According to a recent cover story in The Economist, 3 trends in Chinese e-commerce suggest a variety of paths that U.S. companies might follow. It’s a fun exercise to use these developments as a prism through which to rethink which people buy things online, how different demographics buy different things, and how a variety of adjacencies might be explored in various geographic, technical, and economic terrains.
However it is configured, Chinese e-commerce dwarfs any global online market. In addition to being big, it’s different in that Chinese commerce is much more likely to be conducted via a mobile device: 90% vs 43% stateside, for example. Finally, and most interesting for our purposes, Chinese e-commerce rarely uses storefront metaphors borrowed from physical retail. Social commerce (think neo-QVC live-streaming meets TikTok meets Facebook), serious omnichannel, and mobility affordances including gamification, geofencing, and precision coordination (“have the pizza arrive 10 minutes after I get home”) all can contribute to new ways to socialize, restock, entertain ourselves, and discover new hobbies, art, and cuisines.
There’s a lot going on there, so let’s back up and parse a few things. Buying stuff already performs a variety of functions. We need to procure vitamin water, salsa, ramen, and similar staples with some regularity; there’s not a lot of entertainment to be had here, except maybe when a group of roommates hosts a dinner party or something similar. Other purchases — engagement rings, headstones, kitchen renovations — are both more substantial and less frequent. Buying some things — cars for example — can be so onerous and frustrating that entirely new models such as Uber’s and Tesla’s can gain traction in part because people hated the old practices so much. In the US particularly, there exists a massive amount of physical retail space, much of it built on the idea that people went to stores (read malls) to engage in “retail therapy,” socialize, exercise, or just pass the time. Finally, buying things related to one’s hobby — fabric, model airplanes, kitchen tools, books — is an entirely different kind of retail, potentially as impulse-driven as a Netflix rental or as researched and rationalized as buying a car or dream vacation. All of these factors mean that retail can vary tremendously by locale: the US, for example, has swaths of extremely low population density, the world’s largest (measured on a per capita basis) physical retail footprint, a state-run logistics provider that performs abysmally, countless tax jurisdictions to navigate, and historically high income inequality. All of these matter for what shopping might look like.
When we say “online shopping” or “e-commerce,” then, it’s important to distinguish what flavor of shopping we mean: resupply, fashion, whimsy, gifting, information goods, and domestic infrastructure (think home appliances) each are conducted through different channels, at different life stages, in different human configurations, with varying amounts of forethought, entertainment value, and financial apparatus. That said, the Chinese megatrends (social commerce especially) present U.S. retail with intriguing starting points rather than blueprints. What might this kind of reconsideration of shopping lead to outside the particularities of the Chinese context?
1) Shopping can be social
Whether it’s picking out school outfits, outdoor gear, or food for the big picnic, shopping in packs can be fun. As those packs migrate from the mall to the smartphone, it feels like there are many potential models yet to be explored: Facebook is neither the first nor the last word here. Whether it’s impromptu alumni reunions among hall mates or military families keeping in touch across the world, how might we assemble ad hoc groups around some variety of commerce experience? Zoom-powered watch parties are already a way to share a binge or movie across distance — what if Shopify (which grew faster than Amazon last year) built an app inside Zoom to facilitate “shop parties,” whether at the sporting goods store, the boutique, or the appliance store as new homeowners attempt to navigate the refrigerators. Who’d “own” that app? How “sticky” would it be across shopping experiences (CVS to Lowe’s? Ulta to Gap?), demographics, or geographies?
2) Showing beats telling
In some ways, online video is catching up to the decades-old home shopping TV model, the in-store makeup counter, and the high school shop class. Before the Internet, people still had to figure out which cookware they liked, how to apply mascara, or how to drill a pocket hole. Teaching and demonstrating are a huge business — more people in the US watch celebrity chefs than cook gourmet meals. Both live-streaming and online video repositories are in their early stages, I believe, of being utilized within much more seamless and comprehensive commerce experiences. Again, what will be the principles of speciation? Will clustering happen around the demographic, the product category, the spending at stake (will a table saw video resemble a lipstick tutorial?), or the mega platform hosting the experience? Will Facebook spread itself too thin trying to be too many things to too many people? Speaking of Facebook, where might VR/AR fit into this model?
3) Shopping games
11 years on, game designer and professor Jesse Schell’s conference talk about gamification of real life remains compelling viewing. He noted how the physical and the virtual were coalescing, way before Pokemon Go; how point systems, dating back to Weight Watchers and supermarket loyalty programs (Green Stamps), continued to proliferate; and how the next wave of innovation would be less technical and more behavioral. He saw early on the power of the Facebook dopamine pump, as evidenced in Farmville (RIP), and helped inspire a wave of Internet-connected everyday items with his toothbrush example. Where might we head next? What mashups of YouTube, Twitter, Fortnite, Untappd, and Walmart will emerge? Among which demographics? In what product categories? What role might payment platforms like Visa or Venmo play? What about logistics providers like FedEx or UberEats?
