology itself, but in how to combine technology with human needs to create real value. Having said that, the way to break through the retail industry is not to simply follow the trend, but to find your own unique positioning in the changing situation, so that you can remain invincible in future competition.
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