Lessons from China’s Innovations in E-Commerce

March 2, 2021
Lessons from China’s Innovations in E-Commerce

Social distancing measures have led to a surge towards online shopping and away from physical stores. Such moves were already well underway, as malls have been declining for the past decade, but COVID-19 accelerated this transition. 

The United States has long led innovation in online shopping, originating the Internet and then leading the first wave of innovation in e-commerce. Yet it is China that is leading the newest wave of innovation. China’s domestic market is bigger and its approach to e-commerce more comprehensive, blending social media, digital payments, and shopping. 

For the US to maintain its competitive advantage, it must learn lessons from China. 

Silos in the US vs. Super Apps in China

In the United States, major companies such as Google, Facebook, and Amazon have become near-monopolies. But while each of these companies are enormously powerful, they are siloed. Google dominates search. Facebook dominates social media. Amazon dominates e-commerce. Lyft and Uber dominate food delivery and ride sharing.

In China however, super apps blend e-commerce, digital payments, delivery, search, and even social media. WeChat is a well-known example of “the” Chinese super app. By blending a wide variety of services onto one platform, customers are able to interact with a variety of different companies, and indeed other users, seamlessly. 

In the United States, on the other hand, major companies are less likely to integrate a user experience with other companies that they do not own. This leaves the experience for Americans more disjointed.

Differences in User Experience

If a Chinese person were to decide to go out for dinner, he could hail a taxi, order his meal, pay his bill, and post about his experience on social media without ever leaving WeChat. By blending such unique services into one app, WeChat acts as a market for businesses to connect with customers, without directly competing in that market. The result is a seamless experience for the customer and an integrated business model for the company. 

If an American goes out to dinner, she would use Uber or Lyft to hail a taxi, scan a QR code to order her food, use Apple Pay to close her tab, post a photo of her food on Facebook, and write a restaurant review on Google or Yelp.

These silos can be beneficial, as it prevents a total monopoly over the entire consumer experience. However, it does make the user experience more clunky and the data being transferred during this entire process can be opaque. 

The Great Leapfrog 

To help explain the difference in customer experience between China and the United States, it is important to review the birth of consumerism in each country. Both evolutions were born when each country developed a strong middle class and each were built around overlapping technologies.

In the United States, cars took people to shopping centers. Consumers would flock to malls not just to shop, but also hang out. The experience was advertised on television and radio, and cemented brick and mortar stores as the bedrocks to shopping. According to The Economist, “America has 3.3 times as much physical shop floor per person as China does. Bernstein, a broker, reckons that America’s 330m people have 30 times as many malls as 1.4bn Chinese do.” The massive investment into the brick and mortar to enhance the customer experience has made companies reluctant to abandon them. COVID-19 has forced them to. Thus, the main platform for revenue for retailers has become its biggest liability.

This is not the same story in China. The birth of Chinese consumerism began in the early 2000s, when it’s middle class first emerged. Rather than cars, it was smart phones that helped shape Chinese consumerism. While Chinese consumers still buy most things in physical stores, a high population density makes delivery cheaper for consumers. According to The Economist, “the result is a mix of shops, entertainment venues, food courts, games arcades and gathering places that replicates the 20th-century American mall in digital form, and hybrid links of the virtual with the physical. Videos show something being crafted by hand. Influencers draw attention to how the item is used. Friends recommend it (or not) on social media. Shoppers band together with other netizens to buy it in bulk at a discount. Live broadcasts turn the whole process into entertainment. And a network of real-world businesses delivers the purchases.”

The Rise of “Social Commerce”

WeChat is owned by Tencent, China’s biggest internet company—and directs traffic to jd.com and Pinduoduo, in which Tencent holds stakes. WeChat blurs the line between shopping and social networking for the Chinese people. Customers can post about and review their purchases in real time. This benefits consumers because they trust one another to give honest ratings, and it helps businesses see how their products are being received by consumers in real time. 

It would be like if Google owned Amazon and Facebook, and had a single app that seamlessly integrated all of those services. China’s model has created the new architecture for consumerism, being coined as “social commerce”. In this new system, everyone has the power to be a critic and influencer. For instance, on Valentine’s Day, a company selling chocolates could hire influencers to craft a narrative to spark online conversations. Customers then respond and add their own content related to the chocolates, thus becoming influencers themselves. Customers can better relate to the marketing, and the chocolate maker can gauge how their product is being received. 

American Markets with Chinese Characteristics 

China’s e-commerce market seamlessly blends nearly all of the commerce experience into one app. The lack of silos allows consumers and businesses to interact with each other, and blends the social and commercial networks. 

But for American business owners, lessons can be learned by leveraging the power of networks. By building relationships with consumers and fellow businesses, small businesses can form interconnected networks that benefits all parties involved. Doing so requires investment not only into communications strategies but also into data integration and digital architecture. By taking a lesson from China, American firms can join their Chinese counterparts in charting a course for the next major evolution in e-commerce.

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Written by
Jake Hannigan
Jake Hannigan

Jake Hannigan joined the VAS team in 2019, and serves as both Business Development Strategist and Education Services Manager. During his tenure, Jake has been instrumental in leading VAS into higher education. He has worked in developing each of our education products and services, including our course Moving Face-to-Face Learning Online and Streaming Curriculum Approval. Prior to joining VAS, Jake spent his career growing and developing start-ups in the education and technology industries.

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