What China Can Learn From the US on Commerce
Earlier this year, I wrote about what the US can learn from China on social commerce (you can find the full article here). It is widely accepted that China is more skillful at social commerce than the US, which formed the premise of my earlier article. However, a less covered subject is the reverse and a more general one: what China can learn from the US around commerce in general. Although the comparison can sometimes be apples to oranges given the different contexts the countries operate in, there nonetheless are several key lessons to be learned for Chinese companies and key areas of strength that US companies should continue to double down on.
Chinese companies do a great job of the first layer of integration between social and commerce through things like direct messaging between sellers and buyers, WeChat live streaming for limited time discounts, or chat rooms for product discussions. However, the full power of unmonitored communities is relatively untapped. Instead of being product focused, Chinese communities can be more pain point focused and long term oriented.
Dia & Co, a clothing company for plus size women in the US, is an excellent example of this. Dia launched a Facebook group for plus size women to connect with each other. Of course sometimes the discussions were oriented around particular Dia clothing items, but more often, they were just around the unique experiences of plus size women, regardless of their purchasing interactions with Dia. Prior to discovering the Dia community, many of these women felt alone in their feelings. Even if they had supportive friends and family members in their lives, these other people did not fundamentally empathize with their experiences if they were not plus sized themselves. Through Dia, thousands of women were able to connect with each other in incredibly empathetic ways. Some women supported each other through comments or chats and others met in person; there were even instances where women who met initially through Dia’s community actually became each other’s bridesmaids or went on vacation together!
While there are of course Dia staff in the group doing standard moderating and occasionally commenting where needed, the majority of the group is purely driven by non-Dia affiliated members. Dia has shown the power of pain point oriented, unmonitored communities with long term missions around meaningful connection and friendship rather than short term oriented sales or customer support troubleshooting goals.
Whenever a value creating connection is made, the value is associated with the initial connector. Long term, values driven communities founded but not controlled by brand is an incredible way to scalably create these connections and corresponding good will and trust in the brand itself.
There are numerous data driven, personalized direct to consumer products in the US, from Proven Skincare to Gainful (personalized protein powder) to Function of Beauty (haircare). Consumers typically take a quiz in the onboarding process to share more about their individual situations, preferences, and goals. They are then recommended a product offering that feels uniquely catered to them. Beyond the product, companies add additional features to truly make the customer feel special, such as a pairing with a registered dietician in Gainful’s case or your name written on the product bottles in the case of Function of Beauty and Proven.
While Chinese companies have done an excellent job at personalizing search results and actual recommendations for consumers, they can take this a step further and focus more on the *feeling* rather than the actual product or platform offering. The actual efficacy of the product varies from person to person and can certainly be based on a wide range of factors, some outside of the company’s own control. While it is of course crucial to have a great product, much of marketing and customer acquisition is less about the *what* and more about the *so what*. Instead of diving into the weeds on what your product is and does, focus on how you want your customer to *feel* when using your product. The main differentiator of these personalized D2C companies is less in their product contents and much more in how special they make their customers feel. Often, this additional step is as simple as creating a quick quiz.
Product Feedback Groups
Companies can combine aforementioned community groups and personalized products to formulate product feedback groups. While Chinese companies are no doubt gathering behavioral data on their consumers to better understand their needs and wants to create more compelling products and experiences, through product feedback groups, brands can authentically enroll consumers in their product development journeys. When consumers feel the product was actually formulated in part through their feedback, they become more invested in it, and they become more empowered to be an organic brand ambassador for the company. With hundreds of thousands if not millions of consumers doing this, the brand can very efficiently leverage product feedback groups for organic growth.
There are numerous different ways to formulate product feedback groups: they could be asking customers for a 1:1 conversation in exchange for a discounted product as HIPAAtrek does or be integrated with the community as Blume does or somewhere in between. Find the approach that meets your intended consumers and consumer prospects where they are.
Especially given your product enthusiasts may work in similar spaces or have similar priorities, you can further make them feel special, seen, and heard through creating exclusive community groups with both virtual and in-person spaces (that groups, albeit not product tied, like The Wing and Chief have done). In this way, you further incentivize greater engagement and scalably add more value to your best customers.
In some instances, the community has actually helped to create the product. For example, now unicorn Glossier started as a blog and corresponding community called Into the Gloss. With this cult like initial community, they were able to formulate products based on real consumer needs and have an existing group of consumer prospects they could tap into.
Consolidated Brand Identity
Chinese companies have to maintain their brand identity on WeChat, Douban, Weibo, QQ, Douyin, Kuaishou, and countless other platforms. While some of these apps are more popular and dominant than others, there still is a critical mass of consumers and prospective consumers on each of these over a dozen platforms. Consequently, managing the brand voices and ensuring consistency in messaging and strategy across these disparate platforms can be a big challenge for Chinese companies that may hamper their growth.
In the US, there are of course numerous social applications as well, but Facebook, Instagram, Google, and to some extent, Snapchat do take up the lionshare of consumer attention and mindshare. While it is still challenging to market effectively on these platforms, especially with the growing number of brands attempting to do so, it is at least easier to ensure consistent messaging and strategy across these few platforms.
While the social application ecosystem is outside the control of any one company, Chinese companies can still be more mindful of this quality vs. quantity tradeoff and take a data driven approach to cross-channel optimization.
