Full transcript below:

Max Peiro: My name is Max Peiro. I’m obviously not Chinese. I’m from Barcelona, but I’ve been living for 12 years in Shanghai. And I am the CEO of Re-Hub. At Re-Hub, basically, we are problem solvers. We work with large corporations here in China to help them identify business challenges and match them with proven startups that can solve these problems.

Interviewer: What does Artificial Intelligence mean to the retail industry? What are some of the examples that AI has infiltrated the retail industry?

Max Peiro: AI means everything nowadays. And when we talk specifically about the retail industry, I think that AI can be implemented and it can provide value in any step of the supply chain and in any step of the customer journey. So, this is a very good question, but at the same time, it’s an extremely broad question. Maybe I can give some examples on different steps of the journey where AI can provide value. And also, I think it’s important to mention that AI and data are interrelated. One of the advantages of AI is the ability to process, analyze data, and then deliver insights on top of that.

So for example, if we start from the beginning, when you need to design a new product nowadays, you can leverage data and AI on top of data to really be able to understand trends to unlock opportunities, market needs, and to leverage these insights to design and to launch new products. And I think that this is extremely relevant across many sectors in retail. From FMCG, for example, right now there are AI-driven startups that can identify trends in taste when it comes to food or flavors. And then FMCG brands can leverage that to launch new products in specific markets. Obviously, it can also apply to fashion. You can use AI to monitor what are the upcoming street trends and then use that into the design of the products. Obviously, across the supply chain, AI is extremely relevant when it comes to inventory—leveraging AI to be able to make a forecast on inventory allocation, optimization in terms of product assortment of quantities across different geographies across different channels. When it comes to marketing—selling your products—AI plays a crucial role in customer segmentation, personalization, targeting, content optimization, etc. And at the end of the day, I would say that the good thing about AI is that it can help you on any step of the customer journey and any step of the supply chain. And what is more important is it can make an impact on either your top or your bottom lines.

Interviewer: How can a brand boost up its data capability in China? 

Max Peiro: Brands need to be extremely realistic. And they cannot build full data capabilities overnight. There needs to be a plan and a long-term strategy. And on top of that, I would say that one of the main obstacles is not about technology. It’s not about the availability of data. One of the obstacles comes from inside the companies. It’s about their culture. It’s about their organization. It’s extremely important to make sure that everyone is aligned and that the organization is structurally in place to make the most out of this data or, I would say, to make the most out of the insights that you can extract from the data. We keep hearing from many clients that they have a problem with data. And it’s not that they have too little data. It’s that they have too much data. And they don’t know what to do with that. And at the end of the day, too much data creates confusion and frustration.

In the short term, if a brand needs to start from zero or from close to zero, I would say that the key would be to identify what are the insights that are most relevant for them that they could use to make an impact in their business and then work on solutions on how to identify this data and how to be able to extract these insights from the data. And nowadays, there are plenty of options on how to leverage data from companies like Tmall or Wechat but also working with technology startups based on specific business needs and then being able to leverage their solutions to extract data to solve that specific pain points. In the long term, I think it’s crucial that these brands are able to build up proper data strategy that is able to first collect the relevant data and then build data teams, of course, data lakes, DMP, etc. and then being able to beef up their data science capabilities. It’s not easy, but I think that nowadays, pretty much any corporation should have some data scientists in their team and then use that to extract insights. For whatever type of insights that they cannot extract themselves or they cannot obtain, just leverage external partners through that. 

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an email at dx@daxueconsulting.com

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks transcript #25: AI and big data in retail in China is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Max Peiro:  My name is Max Peiro. I’m obviously not Chinese. I’m from Barcelona, but I’ve been living for 12 years in Shanghai. I am the CEO of Re-Hub. At Re-Hub, we are problem solvers. We work with large corporations here in China to help them identify business challenges and match them with proven startups that can solve these problems.

Interviewer: Can you explain why the brands are now either beefing up their in-house tech capability or looking for external collaborations? Can you give some examples?

Max Peiro: I think the good thing is that now brands realize that they need to innovate to stay ahead in this fast-changing hyper-competitive environment. So, this is a good pattern and I would say that this is the way they are beefing up these in-house capabilities. And they are at the same time looking for external collaborations. And I think also that it’s a normal reaction to try to do it in-house when you want to solve a problem. I think that in some areas, this makes a lot of sense. You need to have full ownership of the capabilities, for example, when it comes to data or at least core data capabilities. But at the same time, I believe that some brands tend to underestimate the difficulties to build a solid in-house team especially to attract talent. When we’re talking about building in-house capabilities, we’re talking about hiring software engineers. We’re talking about hiring data scientists and data engineers. These are among the hottest jobs right now in the world, so it’s not that easy to recruit the best talents to join these brands. Some of these data scientists, for example, would rather join large technology companies, right. So sometimes recruiting will be a little bit difficult. And at the same time, it’s not easy to develop core capabilities when it comes to technology and data.

So, at the end of the day, I think that a lot of these brands will spend or allocate a lot of resources building these in-house capabilities and not always will deliver what they expect. So, I personally think that the best approach is to combine both—to have a strong core in-house team, but also boosting cooperation with external partners. I think that the advantage of external partners is that they are much more agile and they can bring much more efficiency to the whole process. But at the same time, you need to have a core team that can define the strategy, be able to assess what is relevant and what isn’t, and be able to execute it. And I think another problem is they will need to align internally different business units to deliver this innovation. This is a very important point. And actually, this combination of strong in-house team and external partners or external collaboration is what we promote at Re-Hub. At the end of the day, we are problem solvers. Corporate brands come to us with specific business challenges that they already identified and want to address. And then what we do is we leverage our expertise. We leverage our network to find the most suitable proven startups that can address these challenges.

So, it’s up to them to assess them further, test them, and see if they work or not for a specific environment and then implement it at scale. So I think that this combination of in-house capabilities—being able to align the different business units, being able to identify what are the most urgent challenges that they need to address, and then leveraging external players to solve that problem—is the best combination to drive innovation in a way that is agile and efficient. And at the end of the day, that has an impact on your top line and your bottom line. And another interesting trend that we are starting to see—it’s not only cooperation with external players and startups being the most obvious example—is corporations acquiring startups. More than corporations, I would say brands. At a global level, we see a recent example of McDonald’s acquiring Dynamic Yield. This was a huge event because it was a larger position and I think the integration of a pure tech startup into a company like McDonald’s was a great example. And also, we see at global level, some brands acquiring startups to build their R&D teams. And specifically, we’ve seen it in Israel. For example, last year or two years ago, Nike acquired a startup from Israel. And then, they used the team to set up their R&D center. Alibaba also did the same a few years ago. They acquired few startups in Israel and that was the core of their R&D center in the country.

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an email at dx@daxueconsulting.com

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks transcript #23: How can a brand develop a real in-house capability in China? is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Max Peiro: My name is Max Peiro. I’m obviously not Chinese. I’m from Barcelona, but I’ve been living for 12 years in Shanghai. I am the CEO of Re-Hub. At Re-Hub, we are problem solvers. We work with large corporations here in China to help them identify business challenges and match them with proven startups that can solve these problems.

Interviewer: What are the differences and similarities of the Corporate Innovation in China compared to the West? 

Max Peiro: I think first of all China and other economies in the West are very different. And these differences are the ones that shape this Corporate Innovation. I would say that these differences are mainly three.

The first one is the ecosystem. Probably everyone in the audience already knows the ecosystem in China has been parallel with the dominance of giants like Alibaba and Tencent. So, of course, the needs that brands will have when it comes to innovation will be very different than in the West.

I think that the second unique point is Chinese consumers. I would say that it’s somehow related to the first point in the sense that Chinese consumers have been somehow shaped by the ecosystem. So, I would say that nowadays Chinese consumers are extremely digital-savvy to a point that they are more digital-savvy than most consumers in any other country in the world. And they are very demanding and elusive. So, again, the problems that these brands will face when reaching out to these consumers might somehow differ to those in the West.

And the third one is our culture. Chinese culture has thousands of years of history. So, the mindset of the consumers is also somehow different. So, in terms of Corporate Innovation, it’s about embracing these differences and then adapting your strategy to be aligned with them. I would say purely from corporate innovation, the way brands are setting up their innovation strategies or their innovation efforts are similar, but then when it comes to the specific business challenge that they are facing or the ways to deliver these innovations or direct them into the ecosystems will be different. 

Interviewer: What are the Corporate Innovation trends in China and South East Asia in 2019?

Max Peiro: I think 2019 is a very important year because I think that it’s a turning point in China. And it’s the first year that we really see all the growth slowing down. Up until now, I think that brands in China were leveraging this incredible growth that the country experienced for many consecutive years. But now, the growth is slowing down. So, I think that in a way these brands realize the importance of innovation to be able to stay ahead, in this fast-changing environment. In terms of trends, I would say that it’s still all about data. It’s about the importance of data in this digital world. One of the advantages is that we leave traces of data in terms of consumption behavior patterns everywhere. So, it’s about how to leverage this data in order to improve operations processes, make better decisions, etc. And obviously AI.

I would say that in 2019, AI is at the center of every decision. Even though AI has been here for many years now, it’s when we see all of the brands putting it on top of their list. This year, we also see a large increase in setting up specific innovation strategies—for example, innovation teams.  Earlier, for many brands, there was an innovation mindset but it was not properly funneled. Whereas now we see more and more brands setting up dedicated innovation teams so they can funnel this innovation and collect the needs from the different business units and be able to deliver what they need. And also, there is a rise in corporate venture capital. So, it’s not only seeking internal and external innovation, but also the willingness to invest in different startups which I think it’s something that is growing a lot in 2019. I think it’s interesting enough. If we see the difference between China innovation, we see more innovation teams being set up and more CVCs in Singapore, for example, as a focal point for Southeast Asia than in China itself.

Obviously, when it comes to global corporations, it makes sense in terms of some global corporations being more comfortable doing business in Singapore or recruiting global talents in Singapore than in China. But I think that this also can create some problems on the road. When the decision is funneled for Singapore, if you want to implement this innovation in China, it might be a little bit difficult. 

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an e-mail at dx@daxueconsulting.com.

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks transcript #22: Corporate innovation trends in China in 2019 is the first one to appear on Daxue Consulting - Market Research China.

Question: Brands are now either beefing up their in-house tech capability or looking for external collaborations. Can you explain why?

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China

This article Daxue Talks 23: How to drive agile innovation in China? is the first one to appear on Daxue Consulting - Market Research China.

1) According to Daxue Consulting, how many AI companies are there in China in 2018?

150

1,000

3,000

10,000

Correct! Wrong!

There are 3,000 AI companies in China in 2018 (officially registered).

2) What was the first supermarket to use AI heavily in China?

Carrefour

Hema Xiansheng

7 eleven

Aldi

Correct! Wrong!

It was Hema Xiansheng, the showcase of Alibaba's New Retail project, which began to use artificial intelligence at all levels first to offer its customers a new shopping experience. JD.com and Tencent then followed the trend with 7Fresh and Carrefour Le Marché.

