The Chinese e-commerce giant Alibaba Group is intensifying its efforts to expand internationally to compensate for the weakening domestic market. The company is increasingly relying on artificial intelligence in this endeavor.

Alibaba's Family of Generative AI Models and New Teams Focusing on AI Applications Support the Company's Push Beyond China's Borders. This Includes Helping Small Merchants Overcome Language Barriers and Handle Complex Tasks Like Negotiating Refunds, Explained Zhang Kaifu, Head of AI Development at Alibaba's International E-Commerce Unit.

For Chinese merchants who have not sold abroad before and may only speak Chinese, "our platform offering can make the most sense because we have AI and other services to promote both sides," Zhang said in an interview. The technology can play a particularly significant role in cross-border e-commerce for smaller businesses, he added.

Hangzhou-based Alibaba faces slowing growth due to strong domestic competition, a weakened Chinese economy, and changing consumer habits. However, international e-commerce, which represents a smaller portion of the total revenue compared to the main business in China, has been the fastest-growing segment over the past five quarters, growing by 45% in the last quarter compared to the previous year, while Alibaba's overall growth during the same period was 7%.

Zhang, an engineer, took over leading a team of more than 100 engineers and other professionals a few months after the launch of ChatGPT by OpenAI at the end of 2022, to develop generative AI tools for international e-commerce business. "My main task in the first year was to identify the use cases for AI," said Zhang. Internal tests showed that some tools could help merchants increase orders by up to 30%, by supporting communication in foreign languages, for example.

Sure! Here is the translation of the heading to English:

"Today, around half a million merchants use Alibaba's AI tools to create marketing materials, select goods, and interact with customers, according to Zhang. The sellers also use the tools, which are based on Alibaba's Tongyi Qianwen model, to negotiate refunds and returns for defective products or to handle customer disputes over bank fees.

The growth of Alibaba's international e-commerce business was supported by the introduction of a new service from AliExpress last year, which allows sellers to send products to Alibaba and leave the sales to the company. This service, known as Choice, has since become the main driver of AliExpress and contributes to over 70% of the orders.

The unit, however, continues to face numerous challenges. Increased marketing expenses for international expansion were partly the reason for a profit decline in the quarter that ended in March, said Zerlina Zeng, an analyst at CreditSights. The company will likely need to continue investing more in AI and marketing to regain market share, which will put pressure on the profit margin in the coming quarters, she added.

We do not expect significant [AI] monetization in the next six to twelve months," said Zeng.

Despite AI support, Alibaba's international e-commerce unit continues to compete with fast rivals like Temu, which are already popular in the US and other overseas markets.

Xing Guangzhi, a vendor in Liuzhou, said he had been using Alibaba's AI tools in the past three months to create descriptions for the food containers he sells on AliExpress. The technology had made his products more visible to buyers and slightly increased sales, although he was still receiving twice as many orders through Temu, he said.

I'm not sure how significant the role of AI can be," said Xing. "Sales figures are still the most important factor.

Alibaba’s Zhang explained that the question of when new AI technologies can really become productive is one of the biggest concerns in industries that are trying to leverage AI to boost business. "For us, the rise in cost efficiency has made me believe that AI is really useful," he said. "And I think that in the long run, the investment will be justified.