US consumers are facing subscription fatigue, which indicates we have possibly swung to one extreme end of the pendulum here. But Chinese companies still have room to grow in this area. While subscription businesses used to only be limited to major B2B corporate software and system sales, they have become increasingly common and viable in B2C models as well.
GEM provides a box of 30 vitamins on a monthly subscription basis; FLO provides PMS relief gummies also on a monthly subscription basis; and Magic Spoon ships you keto cereal monthly. Even Amazon lets you natively subscribe to automated recurring orders of products you may use regularly (like probiotics or face cleansers). With these subscriptions, you pay a smaller price than you would for individual purchases. While many subscription companies see churn and have leaky bucket problems after the first couple months, the subscription lock in frequently does help them hold customers more consistently and for longer than they otherwise would. Especially with products that may take a few months to show results (such as supplements or skincare) or with products that people naturally deplete on a regular basis (such as cereal that people tend to eat daily out of habit and convenience), subscription models can be a promising way to improve the brand’s monetization ability, strength of the brand’s relationship with the consumer, and the consumer’s own time spent reordering. In fact, there have even been companies built to support these reordering behavior, such as Bottomless that helps consumers reorder coffee at the exact right time using smart scale technology.
So many things have been subscription-ized in the US. Second Nature, for example, sells prescription air purifiers; KiwiCo sells subscription learning toy boxes for kids; Stix sells prescription pregnancy tests. Even wilder are subscription slime boxes (yes you read that right!), magical Harry Potter paraphernalia, Zombie makeup, pickles, scavenger hunts, date ideas, art, and boardgames. The subscription possibilities are endless!
Sustainability Measurement and Mission Resonance
Gen Z has often been called the “conscious consumer.” These consumers not only care but fundamentally prioritize factors like environmental impact and mission resonance when making their purchasing decisions. In a world where new brands are created daily, being quantifiably sustainable and mission oriented can be a meaningful differentiator for brands in standing out and building long term relationships with their consumers.
Dozens, if not hundreds, of businesses can be built around this trend both in the software and product words. On the software front for example, Cloverly offers sustainability as a service platform for companies and people to measure and offset their carbon emissions. As regulators, consumers, board members, employees, and shareholders alike are more keen to understand the environmental impact of companies, companies themselves will need a more systematic way to measure and improve this metric.
On the product front, even outside of pure environmental impact, companies are showing their corporate social responsibility through their mission and business model. TOMS popularized the buy one give one model, and it is now being adopted by many brands nationwide in the US. For example, Tatcha donates to Room to Read for each purchase made. Their site even shows the stories and ambitions of the students the donations have gone toward.
Even without a monetary integration of corporate social responsibility, brands can build mission resonance through storytelling. For example, Avarelle Cosmetics shares the founder’s personal story and how he came across this problem. Storytelling helps add more credibility to the company (their solution has successfully solved a problem for the founder personally), creates more empathy with the consumer (showing the founder went through the same challenges), and paints a more authentic picture in the consumer’s mind.
Brick and Mortar Strategy
China has great potential to tap further into both online and offline retail. Chinese companies are ahead of much of the rest of the world in sheer volume and infrastructure around both brick and mortar and eCommerce, but they have room for growth in the integration of the online and offline worlds and in offline experiential retail.
Bonobos, for example, began at the intersection of online and offline retail. Men could come into their stores to try on products to find the perfect fit and experience the clothing in person, but they kept their in-store inventory light and would ship the ordered product to the customer after their in-store visit.
Even beyond omnichannel integration, brands can build better in-store experiences for consumers for them to truly see and experience the product live in a spontaneous way. T.J.Maxx, for example, has a famous “treasure hunt” like experience for retail shoppers where they can run around the entire store looking for different deals. Consumers leave buying much more than they intended (and probably more than they need) but still feel satisfied by the thrilling experience and the discounts they feel they “earned”. While China has done a great job at making online shopping feel more spontaneous, they have more opportunity to do the same in physical stores as well.
More Diverse Brand Investment
China has faced both opportunities and challenges in having a less developed venture capital ecosystem relative to the US. On the opportunities side, established large tech companies in China, like Tencent, have had the ability to invest in and consequently form strong, incentive aligned partnerships with (at the time) startups like Pinduoduo. These collaborations have been a meaningful part of China’s success in social commerce. The disadvantage of having a less developed VC ecosystem is of course the relative lack of investors and capital for startups.
As China continues to grow economically, more individuals and organizations will be better capitalized to pave the way for new startup growth. Of course, these include traditional VC firms and private equity firms and the Chinese tech giants, but these can also include businesses like Chinese versions of Thrasio (a buyer of fulfillment by Amazon businesses) as well as design or developer agencies that take part equity for payment from startups rather than pure upfront capital (Superhuman did this with their developer agency, allowing them to invest at a $25 million valuation; the company is now valued at ~$250 million). As China’s startup ecosystem grows, companies can capitalize on more equity based collaboration opportunities to unlock more private capital markets wealth for people while helping drive innovation growth in a capital efficient way.
While China has solidified its dominance in social commerce, there are still many opportunities for Chinese companies to capture and grow into in the general commerce space, especially as the overall country and consumer population matures and evolves. Many of these lessons can be taken from brand playbooks in the US. These are just a few of the high potential strategies US companies have deployed, and we are excited to continue identifying other strengths of approaches in both countries to continue learning and growing.