3) Chinese AI companies work in collaboration with the government, which provides them with all the data to analyze, especially in terms of security. How many surveillance cameras has China installed?

2 million

25 million

170 million

615 million

Correct! Wrong!

According to Daxue Consulting, in 2018 China has a pervasive surveillance network with 170 million security cameras in its Skynet system and 400 million more in the pipeline.

4) According to Daxue Consulting, what percentage of jobs in the service sector are at risk of being replaced by artificial intelligence?

2%

20%

50%

90%

Correct! Wrong!

21% of existing jobs in China’s service sector could be displaced over the next 20 years because of artificial intelligence in China.

5) On the other hand, artificial intelligence also creates new jobs. According to predictions, by what percentage will job opportunities increase due to the use of artificial intelligence in China in the next 20 years?

2%

10%

25%

50%

Correct! Wrong!

It is estimated that there could be a 50% growth in jobs created by AI and related technology over the next 20 years.

6) How has Emotional Data [data that measures the emotions and feelings of someone] been used recently in China?

To measure the level of commitment and emotions of plant employees throughout the day

To see when WeChat users were not satisfied through their screen

To measure the level of happiness of animals in zoos

To measure the stress level of Chinese people in the subway during rush hour

All of the above!

Correct! Wrong!

In 2014, State Grid Zhejiang Electric Power began to leverage emotional data. They have developed an emotional barometer that measures the emotional level of employees and internal managers. This aimed at improving happiness at work, reducing stress, and thus increase the level of employee involvement. Apparently, measuring the happiness of animals in zoos is not yet on the agenda!

7) Alibaba has set up a brand new hotel that relies heavily on the use of artificial intelligence and robots: the FlyZoo hotel. In this hotel, what is the role of robots?

They act as bartenders and servers

They take reservations over the phone

They do laundry and other household chores

They take care of room service and interact with customers

All of the above!

Correct! Wrong!

The one-meter high robot activated by Alibaba acts as a concierge, accompanying the guests to their room, providing room service, doing laundry, and even acting as a waiter in the hotel restaurant. At the bar, the bartender is also a robotic arm that can produce more than 20 different cocktail mixes.

8) According to Daxue Consulting’s report, the most common type of robots in China are:

Industrial robots

Waiter robots

Military robots

Domestic robots

Correct! Wrong!

According to Daxue Consulting’s report, the main demands of robots in China’s market come from industrial robots (71%).

China quiz: Artificial intelligence in China

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This article China Quiz: the use of AI in China in 2019 | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

MATTHIEU DAVID:  Hi everyone. I’m Matthieu David, the founder of Daxue Consulting, a market research company in China and its China marketing podcast, China Paradigm and today I am with Enjoyce Zhu. You are the COO of  Edenred China, a very large listed company. You have been at the start of loyalty marketing in China nearly 15 years ago. You have seen CRM strategies in China changing tremendously with regards to big data  and now we even talk about social CRM in China. You post on LinkedIn about the 4.0 CRM.

What is CRM 4.0? You have been working on CRM strategies in China for enough time to see the coalition and changes in China of the customer service in China, but before we talk about that, I’d like to talk about Edenred. Edenred is a large, French group. Most French people know it because it is very involved in the prepaid card, loyalty towards employees, and restaurant tickets in Europe or France, specifically. In China, its business is slightly different. The business to get tickets for restaurants does not exist that much. You have focused much more on the CRM strategies in China, and I’d like to know more about that. Thank you very  much for being with us and my first question will be about what you do now at Edenred, what you sell at Edenred, with an idea of the size or number of the clients, number of payments you are processing, number of interactions especially with clients to get an idea of what is going on in Edenred in China.

ENJOYCE ZHU:  I am very happy to be able to talk to you. Indeed, you know a lot about Edenred as a group back in France. It is really a very big company. We started, in fact, the famous Ticket Restaurant business almost like half a century ago. While in China, we started this kind of business, but then very soon we realized that probably it was not the right product and that’s why when I joined this company at that time, we had this prepaid business while we were not confident about if it’s going to be profitable in this market. This is why at that point in time we’d like to introduce something new to the market of customer service in China. I was the first one to develop this service of CRM strategies in China. Today in China, we have around 100 employees and are servicing 20 key clients, for which we have a full team of accounts, IT, technology, and consulting. We also have another business unit, which is the product targeting the small SME restaurants. For that part, we have around 30 clients already.

MATTHIEU DAVID:  You said it is divided into two parts. One is the service of CRM strategies in China, and the other one is?

ENJOYCE ZHU:  All our products and services are surrounding the core, CRM strategies in China. We used to have the customization service of CRM strategies in China along with technology solution, consulting service, and ongoing account service. Starting from last year, we decided to move to another part, which is targeting SME clients, because apparently they also need CRM strategies in China while they don’t need other comprehensive services like customization or consulting. 

MATTHIEU DAVID:  I see. That is the 30 clients you were talking about?

ENJOYCE ZHU:  Yes.

MATTHIEU DAVID:  Going back to what you wrote on your LinkedIn profile, CRM 4.0. Can you tell us what is 1.0 for CRM strategies in China? You have been in the business of customer service in China for 15 years. How do you define simple steps of CRM strategies in China?

ENJOYCE ZHU:  CRM 4.0 is exactly unique to China, which probably has not been heard about or prevalent in the rest of the world yet. Let’s go back to 1.0 of CRM strategies in China. So at the 1.0 time, CRM strategies in China start more in hotels and airline industries when there is a need for customer service in China. CRM 1.0 is more like a call centre. Apparently, these are all from the developed markets like the US and Europe. 2.0 of CRM strategies in China is more like we can do better with this customer service and these big data in China we have collected. It’s not only IT and teams of customer service in China involved.

We also have marketing teams involved to say, “We have one million customers. Maybe we don’t have to service each one of them in the same way, because the class is very different.” That was a time when segmentation of CRM strategies in China and the customer tearing started like gold card or silver card holder. That is 2.0 and still the US market and the European market are dominant, because this is where all the hotels or airlines have developed a very comprehensive, mature loyalty programme around it. Every best practice was importing from the American or the European market, but then gradually in 2004, new retail in China is growing super-fast in China and we started to have social media and big data in China. 3.0 started in 2010 in China. At that time, the trend of customer service in China has been switched. From an agency point of view, I don’t see any best practice that is going to work for the customer service in China anymore. We have to create our own CRM strategy given the roaming environment of new retail in China.      

MATTHIEU DAVID:  3.0 is linked to e-commerce in China?

ENJOYCE ZHU:  Yes. At that time, everybody was talking about O2O or reverse O2O like online to offline, offline to online, but in the end, everybody is talking about the Omnichannel because it is a new channel. It is not like cannibalizing the old channel, but more like providing a better experience to engage Chinese consumers. Then in 2018, 4.0 of the CRM strategies in China starts to take the lead. Thanks to the 4G network, smart phones, the WeChat, the e-commerce, all the big data in China we used to spend a lot of time, energy or budget to connect, they are so easy to be connected. In the new economy, big data in China is the essence of the company and the brand. If you don’t deal with the big data in China or you don’t make sure that you make full use of the big data in China, the value of these data or your assets is going to be depreciated and not appreciated.

The older data is so easily connected, and almost everyone can have access to the insights of big data in China. We are not talking about, “I will use my consulting team to work on the fancy BI tool or the best modeling of big data in China to share with your results.” That can be only understood from the corporate level. Now we are talking about the users in the frontline and our sales team. The sales team doesn’t have a university degree. They are just high school graduates, but they have a smartphone where you can also push the insights of big data in China for them to see, “I was doing good on my sales yesterday. What am I going to do today? When a customer comes to my store, can I recognize her? Can I know what shall I do to her?” Customer service in China is not only recalling her name but also understanding what products they need to recommend to her. All the big data in China at the 4.0 period is very exciting. It is available at the fingertips of everybody, not only for the corporate level in a meeting room of the headquarters.    

MATTHIEU DAVID:  When you say the 4.0 of CRM strategies in China compared to the 3.0, the difference is that the 3.0 of CRM strategies in China was divided into laptops, mobile and shops and it was hard to interconnect these different relationships you could have with the same clients. But with the phone, which follows me at the shop, at home and where I interact with online social media and WeChat, you can actually identify me through different touchpoints with your brand. Is it correct?

ENJOYCE ZHU:  This is also part of the experience from the consumer side of customer service in China. In the end, all the CRM strategies in China is engaging Chinese consumers. The 4.0 of customer service in China is indeed what you are describing. It’s all seamless, no matter in your e-shop, an e-commerce website, your social media account, or your store. 

MATTHIEU DAVID:  The key differentiation now or the key technological aspect is the unique identity of the phone? We can advertise and know which phone is linked. S this what you are talking about?

ENJOYCE ZHU:  Not specifically a device, but more of like a unique ID across all the channels.

MATTHIEU DAVID: To use this unique ID, do you define your unique ID or do you work with a company like Alibaba and Tencent?

ENJOYCE ZHU:  As we are the specialists of CRM strategies in China, we help clients to design this unique ID so that it can be recognized across different channels. 

MATTHIEU DAVID: Alibaba or Tencent as the providers of the unique ID is like Google and Facebook in the west. It is very blurry. You don’t really know where they are going to target to get information. By defining yourself, you are able to master much more in defining the identity of a client. Am I correct?

ENJOYCE ZHU:  You are exactly correct. Because it is also something we see in the trend in 2019 of CRM strategies in China. In the past 2 years, we can see that Alibaba and Tencent have really repositioned themselves as a platform economy with all the big data in China they have to be able to monetize all these big data in China. They have their own, close ecosystem to store all their big data in China on their platforms. However, when they approach a brand, if the brand is not clear head enough, they won’t need to choose one ecosystem. In fact, that ecosystem is kind of blurry to them because the trend is that all the brands, no matter big or small, have realized that if they only rely on a third-party platform and don’t build up their own database, it is going to be very risky.

MATTHIEU DAVID:  If a company wants to work with you. what do they need to provide you and build before working with you to make sure that it makes sense to build strong CRM strategies in China with you? One of the things they may have to do is to get a DMP or that is something you provide? Should your clients come with a CSB that identifies phone number or e-mail or should they give you access to all the social media they have and you put a peak sale or cookies to track them? Could you tell us more of how you onboard a client?

ENJOYCE ZHU:  We don’t pre-call big retail clients a lot of conditions, because every client has its own different internal or external ecosystems of big data in China. If the client is pretty big and has a lot of customized requirements for customer service in China, we will send our consulting team to sit with them to understand its ecosystem and ask them questions like “Do you have your own retail stores or use a POS system? Do you have an e-commerce platform in China? Is it your own brand website or a third-party e-commerce marketplace? Do you have social media like WeChat official account or WeChat mini program?”

We need to clearly identify all the channels to understand their CRM strategies in China. Do they want two Omnichannel or think JD is where their top clients here in China are? We can connect for them, but JD or Tmall does sales for them more like using them as an advertising slot or the online sales coming through their own brand e-commerce website. Different clients have their own different brand positioning for their retail stores and e-commerce platforms. We need to sit together with them to understand their own different ecosystems of customer service in China and positions so that we are able to help them do the interface of CRM strategies in China. In the end, the ideal situation is that we build an essential consumer platform big data in China, which interacts with all different channels in real-time.

