Thursday, June 20, 2024

E-commerce firms adopt new technologies

Rosy pink, warm brown, and coral are the latest lipstick shades Mdm Sita Kurniawan has bought online in the past few months.

Typically, the 40-year-old human resources practitioner would thoroughly research before making a purchase, reading internet reviews, following beauty influencers, and seeking friends’ opinions. However, for her recent shopping spree, she discovered a quicker method: virtual try-ons.

Using an AI shade finder, she tested the lipsticks multiple times before purchasing them on an e-commerce platform. This machine-learning technology employs facial recognition software to analyze and learn how different shades suit various features and complexions.

The mother of two, who lives in Bekasi on the outskirts of Jakarta, has been shopping online since 2018 but became an avid e-commerce customer during the COVID-19 pandemic. Like many people in Southeast Asia’s cities, she was drawn to online shopping by its convenience and discounts.

According to Statista, the region’s internet economy is projected to reach US$363 billion by 2025.

As this economy grows, AI technologies are enhancing the shopping experience, transforming retail behavior, and potentially influencing urban planning in the region, analysts told CNA.

However, they caution that, like most technologies, the use of AI in e-commerce is a double-edged sword. In Southeast Asia, where e-commerce is one of the region’s fastest-growing sectors, as noted by the regional industry magazine Retail Asia, the potential drawbacks could be particularly significant.

AI is not new to e-commerce. Many companies have been utilizing the technology for years, possibly about a decade, according to Simon Wintels, a partner in the retail and consumer packaged goods division of consulting firm McKinsey & Company in Singapore.

Wintels noted that AI’s use in online shopping is widespread, though it may not always be apparent to users.

“If you think about AI and how it helps you make decisions when you visit a website, it is already trying to analyze who you are and with what intent you came to the site from the moment you open it,” said Wintels. “It tailors what you see on the website or app. It works in the background when you consider your e-commerce basket, and if you add items to your basket, it will run some artificial intelligence analytics about what else you might be interested in adding.”

Indonesia, Southeast Asia’s largest economy, leads the e-commerce market by size. Statista predicts that the archipelago will account for 42 percent of Southeast Asia’s e-commerce market by 2030, driven by its growing middle class and increasing internet usage.

The online statistics portal also forecasts that Indonesia’s e-commerce market will generate about US$160 billion in online retail sales by the end of the decade, up from US$58 billion in 2022. However, other emerging markets like Thailand, Malaysia, Vietnam, and the Philippines are also expected to see significant growth in their e-commerce sectors. This growth has coincided with the rise of AI throughout the industry, according to Mr. Wintels.

For instance, Malaysia’s e-commerce industry revenue could reach US$7.88 billion by the end of this year.

In 2019, Malaysia had about 5.5 million e-commerce users, but by 2029, this number could grow to around 18.8 million, according to Statista.

“Everywhere in e-commerce, especially the leading platforms, would have AI across their value chain,” said Mr. Wintels of McKinsey.

“Even in figuring out things like logistics and supply chain, many aspects,” he added.

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