It was a busy afternoon in Mr Park’s grocery on a shopping lane in Seoul. Taking orders and serving customers at the same time, with records held in a large paper notebook, he was thinking about competition from the another chain, that had just launched a new supermarket a few meters away. Desperation filled his heart and thoughts about the impending financial crisis plagued his soul. A member of the Incheon General Goods Distribution Business Cooperative, Mr Park, didn’t know fate is smiling on him and his small business because AI has come to Korean retail.

In an effort to continually offer new and useful AI solutions for the Asian retail industry, OSA DC announces its partnership with Incheon General Goods Distribution Business Cooperative for mutual cooperation in the Republic of Korea and worldwide.

Incheon General Goods Distribution Business Cooperative represents and includes 15,000 outlets in Korea with 57 mobile distributional centers for food and non-food products. They cooperate in terms of product distribution with another 20,000 supermarkets under other associations in Korea. The company distributes products and privately labeled assortments to domestic and foreign stores and end consumers using their mobile B2B2C applications. Cooperative provides a kiosk ordering system that can be placed anywhere inside or outside a building offering easy access to end consumers. Jason Han, Cooperative’s IT Director, is assisting OSA DC connecting with manufacturers and supermarkets to present its AI platform aimed at profit growth and food and non-food suppliers turnover increase as well as at resolution of various problems in the Korean retail sector.

Korean retailing is characterized by large department stores owned by the chaebols, and small, inefficient, family‐centered (mom-and-pop) operations. In contrast to the department store’s decline in sales, the growth of discount stores is the strongest trend in Korean retailing. While department stores continue to capture the middle upmarket segment, the survival of mom-and-pop stores and traditional markets has been threatened since leading discount shops have embraced another format strategy called “super supermarket” (SSM).

The challenges in the retail industry relate to a paradigm shift in how the customers select and purchase goods and services. Additionally, shifting to e-commerce causes low profits for private retailers owning at least one offline shopping center with a fixed cost base for rent and staff. Online trading is gradually but surely replacing traditional retail businesses. The global changes made by companies like Amazon and eBay have brought drastic challenges for the retail industry, as well as huge potential for retailers and consumers. Nowadays, this industry is constantly growing in the global digital space.

Moreover, the current political frictions between China and South Korea caused by THAAD deployment have led to significant financial losses in Korean retail. Lotte Group conglomerate, for example, is considering selling its stores in China due to profit losses. Korean food and cosmetics retailers have been affected by the same issues. Orion’s sales have dropped from $308.3 million to $125.3 million in less than a year. Amorepacific’s profits decreased almost twice in comparison to the same period last year. Total sales of Hyundai and Kia Motors have declined by 44.7% collating to the same time last year.

All this means the retail sector has to take a giant step ahead with optimization and efficiency and shift away from excess and waste. Retail has the perfect chance to benefit from implementation of smart technologies like Artificial Intelligence, Machine Learning, and Big Data.

A survey among retailers around the world has identified cost savings, enhanced decision-making, and process automation as major concerns since AI has a great impact on some of these main areas.

Moreover, by means of data science techniques like Discriminant Analysis, the k-Nearest Neighbors algorithm, Deep Learning and Support Vector Machines, there is a large potential for improving classification, optimization and forecasting within the retail sector using the advantage of AI functionalities like Computer Vision and Natural Language Processing.

According to the retail front, global spending on AI will grow to $7.3 billion per year by 2022, documented by to a study from Juniper Research. Based on the research, retailers will invest in AI tools allowing them to differentiate and improve services they offer customers. These range from automated marketing platforms and timely offers, to chatbots providing instant customer service.

Furthermore, a new study conducted by PointSource shows nearly half (49 %) of users said they are willing to shop more frequently when AI is present.

IDC predicts a 50.1 percent compounded annual growth rate for global spending on AI, reaching $57.6 billion by the year 2021. They suggest investments from retail, banking, healthcare, and other industries will represent over half of worldwide spent on AI.

Other advocates of blockchain claim combining with AI, the technologies enhance the advantages of each other and are, in fact, mutually beneficial. Blockchain can help us track, understand and explain decisions made by AI. AI can manage blockchains more efficiently than humans (or “stupid” conventional computers) according to Bernard Marr.

It appears modern retail develops much faster than the procedures it’s associated with, and the only way to upgrade the working solution is to be one leap ahead. The OSA DC platform, with its AI combined with blockchain, provides the unique opportunity to seize and resolve the problems. Now, Incheon’s ordering system is far from perfect, with the ability to make an order via phone but with no option of online payment and delivery settlement. The platform helps in overcoming these inefficiencies. Using OSA DC innovation, Incheon can offer optimal product availability as well as product stages tracking, special promotions and digital diet assistance which becomes a huge competitive edge in comparison to the ventures offering only online ordering and caters to picky consumers like Millennials. Increasing the potential competitiveness, Incheon offers product ratings and feedbacks, features absent in most retail ventures.

By the joint efforts of Incheon Cooperative and OSA DC, the AI platform will be presented to manufacturers and supermarkets with ambitions to increase profits and turnover of food and non-food suppliers. The Cooperative will lend a hand in promoting OSA DC to 35,000 Korean stores and in the following product integration over the next two years.

At stage one, OSA DC’s pilot project will cover 800 of the most innovative and top quality stores in Korea. Later, the platform coverage will be expanded to 15,000 Association members and beyond.

The companies have settled the formation of a product catalogue in the Republic of Korea. It will be deployed both in the OSA DC B2C platform and in the partner’s B2C applications. The parties will be co-owners of the automatic ordering system, whose development is currently ongoing with a goal of its further integration into traditional stores in Korea, companies’ current applications and further abroad.

Joint efforts always prove to be more productive. With OSA DC’s AI and Incheon’s client base the future of Korean retail seems to be promising.

For more information, please visit: https://osadc.io/en/