MATTHIEU DAVID:  So you have a central platform to collect big data in China and information and another platform to engage Chinese consumers and different media.

Is it possible to be independent currently in this world? Tmall, for instance, will not accept that you put some code to take their big data in China out of the platform. Tencent would have similar regulations. Big data in China you can extract from the T-Mall will be mostly about the existing clients if they mention what they did in the shop and also their history with the company. You may not be able actually to extract big data in China on people who you have not dealt with. Could you tell us more about how you work with those platforms, which are a bit more closed like Tmall, Tencent, Alibaba, Tencent and so on and still keep independent?

ENJOYCE ZHU:  Tencent and Alibaba have different positioning on big data in China. Tencent is more open, while Alibaba is a bit more closed. We have two ways to work with Alibaba and Tmall. When we work with super-brands, they have a  deal with Alibaba to use its big data in China and they have an interface with its own platform for CRM strategies in China, so we connect very easily. Another way is that as ERS, we have our own SCV certificate so that we get access to their big data in China, but the older data we access has to be about the consumers who have already agreed to join or give their information to this brand on Tmall. We don’t collect any big data in China, which are from random prospects or from someone who is just clicking the information of this brand. This is what Alibaba has valued so much. No matter what kind of program they run, they are not going to give away this kind of big data in China.

MATTHIEU DAVID:  Could you describe the different channels in Omni-channels? We think that offline and online as a first division. Is it what it means?

ENJOYCE ZHU:  Of course, online and offline is the biggest Omni-channel, but what we are now emphasizing on Omni-channel is echoing what Jack Ma was talking about, the new retail in China. New retail in China is how we are able to operate offline stores like online stores. Here, big data in China has played a critical role to enable this kind of digital customer service in China even in retail stores.

MATTHIEU DAVID:  How do you collect big data in China in stores? Do you have specific examples? We know some technology like bitcoin, which is making it possible to know where people are, the map and the traffic in the shopping mall in a similar fashion in China. Is it a thing that is really used or it is still the entry fee, which is more of something to show off or a topic to talk about, but actually is not very used? Could you tell us the real status now of in-store data?

ENJOYCE ZHU:  We are still leveraging the existing resources or what is unique to the in-store experience. We leverage the sales associates in the store or the sale promoter in the store to engage Chinese consumers by using their sales promoters and own mobile phones to do the recruitment. I have my own digital QR code as my name card. A consumer scans my QR code, and then he or she is registered immediately. In the back office, the side of big data in China recognizes it like, “It’s me. You recruited a new customer named Matthew today.” 

MATTHIEU DAVID:  It’s mainly still interacting with a salesperson or the associate in the shop to engage Chinese consumers through the phone, so you could make sure there is a point of synchronisation with the big data in China. Some clients have asked us, “How do you deal with WeChat?” All salespeople in the shop are using their own WeChat. If they go to the competitor or somewhere else, they will push for the product and become a small KOL by influencing people. In some way, this salesperson becomes important again. It is not linked only to a brand. He is building his own community and relationship. How do you enter this question because there must be clients that ask you this question?

ENJOYCE ZHU:  The way we deal with that is not preventing them to use the WeChat. It is more of how I leverage your practices and make sure that all the interactions to engage Chinese consumers to belong to the company and brand, but not the salesperson. We have developed a product called  Smart Inchain, which is targeting the retail or sales staff, either in APP format, on the WeChat or a mini-program. All the sales promoters have communications with their customers, which happen through this application.

MATTHIEU DAVID:  How does it work exactly because people are so used to WeChat? If someone is asking me my contact, I don’t even give my name card anymore, because I am in China and I am so used to WeChat, so I am scanning their QR codes. I believe that sales people will have the same action when thinking about sharing contacts. Do you force them to go to Smart Inchain or Smart Inchain is integrating with WeChat? How does it work? 

ENJOYCE ZHU: If it is on a WeChat mini-program, I open a Smart Inchain, and my personal QR code is there. If you are my new customer, I ask the Smart Inchain if he or she is a member of our brand. If not, maybe this customer can join today and has discounts or benefits right away. It will be simple for him or her to just scan my QR code and become a member very easily by just binding something very quickly or just a cell phone number. Next time he or she comes into the store and says, “I am already a member,” so I will ask, “Is it possible for you to give me your cell phone number so I can check what kind of offers are available for you today?” It’s most likely that the customers will be happy to give me their cell phone number. I check from my mini program to see, “This is Matthew, who was here one month ago. He bought an eye cream, which will be replenished in two weeks. Today my job is to recommend replenishment of the eye cream.” If there is a Smart Inchain connected with our powerful model of big data in China, then the recommendation engine will also recommend, “Matthew is a French in Shanghai who is also interested in fragrance.” So my recommendation list number two is a fragrance.  

MATTHIEU DAVID:  This instant Smart Inchain is a system that is going to be deployed and used on different social media or apps, which are used, could be WeChat or another one to collect big data in China in order to avoid the salesperson to use his own identity. Does it mean that when a sales company is adding through Smart Inchain, it is not adding the personal identity of the WeChat or it’s adding both? Is it adding the personal identity and the client identity and the WeChat of the salesperson or it is closed within Smart Inchain?

ENJOYCE ZHU:  It’s closed within Smart Inchain.

MATTHIEU DAVID:  How do you engage Chinese consumers? Is it going to pop-up some messages from the mini-program on WeChat?

ENJOYCE ZHU:  If you are my member, you would like to ask some questions, and we are actually not connected personally. You can ask questions directly on the brands and WeChat official accounts, and then it will automatically direct you to the person who recruited you and is serving you. From the Smart Inchain application, I will be able to answer you back on the official WeChat account, and then we can do the dialogue.

MATTHIEU DAVID:  You keep the relationship personal by redirecting to the person who added you initially in the store. Is the message going to pop up to the salesperson saying that, “This client is talking to you” and then he or she can answer? If I see some salespeople in shops of your clients who are using their phones, they are not playing games. They are probably answering some messages to some clients.

ENJOYCE ZHU:  Yes, exactly.

MATTHIEU DAVID:  And they use their own phone?

ENJOYCE ZHU:  Yes, exactly. A lot of skincare brands have a reservation or invitation, and it can also be done through this way. A customer makes a reservation on the WeChat official account, then I receive the reservation, and it’s on my calendar. I know that on May 23^rd at 10 AM, my client, Matthew, is coming for a 30-minute consultation or a hand care massage. It’s also all the tasks to service my customers on my Smart Inchain application. Probably today, I also have ten calls to do to engage Chinese consumers who are having their birthday or I will remind them, “Your points will be expired, so come to collect your gift.”  

MATTHIEU DAVID:  Very interesting. Because I always feel that in the shop, sometimes the efficiency is very low. People are waiting, and so on. It is a way to engage Chinese consumers and call them when they have time. You mentioned about the personal relationship, and the person who added the client is going to answer, but does it mean that you don’t use chatbots in China, which can be based on single answers like Q&A?

ENJOYCE ZHU:  Very good question. In fact, if you as a customer are initiating the question, the first level is that if you are already a member, this question will be re-directed to the one who recruited you or who is serving you. If I don’t answer within a timeframe, it will be answered by the chatbot automation. Because we wanted the consumers, especially the members, to feel that I am personally served by somebody. The salespeople also take the opportunity as providing high-quality customer service in China and also upsell opportunity. 

MATTHIEU DAVID:  Interesting. Because most of the time, it is the reverse. You begin with the chatbot, and when it gets too complicated, and the chatbot cannot answer it, it will direct it to a personal relationship. Here, it is different. You are first in contact with someone with you. If he is busy, then you are directed to a chatbot. What’s your opinion of chatbots for customer service in China?  Are they really smart now? Are we at a stage where a chatbot can be smart?

ENJOYCE ZHU:  To be honest, I think the chatbots are moving very fast, so maybe somewhere some companies are already using very smart chatbots. In the end, what I still believe as an expert in loyalty marketing in China is that people need people’s customer service in China. If you are already our brand member, you deserve a personal customer service in China. That’s our belief. If you are recognized as a member, we wanted to service you as a member. To be honest, from my personal experience, even if I have a gold card of China Eastern Airlines, each time when I make the call to re-direct through all the automatic, you press 1, press 2 and all of this process is making me crazy. I don’t like this. I believe that for the high-touch service industries, we still need this personalized customer service in China. Because I am the one who recruited you and is serving you, I know you and then my answer will be mostly suitable for you.

MATTHIEU DAVID:  I saw some vocal chatbots used by some banks calling you for commercial reasons. The voice is extremely genuine and real. The answers are quite accurate when you talk to them. What’s your opinion on those kinds of AI formulation to engage Chinese consumers? Is it something you integrate to reach out to clients? I understand that to answer questions, you don’t advise chatbots or artistic simulation, but in terms of re-connecting with clients, are those chatbots a good idea?

ENJOYCE ZHU:  In fact, when you are doing this kind of sales, especially for telesales, it can be all of these. Even you have a human to do the call, they are following the scripts, and the robot is following. I believe this is very efficient. Think about that even a human is following the scripts, sometimes they make mistakes. If I use a robot who is exactly following the scripts, because of the way of doing the outbound sales, it’s only following the scripts. When somebody is asking this, and what is your answer? What is your answer when he is asking B or when he is asking something that you don’t know, what is the answer? In fact, it’s not that difficult to build the model of customer service in China. I believe this is the right way to do it and it will be very efficient, saving a lot of manpower for the telesales.

MATTHIEU DAVID:  You mentioned many examples in the B2C. Do you have some examples of CRM strategies in China in B2B businesses?

ENJOYCE ZHU:  For CRM strategies in China nowadays, it’s not only B2C but also the business model B2B2C. For example, tires don’t sell directly to consumers. They rely on their distributors, dealers, and retail shops to sell to the consumers. How are they are to really enable their dealer staff at those shops to engage Chinese consumers and then also empower them, and do targeted campaigns? To call-back or activate their customer database is what all these B2B2C brands are working on. We are providing not only the back-end CRM strategies in China but also the dealer shop tools for the dealers to have their own small database and leverage the big data in China. Michelin has collected it to provide the insights to the dealer such as, “Why is my business good or bad? Is it because of my new customers or old customers? What is the share of business for the different services? What is my benchmark with my neighbors? If my business of old customers are not so good, what should I do?”

There are recommended intelligent campaigns for them to improve their KPIs, but the campaign design is what we helped Michelin design based on their big data in China. The campaign can be as simple as recalling sleeping customers, who have been here one year ago, but not recently with an average basket of 1,000. We just did this campaign and enabled the dealer to just click on their own cell phones and say, “I want this campaign to wake up my customers.” For one dealership, they send out like 200 SMS and get one customer back with 800-RMB basket purchases or transactions. 200 SMS is only 20 RMB. For them, big data in China has been able to make sure their operation can be more digital and intelligent.  

