Entrepreneurs

Adapting E-Commerce Practices From The East To The West

Online retail sales’ shares of total retail sales increased from 16 percent to 19 percent in 2020, according to a recently published UNCTAD report. Indeed, there are numerous anecdotes about how retailers accelerated their e-commerce capabilities during the COVID-19 crisis.  Take the case of apparel maker Levi-Strauss who reaped the benefits of their investments in e-commerce infrastructure and technology. In a matter of days, they were able to fulfill online orders from both their distribution and retail centers. They also launched digitally connected services such as curbside pickup, and leveraged AI to analyze and drive promotions. For those looking to jump ahead and thrive in e-commerce, experts recommend looking to China for inspiration where the retail landscape has moved well beyond transactional e-commerce models to make online buying into a fun experience

Winter Nie and Mark Greeven of IMD Business School have identified five stages of chinese e-commerce development summarized below.

Stage 1. Lifestyle E-Commerce

“In other countries eCommerce is a way to shop; in China it is a lifestyle,” explained Jack Ma, founder of Alibaba. Indeed, it is commonplace for chinese consumers to expect customized experiences and services based on their location.

Stage 2: Online Merge Offline (OMO) Retail

By 2016, Jack Ma of Alibaba also coined the concept of “new retail” which he described as the integration of online, offline, logistics and data across a single value chain (OMO),  Hema, Alibaba’s technology powered fresh food supermarket illustrates this concept.  Using a dedicated Hema app, consumers can place an order for home delivery, make payments and even order fresh food-including live seafood-to be cooked and eaten in-store.

Stage 3: Social E-Commerce

While Alibaba may be China’s largest ecommerce company, a company called PinDuoDuo (PDD) floated on the Nasdaq at a valuation of US$23.8bn in 2018 through its social buying approach. It’s business model is similar to the US-based Groupon where consumers invite their contacts to form a joint purchasing team to take advantage of lower prices.  PDD’s tagine is “Together, more savings, more fun.”

Stage 4: Livestream Retail

The convergence of livestreaming and e-commerce has become China’s favorite way to shop. For the uninitiated, live commerce is best described as the “infomercial reboot.” Influencers, known as key opinion leaders (KOLs)  showcase products, try them on, and describe them to the viewer. As with America’s QVC shopping channel, viewers are able to ask real-time questions, while discounts and limited quantity statistics flash across the bottom of the screen to get audience appetites engaged in the sale. However, instead of picking up the telephone, viewers can buy products with just one click.  

Stage 5: Invisible Retail

Greeven and Nie point to this last stage as ultimate sublime selling. This is where an ordinary person is featured doing extraordinary things, but does not make any explicit product recommendations. Consumers yearning for this particular lifestyle are tempted to buy the products being used.

Livestream Commerce Goes Global

Amongst the different e-commerce models outlined above, livestream commerce, in particular, has piqued the interest of European and North American retailers. Amazon launched its livestreaming shopping platform, Amazon Live, in 2019. More recently, department store chain Nordstrom launched its livestream shopping channel as they explore new ways to engage with their customers. But will livestream commerce take off meteorically outside of China? 

Jialu Shan of IMD Business School explains there are  fundamental differences between how the internet is used in China and in the West, which may impact potential uptake and popularity.   “The key difference is the emphasis on entertainment. Chinese consumers turn to the internet for fun, rather than information access. Three Chinese companies-Alibaba, JD.com and Pinduoduo-account for almost 80% of e-commerce activities in China. Consequently, they can provide consistent services across e-commerce, content discovery, payment solutions and chat messaging. Outside of China, the internet and e-commerce market is fragmented with multiple platforms and players,” Shan explains.

Brian Wiegand, CEO of Spin Live, has first-hand experience with adapting live commerce for the US market. The startup recently partnered with Shopify to bring live streaming services to Shopify’s  e-commerce platform. “US consumers are used to getting what they want, when and where they want it. Getting them to tune into a live stream event at a specific time of day is difficult. In addition, US consumers are extremely intent-based-they know what they want and will research it,” Wiegand explains.

To cater to US consumer behavior needs, Wiegand and his team quickly realized they needed to develop a platform that delivered a continuous stream of liquid and live content. To fuel quicker adoption of live commerce, Spin Live also refocused its attention on building network effects: creating a network of resellers and influencers, instead of just providing a software tool for live streaming. 

While there may be structural and behavioral differences between how e-commerce is structured between China and the West, there seems to be little doubt that the converging trends of entertainment and commerce will only expand from hereon. The key is figuring out how consumers outside China might adopt their behaviors to this trend, and how businesses can develop business models to distribute it accordingly.

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