Jeff Bezos has a few immutable principles on which he has built the world’s biggest online shopping company.
Amazon, its chief executive has always insisted, must be “customer-obsessed”, laser-focused on getting packages to people’s doors as quickly as possible, and make buying something on the internet as easy as doing so in a shop.
It is a rulebook that has brought great success to Amazon – and vast riches to Bezos, the world’s richest man with an estimated fortune of $185bn (£138bn). It has also become the default way that online retailers operate.
Free shipping, next-day delivery and reliable customer service are commandments for any business hoping to keep up.
But that is not the gospel followed by Peter Szulczewski. Wish.com, the online shopping site he founded 11 years ago, does not just ignore the rules of ecommerce. It purposefully breaks them.
Buy something from Wish, and not only will it not arrive the next day, but it will probably not come in the same month. The average delivery time in the third quarter of 2020 was 22 days – and that was an improvement from previous periods.
Wish’s website itself is often disorienting – a seemingly random assortment of items ranging from knives to watches to pet toys, lacking clear descriptions and of ambiguous quality.
It does not sound like a recipe for a global player. But San Francisco-based Wish is preparing for a US float that could value it at up to $30bn (£22bn), making it one of the few ecommerce companies to emerge from Amazon’s shadow and giving it a value close to that of eBay.
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“Amazon has done such a good job of [that] end to end ecommerce process. So if you want to establish a new company, that part of the market is already gone,”says Sanchit Jain of Enders Analysis.
“You’re left with mobilising a base of businesses that don’t necessarily want to turn to Amazon.”
Breaking Amazon’s rules has granted Wish one key advantage: price. Szulczewski, a former Google engineer who grew up in Soviet-controlled Poland, said he founded Wish to sell to an underserved population that has been neglected by existing companies.
In other words, he is targeting everyone except the 150m or so households that pay for an Amazon Prime subscription. Szulczewski has said this market is so easily ignored that in Wish’s early days he struggled to secure venture capital funding from investors who told him that everyone shops at Amazon.
Wish’s low prices are the result of a direct line to the Chinese supply chain. The vast majority of the goods on the site are shipped directly from the country’s manufacturing hubs. It is a model that China’s ecommerce behemoths Alibaba and JD.com have employed domestically; Wish just marketed the same idea to Westerners.
The Wish formula
Direct shipping to the other side of the world is what accounts for Wish’s lengthy delivery times. At the height of the pandemic, it was forced to shift goods by sea more than air and average delivery times soared to 62 days.
“If Amazon optimised shopping for convenience, Wish is by far optimised for price, says Juozas Kaziukėnas, the chief executive of Marketplace Pulse, which monitors ecommerce.
“By focusing on price, you give up the rest, which in the case of Wish is shipping speed.”
Like many internet shopping sites, Wish largely does not sell goods directly but merely intermediates between its 500,000 or so merchants and 10m users, handling shipping on their behalf. Its 15pc cut resulted in revenue of $1.7bn in the first nine months of 2020, up from $1.3bn a year earlier.
However, the business is yet to turn a profit. It lost $176m in the period, up from $5m.
By far the company’s biggest expense is marketing. It is a prolific spender on adverts with Facebook, where most new users come from.
This year, Wish’s sales and marketing budget has accounted for almost two thirds of its entire revenue.
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Trouble ahead
Like many tech companies, Wish expects to grow into profitability, cutting promotional spending as it secures a regular stream of users. But the investor document ahead of its listing reveals a series of other potential concerns.
A reliance on cheap overseas goods and third-party sellers means the site can fill up with imitations or unreliable products. Last week, a French consumer agency said it had passed the results of a year-long investigation to prosecutors after investigating claims of counterfeiting. Wish has warned investors that it could face claims for fraudulent or illegal products.
A more imminent danger is that the cheap shipping that Wish has been built on is coming to an end. Until recently, sellers have been able to ship individual packages from China to the rest of the world at massively subsidised rates, a result of the Universal Postal Union (UPU) Treaty, an 1874 agreement designed to make international commerce easier.
The agreement was shaken up in 2018, when Donald Trump threatened to exit the UPU if it did not reform. In July, regulated shipping costs from China to the US for small packages increased by up to 100pc overnight, and these changes are gradually filtering through to the real world.
“Wish is using a business model with an expiration date,” says Kaziukėnas.
“It’s not clear when the expiration date is going to come. But it’s coming.”
Wish’s low prices are the result of a direct line to the Chinese supply chain
The company has been scrambling to react, seeking to enlist a network of 50,000 stores across 50 countries to act as shipping hubs and pickup stations for online orders.
It hopes to slash costs by having merchants in China ship orders to these stores in bulk. Wish is also opening its own warehouses, letting sellers store their items in the US and Europe while the company itself takes care of the delivery.
Having its own logistics programme raises costs but solves one of Wish’s key problems – its long delivery times. In turn, this starts to make the company look a bit more like Amazon, the much bigger rival it has tried to distance itself from.
Perhaps Bezos might know a thing or two about selling things online after all.
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