MATTHIEU DAVID:  You just mentioned SMS. It is interesting because we don’t even think any more sometimes about sending SMS. Could you tell us if there is a different touchpoint that you are creating in your CRM strategies in China? Are you integrating posting mails to say now it is time to send an e-mail, a physical card to someone? You have SMS, WeChat, and e-mails. I don’t know what you are thinking about e-mails in China. Can you tell us the different touchpoints you can have?

ENJOYCE ZHU:  In fact, we are able to integrate all the touchpoints. It is more like the unique positioning of this brand of how they engage Chinese consumers. Why we are using SMS for Michelin is because we are servicing Michelin Tire Plus. It’s not only tires, but also like fast fitting, maintenance and this kind of service. Once a car is in the shop doing a fast fitting, customers won’t wait until everything is done because they don’t feel comfortable sitting there. They think they’d better get a coffee next door. They leave my cell phone number there to call them when it’s done. For customer registration or customer information collection, a cell phone is very simple and very easy to get. This cell phone has become the unique ID of Michelin customers linked with their car plate.  

MATTHIEU DAVID:  Phone number is better than WeChat because WeChat can be on mute, right?

ENJOYCE ZHU:  WeChat is a complementary channel. Think it as a car owner, because usually, you don’t go to Michelin WeChat to see like what is the tire. The content itself is not so interesting. The involvement is pretty low. Of course, Michelin wanted to have its own WeChat, but then the account itself is not so excited. The cell phone has become the primary contact information. For e-mail, everybody is saying, “Who has an e-mail address? Who is using e-mail?” Our top clients Sephora is using a lot of EDM for its CRM strategies in China because EDM is the way to carry a lot of information about beauty products and information.

MATTHIEU DAVID:  I have been in China for 9 years, and e-mails in China have always been a mystery. People were not receiving e-mails. It went in separate boxes, and the promotions were in separate boxes of the 163 counterparts. It is very difficult to reach out through a simple newsletter or simple system of e-mail in China. I see that the opening rate of e-mails is lower. What is your feedback on this? 

ENJOYCE ZHU:  For me, it depends on different brands because EDM in Sephora works well, and I think no matter if it is EDM, SMS, or WeChat messages, it is all about content relevance. All the EDM we send for Sephora is personalized and powered by our recommendation engine. It is saying like, “Hey, Mr. Matthew, it’s Mother’s Day. We have this and that theme for your mother or your wife.” Then there is one line of personal product recommendation, which is unique to you and not to anybody else because we know you and we have all your big data in China. We look your big data in China to see what is generally interested in this kind of segment. It is more about content relevance. We have tested and see it is the personal recommendation message. The opening rate has been improved a lot, but of course, we see the opening rate as the conversion rate. No matter what the channel is, it is more about the relevance. If it isn’t relevant, even if it’s WeChat, you won’t really care about WeChat.

MATTHIEU DAVID:  Interesting. Thank you very much for your time. It’s for nearly one hour. Do you have anything else you’d like to add on?

ENJOYCE ZHU:  What we have already talked about is more on the big brands, their CRM strategies in China and how they are trying to become more and more competitive by unlocking all the big data in China they have collected. But another point is that in China, we see a lot ofsmall and medium enterprises who have the need to be able to benefit from the digital operation of big data in China. That’s why I talked in the beginning that from last year, we focus on streamlining all our products and offerings to become really light so that even a small restaurant is able to benefit from good CRM strategies in China.

MATTHIEU DAVID:  How simple can you make it? I didn’t want to talk about other easy solutions from the west like Upstart, MailChimp, ActiveCampaign. You open an account, plug with your website or ID from Facebook. It is very simple. When it is tailor-made and a bit more sophisticated and adapted, in terms of serving SME, you have to make it more standard and simple. How simple is it to activate the solution?  

ENJOYCE ZHU:  Thanks to the WeChat mini-program, we made everything in WeChat mini program. If a restaurant has one store, the store owner has access to see all the big data in China collected. When consumers walk into the store, they can scan the QR code from the mini-program and become a member and order their food, check out and pay. They leave their messages at the end, “We want to become a member of the restaurant.” The store owner is going to see, “Who came to my store? Who ordered what and who was paying? How much? If I wanted to do a campaign, I just click on I want to recruit new customers.” I click on the campaign on social viral coupon sharing.

When the customer receives this coupon of referring to 5 friends, he or she will get a big discount. So they bring friends, and the owner says, “I wanted to increase the basket size.” I click the basket-size increase campaign, and then it will send messages to all my repeat customers. It’s all automated, and all the campaign ideas are from what we have been servicing in the past years to make sure that it can be streamlined as simply as the one-click campaign for the store owner. It’s all WeChat mini program ecosystem from the consumer side to the store owner side.      

MATTHIEU DAVID:  What are the next steps in terms of CRM strategies in China? We are talking about facial recognition and you mentioned that actually it is not used yet on a massive scale, but what is next? What do you have in mind for 2020?

ENJOYCE ZHU:  For the next year, I think there are new technologies coming up. No matter what kind of technologies are coming up, it is making CRM strategies in China more accessible. For big companies, it is accessible to the frontline staff. For small companies, it is making it accessible for them to have their own CRM strategies in China. Before, they have to rely on Dianping, Ele.me. They have to pay pretty handsomely to get traffic, but that traffic, in fact, doesn’t belong to them. If they wanted to convert the traffic to their own assets, they need their own tools for CRM strategies in China. That’s why more CRM strategies in China and the digital operation of big data in China have become really accessible to SMEs and also to the sales staff for the big companies.  

MATTHIEU DAVID:  Democratisation of CRM strategies in China, more adapted CRM strategies in China, corporate CRM strategies in China are more like a trend than a technological breakthrough, which could take more time to be mainstreamed. Thank you very much. I enjoyed it so much. It was very interesting, very insightful with precise examples so thank you very much for sharing. I hope you enjoyed it.

ENJOYCE ZHU:  Thank you very much.

MATTHIEU DAVID:  Thanks. Bye-bye, everyone. Thanks for listening.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #46: How to develop effective CRM strategies in China is the first one to appear on Daxue Consulting - Market Research China.

Unmanned stores in China: Integrating AI technologies in Chinese retail

As the first emerging store-model after the new retail concept was proposed, China’s unmanned stores started sprouting up in China starting in 2017. According to iResearch, the market size of unmanned stores is expected to exceed 3.3 billion in 2020. At this stage, AI technologies in Chinese unmanned retail are mainly divided into three categories: bar codes, radio frequency identification devices (RFID), and machine vision. The following are the major technologies of leading enterprises among unmanned stores in China:

QR codes

The QR code, in other words, the two-dimensional code, provides information storage on both horizontal and vertical axes. It enables consumers to pay for goods by scanning codes on the products. It’s fundamental to unmanned stores with the advantages of lower costs and quick payment. Small unmanned stores such as Bianlifeng and Xiao E micro shop use this technique.

Radio Frequency Identification Devices (RFID)

RFID is relatively mature in using electromagnetic fields to automatically identify and track items’ tags. It requires sellers to stick RFID tags on each product to improve the efficiency of identifying goods.

Machine Vision

Machine vision uses cameras and computers for facial and behavior recognition. Presently in China’s unmanned stores, machine vision performs as a store clerk to recognize and trace customer behavior. 

However, unmanned stores in China have started experiencing a series of closures, bottlenecking further development. One major obstacle is the difficulty of selling fresh groceries in the store without adding staff. Customers expect to buy processed food when in convenience stores. Some unmanned stores that only carry long-lasting products like drinks and snacks would not attract consumers but only be regarded as a big vending machine.

By analyzing Tao Café and Bingo Box, the most recognized unmanned stores in China, it can be seen that they can significantly enhance the shopping experience. Customers can enter Tao Café and Bingo Box by scanning QR codes on their apps. The stores are equipped with biometric systems and machine vision technologies used for facial and speech recognition. With further upgrades of AI technologies in Chinese retail, Tao Café can track target consumers, analyze what the consumer took as they leave the store, and offer speedy payment procedures, effectively removing the need of a check-out system.

From unmanned stores to smart stores: How AI applications in China have changed the retail landscape

AI is being applied in new ways across the entire new retail product and service cycle, from assembly to customer service interactions. Integrating AI in new retail is helping retailers discover actionable insights with different AI applications. For the perception of the retail process, AI applications in China’s new retail can be broken down into the categories as below:

Customer traffic recognition

The traditional Chinese retail industry lacks effective means to understand consumers’ needs and purchasing habits. Customer traffic recognition is one of the solutions of using AI technologies in Chinese retail. Tech companies support AI technologies in Chinese retail Hikvision and Winner Technology.

Customer traffic recognition can identify the flow density of consumers in the store and draw a heat map through real-time monitoring, thereby calculating the most popular goods and services to understand consumer’s shopping habits. Through the results, operation settings of the store can be adjusted timely. Also, it allows retailers to keep the optimal configuration and realize the balance between people, goods, and places.

[Source: CICC and Hikvision, “AI in China’s new retail: customer traffic recognition in smart stores”]

Digitalizing offline retail

Relying on AI robots and other AI technologies in Chinese retail empowers offline stores to adopt digital management

Traditional large-scale retail chains need to manage hundreds of stores across the country. By deploying Dahua’s smart retail solution, offline retailing stores can implement precision marketing, find the stores with poor sales, and even identify theft through reviewing business data. Also, the remote patrol function can be used to directly view the status of each store, in terms of its operation, display, health, service, and compare the high and low performing stores in real-time. The face recognition among AI technologies in Chinese retail accurately counts the consumer traffic data and combines the sales data to analyze effectiveness and customer preference.

Supply chain and logistics optimization

Increased usage of AI technologies in Chinese retail serves to improve overall efficiency and resolve the limitations of traditional retailers, such as inefficient planning, labor-intensive warehousing, and slow response to market changes. Under the complex network and increasingly diversified consumer demands, retailers will need an automated supply chain. AI technologies in Chinese supply chain include deep learning, machine learning, and sensor equipment. Product tags like popularity, best seller, and high margin will be categorized without human intervention. When a product is contributing relatively less compared with its resource, time, revenue, margin, it would be automatically replaced.

For a specific example, Cainiao Network has created a logistics information platform that links delivery vendors, warehouses, and merchants. The platform is designed to digitize the logistics management with AI applications in China’s new retail. Also, building on their work in smart logistic robots, Cainiao has developed an agile, automated warehouse solution. The self-charging AGV robots in the warehouse are expected to reduce manual staff labor by an average 50,000 steps per day and improve efficiency by 30%.

The promotion of AI in new retail in China is to further accelerate the process of new retail transformation in terms of data, networking, and intelligence. It changes the retailing landscape by creating efficient and accurate user portraits, perfect merchandise, and service, as well as the accurate decisions based on AI-led data.

Retail reform: Using AI technology in Chinese retail to center on customers’ needs

China is the first country undergoing a“new retail” reform to focus on customers’ needs. Compared to the traditional retail industry, the collection of customers information is more time-efficient. At the same time, with updated AI applications in China’s new retail, retailers are considering how to use customer data to analyze customers’ consumption behavior in the store or online in a timely manner. Therefore, customer supports have also been launched by AI in China’s new retail.