4) What is the buying unit?
For a time in the 1990s, B2B demand aggregators were the hottest startup category. Labs that needed a specific reagent could pool their demand, the thinking went, getting bulk pricing for small-quantity buyers. Ariba, Chemdex, and many (!) others sought to become a new kind of market intermediary. Later, the same thinking came to retail: if I need a printer, the lower coordination costs afforded by the Internet mean that I and 249 strangers also needing printers should be able to present HP or Canon with a bulk order just for us. Sites such as MobOffer sought to operationalize this idea. We’re used to supply aggregators: it’s what retail is premised on. But what if TikTok, AAA Motor club (which already does this for cruise line bookings), the Western Carolinas Organic Cheesemakers Association, or other groups could mobilize buying power for more goods and services that matter to their members? Then what happens if the buying groups are algorithmically constituted, much as Waze forms ad hoc anonymous social networks of proximate drivers?
5) Where is the application logic?
Not to sound too technical, but this is an important point. In the US, online commerce began with websites. The physical retail experience was very much front of mind; competitors fought over the shopping cart metaphor in court. Fast forward 25 years, and expand to ~150 countries, and 1995 US brick-and-mortar retail is no longer a universal frame of reference.
After about a decade of desktop web commerce, largely in the west, Apple built on Japan's early DoCoMo learnings and introduced the mobile app as a new programming model. Much of the website experience carried over, but there were glimpses of new retail experiences here and there (in-app purchases are one example). Now, with most of the planet connected via mobile devices and with billions of people who don’t remember driving to Walmart or Sears as their mental anchor, Chinese and other online commerce sites are putting commerce into messaging.
This model makes sense: texting somebody at the store to remember the eggs, or asking someone at home what kind of beer Emily likes, has become habitual. This extreme drop in coordination costs (making grocery lists isn’t nearly as important as it was 20 years ago) suggests commerce could logically be proximate to messaging. In addition, group-texting provides another use case for embedding commerce. If a half-dozen people are convening on the impromptu picnic, figuring out who’s bringing hotdog buns could easily trigger a buying moment. In a permission-based scenario, if I let Krogers monitor certain of my text exchanges, the store could drop coupons, inventory availability, or price comparisons into my queue. If the word “seltzer” is used, and I’ve given opt-in approval, a prompt — “what flavor?”, “how many?”, or “brand preference?” — could get me to click-and-collect transaction with only a few voice commands, no shopping carts (metaphorical or physical) necessary.
Speaking of physical vs virtual, embedded QR codes serve as hyperlinks between the messaging and brick-and-mortar domains. I can discover something on my phone and walk into a physical retailer to find the exact item and possibly get some form of discount or loyalty points. Here is another potential application of the gamification theme noted above, and another highly convenient omnichannel implementation.
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Some of these scenarios are already playing out in North America; others are still years off, if they ever take hold. Who’s poised to win, and who might need to scramble?
-Facebook has the reach across platforms, which they are more tightly integrating as we speak, and the behavioral know-how to learn how to trigger the desired consumer actions. Talk of breaking the platforms apart could slow Zuck down, at least initially.
-Google has failed to build social connections, dating back to Orkut and as recently as (I’m betting) Meet. In addition, search crawls don’t work across apps, but this is less of an issue when Android devices provide Google with lots of user data. If the messaging layer turns out to be a US variant of WeChat, hypothetically, that invisibility to web crawls could be a major impediment.
-Amazon hasn’t missed many steps over its 25 years, and I don’t see the Seattle Godzilla getting outflanked by a startup, by Walmart, by Alibaba, or by Facebook on social/mobile commerce. Amazon already leads the way in many aspects of omnichannel, for instance. Furthermore, as Scott Galloway notes, Amazon is unique in its ability to turn “core competency” logic on its head: rather than sticking to what differentiates it and outsourcing the hard back-office stuff, Amazon takes those hard back-office tasks — order management, data centers, and logistics so far — and gets so good at them that it can sell those services at a healthy profit. Finally, Amazon is also good at driving wedges into non-adjacent markets: Audible, Kiva, Twitch, Annapurna, and Blink were brilliant acquisitions. Now watch what Amazon will do with PillPack and Zoox.
Given the changes in London, Brussels, and Washington, along with the change in trajectory of the coronavirus, it’s hard to see how cross-border cultural transmission will fare in the coming year. Whatever happens to TikTok post-Trump, the future of Chinese tech companies in the west is uncertain for many reasons, air travel only one of them. As much as I think WeChat, AliPay, and Pinduoduo have much to teach us about what shopping is and can become, my gut says it will be firms that translate the Chinese (and Indonesian, and Japanese, and Korean) practices — rather than export them — that will gain traction in the US; Europe is sufficiently different that I won’t make any claims for what happens across the Atlantic.
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