Second Time’s a Charm? – Social Commerce in China

Editor’s Note: The piece was written by Yang Wang, who is currently the brand and media director at Chemical Industry Press. He has published and translated seven books, and several of his works have been translated and published in areas such as Taiwan and South Korea. Yang has also contributed pieces and columns to The Beijing News and other major media outlets.  In regard to technology, he is mainly interested in the changing face of media as well as the business side of the industry. 

Originally from Beijing, Yang moved to California with his family before coming back to his native city after receiving a degree in Communication from the University of California, San Diego.  

If the Internet traffic to a certain type of site grows nearly ten-fold in a year, does that qualify as a trend? The so-called social shopping sites would certainly hope you think so.

Whether it be market leaders like Mogujie or Meilishuo or their lesser known competitors, exponential growth has almost been a given for the past 12 months.   While the people at helm and the investors behind them certainly seem confident, for doubters like me, the eternal question concerning internet companies still beckons: will this be permanent or just a fad?

This concern arises not because I foresee a gigantic iceberg ahead, or that the model has failed elsewhere, but because the exact same model has failed, and that was only five years ago.

Back in 2005, Thisnext pioneered the so-called social commerce business model, which mixed B2C with the rising trend of social networking that intensified by the rise of Facebook and MySpace. As usual, Chinese look-alikes were not far behind, and in 2006, social commerce was brought to the Middle Kingdom by sites such as Buykee.com.

However, unlike the Chinese copycats that obtained enormous successes by transplanting American business models to China, Buykee.com failed miserably, closing its door merely a year or so after its founding. While other Chinese sites that mimicked Thisnext’s business model fared better than Buykee.com, most of them merely hang on for their dear life, with none finding successes they initially envisioned.

Across the Pacific, the tale couldn’t be more different. Much like other pioneers, Thisnext itself did not become a huge hit, although it is still around and through three rounds has raised nearly 10 million dollars in total in financing 7 years after its founding.

The ones that benefited from Thisnext’s trailblazing move are sites that improved on the pioneer’s model. Kaboodle became better at social networking, and it was sold for tens of millions of dollars back in 2007 to Hearst Corporation. Polyvore turned into specialist in sharing pictures, and the Mountain View startup claimed in 2011 that it was profitable independently.

Why did the roads diverge in the woods? For one thing, America has a much better developed infrastructure in regard to logistics, payment, and other prerequisites to make e-commerce successful. In addition, Americans are used to using their credit cards, and after a decade or so of experience, are very adept at shopping online. In this sense, America was ripe for social commerce, for it is merely a layer atop of a mature market.

China, by contrast, lacks these things, so from hindsight it was not a surprise that pioneers like Buykee.com failed. When the infrastructure is not there, building a social shopping site is akin to building sand castles.

However, to quote Bob Dylan, the times, they are a-changing, or at least many are hoping so. Taobao has done much to make people get used to shopping online, and now China’s e-commerce foundation is relatively more developed. At this point in time as Mogujie and Meilishuo are thriving with more similar services to expect, even Buykee.com is making a comeback. The site announced in last month it was ready to re-launch and claim its rightful place.

However, compared to its American counterparts, the Chinese social commerce sites are hugely dependent on one source: Taobao.Mogujie even boasts that its team came out of Taobao, so it could offer user a better experience. This is all nice and dandy for these sites now, as working for Taobao is profitable. But in the long term perspective, doing leg works for Taobao is good and only good for Taobao. For social commerce to take off, a variety of outlets is necessary, and so far in China that’s not the case. Taobao which all these sites counted on launched a succession of its own approaches to social shopping to tap into the trend, which could be the major threat to services like Meilishuo and Mogujie. So at least for now, social commerce is still in the experimenting stage, at least in China.