1) Smart product search and recommendations

By integrating AI in new retail, real-time data in many e-commerce channels is used to predict what consumers want. It is based on previous purchases, online browsing, comments, to achieve precise marketing. Take Taobao’s AI design system Luban as an example:

Luban system first combines big data and deep learning to decompose the original images, train and learn different designer styles; secondly, according to users’ preferences and other data matching to generate digital ads, the system selects the best ads after scoring. The system processes over 8,000 posters per second as demonstrated in the below picture:

2) Smart customer service (Chatbot)

With the development of the Chinese retail industry, the needs of the online customer service are continuously growing. The data shows the market of China’s online customer service in 2017 was 64.4 billion yuan, with a compound growth rate of 10.62%. Because the traditional type of customer service has many weaknesses such as high labor cost, speech recognition is used as one of AI technologies in Chinese retail to solve problems effectively based on big data and deep learning. It is expected to gradually replace traditional manual customer service and improve the quality of service.

Ali Xiaomi (阿里小蜜) is an AI-enabled personal shopping assistant and customer service representative used on Alibaba’s e-commerce websites. With the use of natural language understanding, Ali Xiaomi stands out from other chatbot services available in China. It is able to understand customers’ messages, including texts, voice, and even photos. It will return a list of recommendations that users can choose by brand, color, and other characteristics. Also, Ali Xiaomi can answer some frequently asked questions and inquiries from consumers.

3) Pervasive personalization

Merchants selling on mainstream e-commerce platforms presently can personalize their virtual storefronts, offer real-time and tailored product recommendations based on purchase histories, demographics, and geographic locations. It is also an effective approach to center on customers and improves efficiency by integrating AI applications in China’s new retail.

Large new retail platforms using AI: the fusion of algorithms and experience

Currently, AI is widely implemented in hypermarkets, supermarkets, and also convenience stores. Apart from such retailing stores, other internet companies like Tencent are also the leading buyer and contributor to developing related AI applications. Thanks to the promotion of retail giants, such as Alibaba, JD.com, Suning, etc., AI applications in China’s new retail are on the rise will continue to expand over the next two years.

1) Hypermarket: Ali & Hema, JD & 7Fresh

Hema and 7Fresh are both highly integrated their online and offline markets. They provide services that connect supermarkets and restaurants. Users add products to their digital cart by scanning QR codes. JD also launched the unmanned shopping cart service, which supported by image recognition. In addition, combined with the no cash payment method, Ali and JD can obtain accurate data of users, in turn, to achieve precise marketing.

The availability of electronic price tags that can be recognized by machine learning applications like RFID, is the key to the efficient operation of hypermarkets. Hence electronic price tags are a key AI technology in Chinese retail.  The use of electronic price tags ensures the same price online and offline sales. Furthermore, with the mobile handheld identification devices, staff use codes to identify which goods to pick from shelves, then package the products and transport them to the express delivery department. The efficient data transmission chain is also important to support for their delivery commitment, as well as to helping expand the customer base.

2) AI + big data: Tencent & You Mall smart retail system (优mall)

Tencent’s Mall Smart retail system was released in 2017. It is equipped with Tencent’s AI technologies called Youtu, and Tencent’s Cloud Data. The system includes VIP-to-store reminders, store compasses, line analysis, customer group management, facial recognition payment, etc., covering the various sections of the store. Youtu’s facial recognition technology is applied to customer identification; shelves display adjustment, shopping guide, and patrol shop functions. Through the moving trajectory in the mall, shopping paths, and correlations between categories and commodities can be recorded and analyzed to optimize the arrangement of shopping malls. The following chart shows the central values of the AI system in digitalizing customers’ information analysis:

In short, AI in China’s new retail indeed has great potential for continuous development. Whether in the hypermarket, the smart retail system, or any new forms that may emerge in the future, the fusion of algorithm and experience is an important factor for retailers to consider when deploying AI. That means it is necessary to combine advanced algorithms of AI technologies in Chinese retail with customers sentiments from the previous retail experience.

What AI technologies in China can bring to your retail shop?

Currently, the main players of AI in new retail in China can be sorted into three categories: cloud services, large retailers with AI uses, and AI companies.

Based on their own database, large internet companies can develop or integrate AI technologies internally. The represented companies are Alibaba, Tencent, and Baidu. AI companies in China can deliver customized technology that addresses individual store needs. Apart from AI technology, relatively small retailers can also learn from large and mature retailers to find AI solutions.

The structure of leading players of AI in new retail in China:

Chinese AI companies in retail are mainly focusing on the technology layer. For example, Malong Technologies provides computer vision service. Some other companies like Megvii, Deepglint, Extreme Vision are also offering AI applications to cover the overall retail chain in China.

Therefore, for the foreign retailers who want to launch or further develop their business and integrate AI in China, cooperating with AI technologies companies is considered as an essential and practical approach to target more Chinese consumers.

Based on the algorithms, there are two segments of technologies that foreign retailers can use to find partners in AI and China’s new retail.

Firstly, in the basic level, it is suggested for those retailers with a market share in China to partner with the AI companies which are serving cloud, data, and algorithms technologies. They can integrate AI in new retail to form their own consumer group portraits and analyze their preferences and expectations through the data analysis services. Here is the list of companies which are providing cloud, data, and algorithms services:

On the other hand, China’s AI companies in technology may bring more solutions to the current retail bottleneck. With applications such as computer vision, intelligent speech, and natural language processing, retail companies can directly target the consumers and reduce costs by more intelligent customer services and improved shopping experience.AI companies in China who are developing this type of technology are below:

In conclusion, an innovative retailer should use AI to make accurate forecasts and anticipate the future. AI in China’s new retail is more expansive than just unmanned stores, also reaching into the territory of hypermarkets and supermarkets, and other retail methods that are yet to be invented. In this world of big data, insights from AI will contribute to creating competitive advantages for retailers to improve the efficiency and profitability within the Chinese retail industry.

Author: Yufeng GUO

Learn more about China’s Artificial Intelligence ecosystem by reading our AI in China White Paper.

See our report on AI in China:

This article AI in new retail in China: not just unmanned stores | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

“The dividend of government policies is a key factor behind China’s AI development.”

Baidu co-founder and CEO Robin Li was quoted saying at the 2018 Baidu World Technology Conference in Beijing. 

One of the Chinese government’s greatest ambitions, with the Communist Party at the forefront, is to make China the world leader in artificial intelligence and the world’s first innovation center by 2030. As stated in a previous article on AI by Daxue Consulting, the Chinese government established the Next Generation Artificial Intelligence Development Plan (AIDP) in 2017. The financial resources dedicated to this new plan are equal to China’s ambition: $22 million per year, a sum that contributes to a budget that should reach $59 million by 2025.

China’s AI development plan prioritizes research and innovation in applications of AI in the Chinese military and defense industry, as well as insecurity and surveillance. The aim is to become the world’s first innovation center by 2030, and the country certainly has a chance to win the AI race against the US.

AI used by the Chinese government: tech companies at the party’s orders

China’s AI development: Champions at the forefront of innovation

In 2018, the Chinese government took a major step forward in China’s AI development plan by announcing that China’s technology giants Baidu, Alibaba and Tencent (BAT) along with leading facial recognition companies Flytek and SenseTime, officially became China’s “AI Champions.” This new position benefits technology companies by ensuring them a position at the forefront of the innovation race, freeing them of the competitive threat of state-owned enterprises. However, collaboration with the government on national security and military applications of AI in China is the price to pay for this strategic position.

The Chinese government has specifically entrusted certain tasks to the local technology giants to achieve its Development Plan. Alibaba Cloud must dedicate its research in AI for Smart Cities, Baidu in the sector of autonomous vehicles, Tencent in medical imaging, and iFlytek in voice recognition. The Chinese government has also set up a Strategic Advisory Committee made up of leading technology universities, the top AI experts in Chinese technology start-ups and “AI Champions.” The “Made in China 2025” plan is another essential plan, which aims to increase China’s autonomy in AI, and reveals how it has become a national priority for the Chinese government.

Public and private: dual use of AI technologies in China

The use of AI in China essentially implies a dual-use factor: both actors from the public – the Chinese government- and private sector benefit from the synergies of the interdependence relation. For example, the same technology that powers autonomous vehicles can be used in commercial vehicles in the same way as in military AI-enabled drones in China. On the other hand, the company that specializes in natural language analysis and automatic translation, YaTrans, collaborates with the Chinese government on counter-espionage by making its NiuTrans system available to the Ministry of State Security. Similarly, computer vision is widely used in facial recognition in China for commercial purposes and is also used for military applications, including automated image analysis.

There is then a military-civil fusion approach elevated to the level of “national strategy” that allows China to transfer dual-use technological advances. The government promotes resource sharing and institutionalizes links between the People’s Liberation Army, the defense industry, the private sector, and universities.

AI innovation in China needs for data

In addition, AI technology works based on an enormous amount of data. China is the country with the most potential for AI development, mainly because of its wealth of data to train AI systems. China is on track to have 20% of the world’s data by 2020 and 30% by 2030.

With fewer obstacles to data collection and dissemination, China is accumulating an unprecedented database. With increasingly powerful computers, new algorithms, and an extensive database, China becomes the country with the most advantages to lead the development in machine intelligence. The 800 million Chinese Internet users and 700 million smartphone users are the keys to China’s AI development.

AI security systems in China allowing the government access to data

To obtain such amounts of data from the Chinese population, in 2017 the Chinese government enacted a law on personal data and cybersecurity requiring all companies, both domestic and foreign, to make all data collected from users available to the government.

Data allows the Chinese authorities to know and track the population: location, customs, political opinions, affinities, sociability. Similarly, it feeds the AI algorithms that will be able to refine their precision in facial and voice recognition, and in identifying suspicious behavior. In turn, as AI technology is largely owned by private companies, commercializing it in the market is always an option, or at least is what the authorities say.

Article 7 of China’s National Intelligence Law gives the Chinese government the authority to obtain any assistance and cooperation from tech companies to Chinese military and security services. The Chinese government is increasing the pressure on technology companies, subjecting them to intense scrutiny. According to press reports, companies have noticed a growing pressure to fall in line with Beijing’s mandates during 2018.

Likewise, public and private sectors are united in a close relationship of dependence: the needs of the Chinese government in security and military direct the R&D investment in tech companies. The latter can develop AI devices thanks to the entry of vast amounts of data, partly made available by the Chinese state.

Military applications of AI in China: the advent of unmanned wars

Development of AI in the Chinese military is a state priority

The Chinese government’s AI development plan (AIDP) strategy states that the country will promote all kinds of research to lead innovation in national defense. The Chinese People’s Liberation Army (PLA) sees the transformation of today’s informative ways of warfare into future intelligentized warfare a source of national advantage for China. AI in the Chinese is a priority, and this strategic vision makes it easier for the PLA to achieve its desired capabilities by using breakthrough AI technology from the private sector. China’s state-owned enterprises dominate its defense industrial base, which Jane’s – a journal specialized on global defense industry- rates as the most advanced in the Asia-Pacific region.

