China's cunning plan to beat the US where it hurts the most: internet sales capitalism

By Tim Bradshaw in London and Hannah Murphy in San Francisco

Technology entrepreneur Dan Dan Li has waited for years for the smartphone generation to rediscover a venerable American pastime: channel shopping. The idea of ​​selling products through video displays dates back to the 1980s, when they appeared on North American Home Shopping Network and QVC television.

In 2021 live video has become a central element of the big e-commerce applications in China, such as Taobao Live, JD.com or Pinduoduo. Shopping has also become an integral part of the most popular social video apps Kuaishou and Douyin, Bytedance's Chinese version of Tik Tok.

But consumers in Europe and North America have been left with flat, static online merchants, which look more like miniaturized versions of their desktop web pages.

"Almost everything else is mobile first," said Li, who lives and works in Hollywood. "Entertainment is mobile, social networking is mobile, but e-commerce is in the stone age," she added. That's something Li hopes to change with his startup PopShop Live, part of a new generation of mobile shopping apps that seek to channel the most essential features of phones -- cameras and communication -- into commerce.

Chinese inspiration

Inspired by the rapid expansion of mobile commerce in China, new startups like Popshop, Verishop, OOOOO and NTWRK are competing with Instagram and TikTok to redefine online commerce for a new generation of consumers.

Imran Khan, a former banker and CEO of Snapchat, wants Verishop, his US-based online sales start-up, to become a "digital shopping center."

Amazon, he notes, is great for finding "must have" items, but with the fastest-growing categories in e-commerce like fashion, beauty and home care, "people want to hear what others think and understand the history of the product".

In the UK, the app OOOOO bills itself as the "QVC for the TikTok generation", and has video channels dedicated to handbags, cosmetics and perfume.

Li, of Popshop, was inspired to relaunch the shopping channel in the social media age after attending South by Southwest in Austin in 2016. The festival participants were broadcasting moments of the appointment in which personalities such as Barack Obama were present, through Snapchat and Periscope, the live video application of Twitter.

She began to work on turning what had been a thrift-trading app into a video-focused experience. But it would take several years for the idea of ​​using live interactive broadcasts to catch on with North American consumers.

"It took a while to figure out the product experience," Li said. "Video alone isn't going to change purchases that much. We have a much stronger emphasis on entertainment and the community."

Today retailers from Midtown Comics in New York to Lee Lee's Valise, which sells crystals and tarot cards, or the Mall of America in Minnesota, the largest shopping center in the United States, < b>book shows on Popshop to showcase your products, answer customer questions, do live broadcasts or just talk to viewers.

They are often business owners who had to close their doors to real-world customers last year, turning their empty premises into studios.

It took a pandemic

"I think Covid is helping a lot of people better imagine what the future will be like," Li says.

In November Popshop was valued at $100 million in a funding round led by Benchmark, an early investor in Uber, Instagram and Snapchat. Time spent on shopping apps around the world increased 30 percent in 2020, according to App Annie, which tracks mobile usage.

Much of the renewed interest from investors and big companies like Facebook in live streaming is driven by the idea that shopping habits developed during the coronavirus lockdowns will soon match those of apps across the globe China e-commerce.

Their logic is that if Amazon supplies basic needs, startups or social networks that offer video chats and the ability to shop online will push a more recreational type of e-commerce< /b>, what Connie Chan, from the entrepreneurship firm Andreessen Horowitz, has called "buying".

Taobao Live has become one of the fastest growing parts of Alibaba, generating some 400 billion yuan ($62 billion) in consumer spending in 2020, the Chinese e-commerce group reported. Similar models have taken off in Japan, South Korea and Southeast Asia, where for many consumers a smartphone is their first and only computing device. But Internet companies in Europe and the United States are falling behind.

"Curated exploration is the future of mobile-social commerce, and right now the big companies in America are not good at it because they don't have business premises," said Steve Sarracino, founder of Activant Capital, which specializes in investments in electronic commerce. "China is way ahead of us in that regard," he said.

Not everyone is convinced. Studying retail trends in China is "super interesting," agreed Harley Finkelstein, president of Canadian e-commerce group Shopify, but it's not always clear which ideas will spill over into other markets. "I don't know (yet) if live video will be one of them," he said.

Offering a decent mobile app has been the "staple" of online marketers for years, Finkelstein said in an interview earlier this year. "We don't necessarily have a group called mobile 'because it would be like calling it a color TV,'" he added.

Pay on bigger screens

Despite this, Americans still prefer to shop on larger screens. An Adobe study last year found that 39 percent of e-commerce spending in the United States was spent on smartphones, while the majority was on laptops and other devices. A visit to a shopping site from a PC or laptop was twice as likely to turn into a purchase than a visit from a phone, Adobe said.

The type of shopping apps that Western consumers have so far embraced tend to be more utilitarian than recreational. The Shop app that Shopify created a year ago tries to combine the two. About 24 million people use Shop each month, primarily to track clothing shipments made at Shopify merchants.

But now consumers can discover and buy new products in places they've shopped before, without leaving the app.

"There is a difference between buying and going to the mall. There are many places where a consumer can go to buy something, but I think that customers are showing that they really want to buy something: they want to finding new brands and new products, they want to have that experience," Finkelstein noted.

Verishop's Shop Party feature, which launched in December, allows small groups of friends to combine Zoom-style video chat with browsing their products. It proved a success when lockdowns prevented people from group shopping in the real world.

Verishop's "shoppable" content, with videos uploaded by select brands and influencers, is already powering ten percent of the products users add to their virtual cart.

"Content that inspires people to buy things is a new concept in the UK. All e-commerce is search, but you can't find a story just by searching," he said Khan.

Until recently, venture capitalists in Silicon Valley were reluctant to back new online retail concepts, outside of specific cases like food delivery. "Nobody wanted to go against Amazon," Khan acknowledged.

Li discovered that it took a pandemic, and a younger group of venture capitalists, to convince investors that the world needed a new approach to e-commerce.

TikTok and Instagram make strength

Although adoption of streaming and video shopping apps remains small for now, that hasn't deterred two of the biggest social media groups on the planet from launching a big push into e-commerce.

TikTok plans to promote shopping with live streams in which its influencers or "creators" push products to its millions of followers, and is adopting new features that allow brands display product catalogs.

After Facebook added dedicated shopping tags to Instagram and its flagship app, it announced recent plans to introduce creator-served businesses. The company is setting up a platform for sellers which, according to Facebook executives, it will soon extend to its other applications, Messenger and WhatsApp.

"It's very early but we're seeing a lot of movement," said Ashley Yuki, director of product management at Instagram.

Along with making seller and product recommendations more personalized, adding links to live videos is another big emphasis, he added. "People are looking to discover products from people they trust, people like them but also creators."

Inspired by WeChat, the Chinese all-in-one app, Facebook sought for years to turn its different services into a "super app."

George Lee, director of product management at Facebook, admits that US and European shopping apps "continue to lag" their Asian rivals due to their desktop computing heritage.

"The way we're building our commerce infrastructure is so that companies can come in, do quick catalogs of their products in our system and we can display them in ways that aren't traditionally Western," he observed.

Months ago, Shopify reported that last year the number of businesses selling through Facebook or Instagram quadrupled, as did the total volume of merchandise on those social networks.

But after getting used to shopping from PCs or laptops, it could take years for more European and North American consumers to fully adopt the modern version of the Home Shopping Network.