According to the official PLA, dictionary defines an “artificial intelligence weapon” as: “a weapon that uses artificial intelligence to automatically pursue, distinguish and destroy enemy targets; it is often composed of information gathering and management systems, knowledge base systems, assistance to decision-making systems, mission implementation systems, etc.”.

Today, the PLA funds a wide variety of AI projects, and the Chinese defense industry collaborates with many private tech companies in an extensive R&D program. Among other military applications, the PLA hopes to improve its future capabilities by leveraging AI to create intelligent and autonomous unmanned systems, intelligent support in command decision-making, data fusion, and information processing. Without wishing to establish an exhaustive list, the following are an example of military applications of AI in China.

Autonomous weapons in China: Unmanned Aerial Vehicles (UAVs)

Unmanned aerial vehicles (UAVs), also known as drones, are intelligent autonomous weapons with AI-integration. The intelligent drones in China are mainly used by the military, as it is supposedly forbidden for commercial use. Thanks to the speed and accuracy of identifying potential threats and transmitting information to military bases, the use of UAVs reinforces military efficiency. No need for pilots, drones can attack remotely by pressing a single button from the operation center.  

During the 12th China International Aviation and Aerospace Exhibition in November 2018, China presented its latest stealth combat drone model. Conceived by a state-owned company, the CH-7 is a UAV the length of a tennis court with a 22-meter (72-feet) wingspan. In addition, also shown at the exhibition was the TYW-1 is a high-altitude, high-strength UAV used by PLA Navy (PLAN) and PLA Air Force (PLAAF) primarily for reconnaissance.

The Chinese defense industry is beginning to incorporate higher levels of autonomy into its UAVs: it can operate with a high degree of automation, taking off and landing independently and involving minimal human intervention in tracking and attacking targets thanks to the weapons incorporated.

Unmanned Surface Vessel (USV)

Last year, the state-owned China Shipbuilding Industry Company (CSIC) launched it’s Marine Lizard, which is not a UAV, but an autonomous amphibious landing vehicle, a type of USV. The vehicle can be used for protection in an amphibious assault force, providing anti-aircraft support with armaments and avoiding an obstacle, and its weapons are controlled remotely.

Military Command decision-making in China

Another field where the PLA is expanding military intelligence in China is on military command decision-making, that takes advantage of the potential of AI, as well as big data, cloud computing, and machine learning. Leveraging AI in improving military capabilities in command decision-making introduces a uniqueness on the battlefield, where human cognition will no longer be able to keep pace with AI in future wars. AI technology supports commanders’ decision-making on the battlefield through advanced prediction, option, and impact assessment capabilities. The PLA is leveraging AI technology to “enhance” decision-making of fighter pilots or commanders of submarines.

AI and Cybersecurity in China

Military computer systems are vulnerable to cyberattacks, which can result in the loss of classified military information and damage to military capabilities. However, AI-equipped systems can autonomously protect networks, computers, programs, and data from unauthorized access. In addition, these AI security systems in China can anticipate cyberattacks by logging patterns, allowing counter-attack tools to be developed to deal with them.

Current research of military applications of AI in China

The PLA is working in partnership with many academic institutions and AI expert companies for the support of the dual-use of AI in China and military research. Hoover Institution makes an extended description of current research projects in AI in the Chinese military:

• Using AI-enabled image processing and target recognition technologies to detect ships in satellite imagery.
• Using machine and deep learning for the analysis of underwater acoustic signals.
• Implementing an AI decision-support system on nuclear submarines.

AI used by the Chinese government in surveillance and security

“I look forward to a world in which AI will make it impossible to commit a crime without being caught”

A scholar at a Chinese think tank told the Center for a New American Security.

Video surveillance AI-technology in China

Hikvision, owned by the China Electronics Technology Group Corporation’s (CETC) 52nd Research Institute, has pursued collaboration with the PLA to provide its AI-enabled video surveillance technology for national defense and security purposes in China.

Facial recognition in China: tech companies working for the state

Face++, Megvii’s powerful AI-enabled devices

Technology start-up Megvii was founded by the Chinese government to collaborate with the police in security and law enforcement. Its Face++ facial recognition device is designed to find criminals, detecting faces by analyzing data with facial points, and confirming the identity of the person with extreme precision. The system is powered by data provided by the government: China has a pervasive surveillance network with 170 million security cameras in its Skynet system and 400 million more in the pipeline. Moreover, Face++ is an open platform where any developer can create their own app, contributing to data sharing. Face++ becomes the most extensive facial recognition platform in the world, with more than 300 thousand developers from 150 countries using it. 

Isvision

China is building the world’s most powerful facial recognition system, ambitioning to identify any of its 1.3 billion inhabitants in less than three seconds. The system is being developed since 2015 by Isvision, a Shanghai security company, in collaboration with the Chinese Ministry of Public Security. The system is connected to the police and their database of suspicious citizens, allowing them to be recognized and tracked. Isvision AI-powered facial recognition devices have already been installed in some important squares in Beijing, and in Xinjiang and Tibet, where certain “ethnic conflicts” persist. 

SenseNets

SenseNets was established by video surveillance company NetPosa Technologies and AI start-up SenseTime in 2015. SenseNets is also part of the government’s Skynet project, the national system for fighting crime and preventing potential disasters in China. It specializes in three types of systems: facial recognition, to identify potential suspects and fight terrorism; crowd analysis that facilitates and accelerates decision-making; and human verification to compare facial images with ID card identity photos.

LL-vision

In March 2018, local police in Beijing tested a new surveillance device: smart glasses with facial recognition and car plate identification, that then match the data in real-time with a suspects’ database, or a “blacklist,” according to Reuters. The AI-powered glasses are manufactured by the AI start-up LLVision, that collaborates with the government on security matters, or as LLVision CEO Wu Fei says, in “noble causes” (Reuters).

China’s success in artificial intelligence brings economic growth to the country through investment and talent as well as the development of economies of scale. There is a boom in the number of AI companies and start-ups in China, innovating relentlessly, and widely selling its technology across many industries (Know more about the AI landscape in China in Daxue Consulting).

While most of the AI companies in China collaborate with the government within the dual-use strategy, some of them are selling military and security technology abroad. For example, DJI, the Chinese company world leader in consumer drones, was selected as the sole drone provider to the New York Police Department. Moreover, China has become the primary exporter of UAVs with clients in the Middle East, such as Egypt, Iraq, Saudi Arabia, and the UAE. Ziyan UAV’s attack helicopter drone Blowfish A2 is gaining increasing interest in the Middle East.

China doesn’t seem to want to slow down the development of lethal autonomous weapons. However, there have been concerns from within the Chinese government to avoid an AI arms race, and Alibaba’s chairman said that new technology such as artificial intelligence could lead to World War III.

Despite these concerns, China’s leadership is continuously pursuing global AI dominance and its use in the military and surveillance.

Author: Ines Beneyto Brunet

Our AI in China White Paper is available to anyone looking to learn more about the role of artificial intelligence in Chinese industries.

See our report on AI in China:

This article Modern tools for managing humanity: AI used by the Chinese government | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

The History of AI in China’s healthcare industry

In the early 1980s, China began to develop research in the field of artificial intelligence in healthcare. Although it first lagged behind developed countries, it has developed rapidly. Since the beginning of the 21st century, AI in China’s healthcare industry has made significant progress in more segments of healthcare.

With a rapidly aging population, the increase in the chronic diseases, the shortage of quality medical resources, and the rising public medical expenses, the application of AI in the healthcare sector in China has brought new development direction and motivation to the medical field.

Currently, investment in AI in the healthcare industry in China is ranked first in the world, and the quality of research is among the top three.

According to Global market insights, the Asia Pacific healthcare AI market will witness lucrative growth of 44.4% by 2025 due to the rising R&D expenditure, developments in pharmaceutical and biotechnology sectors. It is estimated by Forward-the Economist that the market size of China’s healthcare big data industry will exceed 80 billion yuan by 2020.

This article will focus on the five main applications of AI in the healthcare industry in China, namely medical imaging, auxiliary diagnosis, drug development, health management, and disease prediction.

Current situation of AI in the healthcare industry in China: How are healthcare AI companies in China developing?

There are four pain points in Chinese medical field: insufficient medical resources, a long training period for doctors, high medical costs, and a high doctor misdiagnosis rate. AI may be leveraged to solve some of these problems.

AI in Medical imaging

One of the most common applications of AI in China’s healthcare industry

Medical imaging refers to the specific application of AI technology in the diagnosis of medical imaging. AI may find multiple applications, from image acquisition and processing to aided reporting, follow-up planning, data storage, etc. AI is expected to massively impact the radiologist’s life.

Currently, it is the second-largest market segment of artificial intelligence medical applications in China and was predicted to grow at a growth rate of more than 40% and reach a scale of 2.5 billion US dollars in 2024. In addition, AI medical imaging in China is considered by industry insiders to be the first market to commercialize in AI in the healthcare industry in China.

Due to the huge gap in the number of professional doctors in medical imaging in China, the rate of misdiagnosis and missed diagnosis is high, and the speed of manual diagnosis is limited. AI in medical imaging can help to process image data in the following aspects: reading mode, time, accuracy, objectivity, memory, modeling conditions, information utilization, repeatability, the difficulty of quantitative analysis, experience transmission, and cost. Patients, physicians, and hospitals will all benefit from the use of AI in medical imaging in China.

AI in medical imaging has become the most commonly used depends on several developments of AI in the healthcare industry in China.

First, the medical imaging data is huge; more than 90% of the medical data comes from medical images. The picture data structure is simple, which is convenient for machine learning. It is estimated that the volume of medical data will reach 40 trillion RMB by 2020, 30 times that of 2010.

Another developing advantage of AI in China’s healthcare industry is about the fast iteration of big data, and intelligent image diagnosis algorithm is relatively mature. In addition, medical imaging in China is strongly supported by national policies. The government has issued several policies to increase support for domestic medical imaging since 2013. In 2017, the total amount of financing in this field exceeded 1.7 billion RMB.

The current business model used in medical imaging in China

At present, AI in medical imaging products is mostly used for disease screening, especially cancer and chronic diseases. Most of the roughly formed AI medical imaging products in China are in the trial stage of hospitals, and the healthcare AI companies in China have not realized profits yet.

The three business models used in medical imaging in China include cross-border Internet technology giants, device companies, and technology companies. Cross-border Internet technology giants have the capital and technology to support the development of projects with their own strong financial resources. Device companies rely on medical imaging equipment or systems to gain access to medical facilities. Technology companies focus on the application layer, with their algorithms that provide final solutions based on industry data.

In 2017, Tencent launched the AIMIS (觅影), an AI-powered diagnostic medical imaging service. This healthtech in China currently has accuracy rates of over 90% for preliminary diagnoses of esophageal cancer, 95% for lung sarcoidosis, and 97% for diabetic retinopathy. According to Tencent, AIMIS has reached cooperation with more than 100 hospitals (3AAA Hospitals) in China to promote the research and application of AI in the healthcare industry in China.

AI in Diagnosis

Current AI applications in assisting diagnosis in China

In addition to medical imaging, AI in diagnosis in China also provides Electronic medical record (EMR), medical robot, virtual assistant and other services.

Electronic medical record

The traditional electronic medical record (EMR) system of healthtech in China doesn’t meet the needs of specialization of disease data, structuring of medical case data, and cannot provide clinical decision support based on medical records. Healthtech in China can use natural language processing technology to standardize and structure medical records and use speech recognition and speech synthesis to process large amounts of text entry.

Medical robots

China’s medical robots mainly include: surgical assistants (orthopedic and neurosurgical robots), gastrointestinal examination and diagnostic robots (capsule endoscopes, gastroscope diagnostic treatment, and auxiliary robots, etc.), rehabilitation robots and other robots for treatment (intelligent intravenous infusion drug configuration robot). The Boston data shows that the compound annual growth rate of the global medical robot market will be about 15.4% in the next five years. Recently, medical robots as a driver of the healthtech in China are gradually breaking the monopoly of imported robots. Domestic surgical robotics companies conduct business primarily by selling robots to hospitals and providing long-term maintenance services. Others provide parliamentarians with a model of the overall engineering solution for the surgical center.

Virtual assistant

Virtual assistants can provide real-time support to doctors. For example, patients need to know the necessary information about the disease when they go offline for consultation, and these highly overlapping contents take up a lot of doctors’ time. AI technology in China’s healthcare industry can help doctors respond to inquiries based on a large amount of historical information, saving time and energy.

Since most of the AI-assisted diagnosis products are software and hardware integrated solutions, healthcare AI companies in China cooperate with hospitals and continuously train models and optimize algorithms through hospital desensitization medical records data. Hospitals can use the products mostly for free. In the future, when the product becomes more mature, AI in diagnosis in China may be inclined to adopt the service charge business model.

Airdoc -Diagnosis in the blink of an eye

Airdoc is a fast-growing healthcare company specializing in AI in diagnosis in China. It has leveraged an AI-driven system that can seek out signs of many chronic illnesses by images of the retina at the back of each eyeball. By conduct screening in and outside medical institutions, Airdoc fundus disease recognition has become the doctor’s assistant for chronic diseases. This healthtech in China has been highly recognized by the international community. In 2017, Airdoc boarded the ‘Peace Ark hospital ship’ and visited six African countries on behalf of China, providing AI medical services to the crew and people living in these countries.

AI in Medicine discovery

Artificial Intelligence improves China’s drug research and development field

Medicine discovery is a notoriously expensive process, and it has four main stages. AI has already been successfully applied in all stages in drug development: identify target molecules, discover effective drugs, speed up clinical trials, and find biomarkers for diagnostics. At present, medicine discovery in China has several problems to be solved. Some of which can serve as the directions of AI development. Specifically, medicine discovery in China always takes a long-time duration, high costs, high-risk, and low rate of return. It is developing a new drug that costs $2.6 billion and takes 10 years to develop. However, the union between artificial intelligence and drug discovery can greatly reduce time and development costs. Artificial intelligence can quickly select the right compound through a large amount of data to generate hypothetical drugs, which shows the potential for more efficient development of medicine.

Current medicine discovery in China is still focused on generic drugs and improved drugs, while innovative drugs dominate foreign R&D. Therefore, in the field of drug R&D, international research goes further than in China.

The business model of  medicine discovery in China

There are three major categories of healthcare AI companies that specialize in AI in drug research and development: AI technology companies, drug research institutions, and large pharmaceutical companies.

AI technology companies in China do not produce drugs but provide technical services to large pharmaceutical companies or medical institutions. As a service platform, drug research institutions offer support to national pharmaceutical enterprises in preparation, metabolism, safety evaluation, etc. The trend of large pharmaceutical companies is to seek cooperation or investment opportunities with AI technology companies by using their massive data.

Accutar Biotechnology is a Chinese pharmaceutical AI company specializing in medicine discovery which raised $15 million in funding in 2017. Accutar Biotechnology computational projections of 3D operators and deep chemical structure networks have greatly improved pharmaceutical efficiency and success rates in China.

AI in Health management

Big data as a breakthrough to achieve accurate health management

There are two main issues in health management in China. The first is smart wearable devices in traditional health management fail to solve data correlation. Wearable devices only focus on data extraction, collection, and trend analysis, but fail to provide users with health portraits and improve their health. Secondly, staff in the health management field are not that professional; most having a non-medical background.

Massive big data is a necessary prerequisite for the development of health management in China. From the technology-driven perspective, AI can make personalized health management possible through efficient calculation and accurate decision analysis. Even in the future, nutritionists and sports experts can generate accurate health intervention plans based on the AI system of healthtech in China.

Current situation and business model of health management in China

China’s current amount of smart wearable device hardware is not high enough, and the accumulation of disease-related data is insufficient. Therefore, the main application of AI in health management in China is chronic disease management (such as diabetes and hypertension), maternal management, mental health management, and population health management.

Health management operation is mainly based on physical examination, including health assessment and promotion, but follow-up health management services have not been fully popularized. In addition to employee health management services, some enterprises cooperate with insurance companies. In the future, the cultivation of individual users’ payment habits is expected.

AI in Disease prediction

Genetic testing as an inalienable development approach

AI technology in disease prediction in China are mainly used in gene sequencing and detection to forecast disease occurrence. Gene testing is the cornerstone of medicine.

Current business models of genetic testing services of AI in China’s healthcare industry can be divided into two types: a hospital delivery model and third-party testing model. Compared with the hospital delivery model, the third-party testing model requires a higher threshold of qualifications, personnel, and funds of medical inspection institutions.

Industry pain points and emerging benefits of disease prediction in ChinaGenetic testing is not easy to implement. Firstly, the amount of genome data is huge, and manual experiments are time-consuming and labor-intensive. Traditional gene sequencing costs too much. In addition, the general algorithm of gene sequencing diagnosis in different stages is ineffective and has low accuracy.

The advantage of disease prediction in China is the increasing market size and the development of the supercomputer. According to the trend of disease incidence, cancer incidence, and death rate have been continuously increasing in China in recent years. Data show that from 2007 to 2016, China’s revenue from gene sequencing increased by 62.2 percent annually, reaching 5.06 billion RMB in 2016. It is estimated that by 2022, China’s gene sequencing market is expected to reach about 30 billion RMB. Additionally, if supercomputer’s powerful data processing ability is applied to gene sequencing, it will greatly shorten the time of gene testing and improve efficiency.

Policies regarding AI in the healthcare sector in China

At the national level, AI manufacturing was first mentioned in the “Made in China 2025” issued by the State Council in 2015. In the past three years, it has released big data about national health and Internet medical care. Such policies have promoted the rapid development of big medical data and laid a good foundation for the development of AI in the healthcare sector in China.

At the provincial level, as of 2018, 19 provinces in China have released AI strategies, among them, Beijing, Shanghai, Hangzhou, and Shenzhen. Other cities are in the early stages of AI development.

How to partner with leading healthcare AI companies in China

There are several possible ways to collaborate with leading AI companies in China. Firstly, foreign research institutes can cooperate with healthcare AI companies in China. InferVISION (推想科技) is a Chinese AI company, which provides services in the ‘AI as a Service’ mode and launches the medical imaging deep learning center to provide medical researchers with deep learning capabilities. While cooperating with more than 300 domestic hospitals, it also focuses on the overseas market expansion.

Another type of collaboration is between two tech companies — for example, iMedical Cloud from Tencent and Mediway. The iMedical Cloud builds an industrial internet ecological IT platform featuring cloud, security, sharing, and collaboration. Therefore, the key is to find healthcare AI companies in China that can complement each other’s resources and integrate companies’ technologies. In addition, there are many healthcare AI companies in China that started as software systems, and after quickly found a way to generate revenue by combining with big medical devices manufacturers.

In terms of medical discovery, cooperation between AI technology companies, pharmaceutical enterprises, and medical research institutions can be mutually beneficial. Foreign pharmaceutical enterprises can use the data from domestic AI technology companies to conduct drug research and development more efficiently.

The following are the primary healthcare AI companies in China:

AI Medical imaging: Airdoc, YITU依图科技, InferVISION (推想科技)

AI in Diagnosis: 云知声，iFLYTEK科大讯飞，iCarbonX碳云智能

AI in Medicine discovery: 晶云药物，晶泰科技

AI in health management: 安翰医疗，妈妈帮

AI in disease prediction: 万灵盘古，认知关怀

Author: Rita Fan

Want to learn more about AI in China? Check out our AI in China White Paper.

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This article AI in the healthcare sector in China: current trends and applications | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Emotional data in China: What does that mean?

Over the past decade, the world of research has seriously examined emotional data. According to the Tractica research institute, the market for emotional data is expected to grow from $123 million in 2018 to $3.8 billion in 2025.

What about emotional data in China?

Putting humans at the center of everything

Emotional data is data that measures the emotions and feelings of someone. It is also known as “Feel Data,” a term popularized by the agency Datakalab, a French start-up specializing in brain tech that aggregates feel data to stand in the distance and obtain valuable insights. It is estimated that they are now the future of research. The aim is to capture consumers’ emotions about a product, atmosphere, or advertisement and use it as marketing data.

Datakalab, was interviewed by Daxue Consulting to get insight for this article; they give the following definition of feel data:

“Feel data is different from the data brands are used to be working with, which are transactional data such as click rate, average basket, number of visits. With Feel data, we are able to give the attention rate, the emotional engagement and the positive emotions. These are crucial metrics because capturing attention today is the ultimate goal of any brand.”

Thus it is possible to detect emotional connections through data when an audience is in front of a content to modify or personalize it later.

Emotional data comes directly from the world of neuroscience and more specifically from neuromarketing. Neuromarketing takes into account advances in neuroscience that aim to observe and measure brain and nervous system reactions and apply them to the consumer. It is in this sense that feel data puts the human being back at the heart of research.

Neuromarketing, for example, has shown that the context of an advertising message strongly influences consumer reactions.

Measuring emotional data is becoming more and more critical for AI in China

In the advertising field, there can be no memorization without engagement, just as there can be no engagement without emotion. This is the biggest challenge all brands are facing: to reach the hearts of consumers.

We now know that humans react first and think second. Indeed, according to the famous American researcher Milton Erikson, 90% of the stimuli that impact us every day are treated by the unconscious. This means that declarative data are no longer sufficient. So there is a huge gap between what people say, what they think they are doing, and what they are actually doing.

That’s why using feel data in China can be the perfect way to really understand the consumer in 2019.

In China, digital advertising is particularly confronted with this problem due to intrusive ads that interfere with Internet users’ navigation. This has resulted in the growing number of users using Adblock and the decision of China’s State Administration for Industry and Commerce to ban them.

In addition, with the democratization of the smartphone, companies working in emotional data in China have excellent support to develop these new emotional recognition technologies.

According to data from Statista, smartphone penetration in China had already reached 50% by 2018 and will reach around 55% by 2020. Since phones are carried everywhere and hardly left alone these days, it is an excellent way to increase the accuracy of the emotional measurement.

Neuromarketing in China, not-so-new marketing concept

Although all this may seem futuristic, it is on the agenda. Many companies have already been using emotional recognition technologies for years. Moreover, we can consider that emotional data and neuromarketing in China are not that recent.

A few years ago, Weibo took a step forward in neuromarketing and emotional data in China with the reaction buttons: joy, sadness, surprise, laugh, and anger. Even if this data only remained declaratory, they still promised to measure the feelings of Internet users directly. Information that the social media giant can use to personalize each user’s feed according to their preferences.

Everything about experiential retail that tries to make the customer feel good in a purchasing context is also a form of emotional data collection. The purpose of sensory marketing and the use of New retail in China is to adapt to the emotions and feelings of customers to promote shopping.

How does emotional data in China work?

There are many ways to measure emotional data in China. Thanks to different technologies and applications, which can be used independently or at the same time to have more accurate detection.

Different types of information can be analyzed:

• Voice modulations

This consists in deciphering the emotions transmitted by the customers’ voices through vibrations. Some software would be able to detect up to 5 emotions in the vibrations of the human voice such as anxiety, joy, or sadness.

In China, Huawei launched a voice assistant in 2013 and is now researching to add emotion-based features to it. This entry into the world of artificial intelligence in China would allow Huawei to refine the relevance of its voice assistant, used by more than 110 million users on a daily basis.

The idea is that a specific program in the virtual personal assistant would be able to detect a user’s mood and respond accordingly.

• Pupil movements

This method is part of eye tracking. It measures eye movements, pupil dilation, fixation points, and fixation times of the consumer’s gaze.

Some 30,000 data per second can be processed with eye tracking.

“Many companies in China’s market, both domestic and international, have leveraged the eye-tracking technology to do shelf testing, ads design and many other commercial research, which all benefit from it.” said a salesperson in Tobii China, a branch of an international eye-tracking firm focused on the Chinese market.

Daxue Consulting leverages the eye tracking methodology to study Chinese consumers. It has especially been a key method for international brands looking at testing and validating their packaging adaptation or their online China-focused user interface design. If you’re interested in this research method, you can directly contact us.

• Facial microexpressions

Facial coding or facial decoding is probably the most widely used method when it comes to emotional data in China. Theoretically developed by the researcher Paul Ekman as the Facial Action Coding System (FACS), it measures emotions by observing the reactions expressed by a consumer’s face.

The combination of what Ekman called Action Units (AUs) defines which feeling or emotion a person feels. These microexpressions are often difficult to perceive to the naked eye and required the development of specific technologies and algorithms.

Recently, the Hangzhou No. 11 High School has invested in facial coding technology to measure students’ emotions during class. Several cameras have been installed in the classrooms that will film the students at each stage of the lesson, reading, writing, answering questions.

School officials explained that the aim was to measure the level of stress and satisfaction experienced during school hours. This will optimize the way teachers teach and the learning capacity of students. A first very good example of feel data used in China, outside the field of marketing.

• Heartbeats, body temperature, and blood pressure

Finally, “health” data can be measured to get an idea of the consumer’s condition at a given time. This method is particularly effective in measuring the level of stress or calmness of consumers in a store. Many companies specialized in emotional data in China have developed connected bracelets that measure heartbeats, body temperature, or adrenaline levels.

All this is often combined with sociological information to refine the user’s profile and optimize advertising targeting.

Thus, by combining data from facial expressions with data from the brain, body, and sociology, human emotions can be measured and analyzed in a specific context. In China, thanks to these data, deep learning algorithms now interpret the emotional state of consumers and immediately adjust responses according to perceived feelings.

How can businesses leverage emotional data in China?

According to Tractica’s analysis, the fields where emotional data is most commonly used are customer experience, market research, and customer service.

Improve and customize the user and customer experience thanks to emotional data in China

The customer experience field in which emotional data is most commonly used is the shopping experience, online or offline.

By putting temperature sensors or facial coding cameras in stores, retailers can know how customers feel when entering a store or looking at a product. It also allows you to guess which customers wants the help of a salesperson and which customers would rather be left alone

In China, the chain of stores Suning collects data as part of its New Retail approach. Shelves record the frequency with which clients look at or touch a product and their emotions at that time. This allows Suning to know its customers well because they also collect demographic data such as age and gender.

For online experience, it works the same way. Emotional data can be collected with eye-tracking software that also measures pupil movements and facial tightenings. We can, therefore, improve navigation on a website by analyzing the most complicated moments of navigation or by discovering the untapped areas on a website.

It also allows you to customize the user experience according to everyone’s browsing preferences.

Enhance customer relationship

For Customer Relationship Management, emotional data is a formidable weapon. Knowing if a customer is satisfied, enthusiastic, disappointed, or even angry after an experience is the best way to get customer feedback.

So you can use feel data in China to improve service in your call centers and sales departments.

Moreover, combining sentiment analysis with existing CRM data can provide your team with a holistic view of customers to provide personalized retargeting ad campaigns.

How feel data in China can help you with management and human resources

Emotional data in China are also used in the fields of management or HR. As for human resources, emotional data is used by recruiters to analyze the expressions of potential job candidates. Are you claiming to be highly qualified for the position? Algorithms can detect some signs of self-confidence or lie. Companies in China begin to record interviews, and then the videos are analyzed by the facial coding software.

The problem with this is the discrimination and possible biases that the software can induce. If you want to use feel data in China for human resources, use blind scores, which means that the software will not recognize the sex, gender, race or age of the candidates to avoid any bias.

In 2014, State Grid Zhejiang Electric Power in the southeast city of Hangzhou began to leverage emotional data in China. The company has developed an emotional barometer that measures the emotional level of employees and internal managers. This aimed at improving happiness at work, reducing stress, and thus increase the level of employee involvement.

In these factories, employees are filmed. This also aims at preventing any incidents if an employee is tired or distracted.

The managers told the newspaper South China Morning Post that the aim was also to see if management was effective. If half of the employees feel anxious when they go to work, it is because of poor management which needs to be changed.

On the same principle, the caps of train drivers between Beijing and Shanghai have now sensors that measure the tension and attention of drivers to avoid an accident.

Leverage artificial intelligence in China for your research: test your content!

The use of emotional data in China and around the world is, therefore, completely disrupting the field of research. This is the end of simple satisfaction questionnaires that involve several problems when used alone: data is not collected directly, declarative data is always subject to the will of the respondents, and questions can be biased.

Datakalab used the following example: they measured the emotions of travelers in a French train station. When analyzing the data, they realized that travelers felt a high-stress level when they entered the toilets. When they asked people why they felt that way, they answered: “because the bathrooms were not free”. In a declarative questionnaire, if the question asked was “do the bathrooms are clean”, everyone would have been answering ‘yes’ and they could not have discovered this insight.

This proves two fundamental things:

• If emotion is not transformed at the moment it is experienced, we lose relevancy
• To measure customer experience, it is difficult to use a simple questionnaire because questions can miss the real problem

Claire Latourre, project manager at Datakalab, explained:

“Emotional data can be combined with all kinds of transactional data. Our data can be used alone, but it can become the ultimate data if it is smartly combined with declarative data, for example.”

For this reason, you can even use feel data in China during focus groups in addition to collecting simple declarative data.

Finally, to test your advertising content, feel data is the ideal solution. Not only will you be able to measure the audience’s attention and satisfaction level, but you will also be able to identify the exact moment when the client is laughing, sad, or angry. In an advertisement, we will, therefore, be able to see which precise punchline makes the audience laugh, or which image touches them.

For the creative industry, it’s a real revolution!

How to find the right neuromarketing partner in China?

Daxue Consulting has compiled a list of the best neuromarketing partners in China. For more information and advice on how to choose the right partner for your project, you can contact our experts.

Facethink – 德麟科技

FaceThink offers one of the best facial expression analysis technique in the field of brain tech in China. It enables the understanding of customers’ emotion and leads to better business decision making.

They offer three main services: face detection, eye tracking, and emotional data analysis. They claim to have one of the best algorithms in the world and are specialized in audience analysis. They analyze user’s emotional feedback when watching your content in direct life.

Seeta Tech – 中科视拓

Seesatech is a neuromarketing company in China based in Beijing, which provides technology, talent, and knowledge services in the area of face recognition, computer vision, and machine learning. It is specialized in research and innovation in artificial intelligence in China. Best known for his SEO, Prof. SHAN Shiguang, who has more than 20 years of experience in face recognition and brain tech in China. He even received the Annual Young Scientist Award of CCF 2015.

The company has developed a facial recognition technology, called Seeta Face Detection. It can accurately locate the human face in the image and analyze its features, including emotional data.

They promise to be able to pick out all kinds of faces in complicated environments, including side faces, emotions, and even partially-occluded faces. The accuracy is supposed to have reached a high standard in the world.  

Seeta Tech won the 1st Place Award in ACM IMCI 2014 Emotion Recognition in The Wild Challenge in 2014.

Vionvision – 技术中心

Vionvision or Viontech is a company founded in 2006, specializing in the research and development of core algorithms and products of artificial intelligence in China. Located in Beijing, Zhongguancun Science Park, the teams are composed of doctors and masters from institutions including Tsinghua University and Chinese Academy of Sciences.

VionTech has developed a series of core algorithms of image recognition and high-performance AI hardware platforms.

In terms of emotional data, they can monitor the passenger flow and analyze face and behavior.

Their technology can be used for passenger flow detection and analysis in various announcement places like shopping malls, stores, transportation, streets, etc.  

It allows real-time face capture, face image retrieval, face clustering, age/gender analysis, and of course, emotional analysis.  

Authenmetric – 中科奥森

Authenmetric is a Chinese company with the focus of face recognition. They accumulate decades of face image processing research and development experience and are able to quickly detect emotional connections through data thanks to their continuous iterative algorithm.

Translation:

Core Technology

Specialized in machine vision research and artificial intelligence technology with face recognition as the core

Arcsoft

Arcsoft is the leading algorithm in the computer vision industry. Their solution is well known around the world in all types of industries such as smart cars, smart homes, Smart retail, Internet video, etc.

Since the beginning, ArcSoft has been focusing on the technology and software applications related to imaging and computer vision. Arcsoft is a potential good neuromarketing partner in China for your business because, even if it is not their core business, teams have also developed race, age, gender, and facial expression recognition capabilities, in other words, emotional data collection.

Their technology can be leveraged in all kinds of situations and can make the difference between the change of expressions due to age, movement, or light, which is quite tricky to apply.

Thus, research possibilities are strongly increased thanks to emotional data in China. However, this raises two questions:

Is emotional data the end of personal privacy? In China, where the laws for personal data are a bit less strict than in Europe, consumers may feel annoyed to be analyzed in this way. According to a study carried out by CCTV and Tencent Research (AI Lab) in 2018, 76.3% of respondents believe that artificial intelligence in China can be a violation of privacy.

Finally, critics believe that it is impossible to decipher human emotions even if they are universal because each human reacts differently, and the signs are too complex.

According to Claire Latourre, despite the revolution initiated by Feel data, human beings will always remain extremely difficult to decipher:

« Today, algorithms are trained on million of data, which allows us to reach a certain truth, but human beings remain unique. It should be kept in mind that we are only working on global trends, but they are reliable and precise enough to draw strategic conclusions. »

Author: Steffi Noël

Our report on AI in China:

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