Over the past decade, package shipping from China has been heavily subsidized, but not anymore. How will Americans get their 5-gear electric toothbrushes and accessory kits for air dryers now?
SLocated next to a florist and taekwondo studio in a Portland, Oregon mall, Jullienne Adams’ discount store feels like a brick and mortar infomercial. A panda swim cap – only $ 1.25! A comb that turns into a knife – now only $ 7.68! A “YOLO” pool float – a steal at $ 13.45!
The Adams store, which is called LiquidNation, also clearly feels like the discount e-commerce site Wish, that’s because, in essence, that’s what it is. Seeking to increase its foot traffic by serving as an online order pickup point, Adams partnered with Wish last year, not unlike how Rite Aid, GNC, and other struggling retailers have teamed up to become Amazon delivery points. . Then she started collecting inventory to sell at the store.
“It’s fun, cheesy stuff,” says Adams, who says he now sees a steady stream of 20 to 25 new visitors coming through his doors every day, to pick up his Wish orders, quadrupling his previous foot traffic. Two-thirds of them make an impulsive purchase at the Adams store.
LiquidNation is one of 36,000 small businesses in the US and Europe that have partnered with Wish since January 2019, agreeing to store and sometimes even deliver their product. For retailers, they get additional revenue and access to Wish’s 80 million monthly active users at a time when they desperately need the boost. Wish, meanwhile, gets a cost-effective distribution network virtually overnight.
“It allows us to have 36,000 stores very close to our main consumers and helps these stores get traffic,” says Peter Szulczewski, 38, co-founder and CEO of Wish, in a rare interview.
Once homeless, Jullienne Adams and her store have partnered with Wish: “They could have gone for Kohl’s or Rite Aid like Amazon. But working with us at mom and pop stores is amazing.”
Jullienne Adams
Launched in San Francisco in 2011 by Szulczewski and college friend Danny Zhang, Wish has become one of the world’s most popular e-commerce platforms, selling an avalanche of cheap junk stuff, almost all of it sourced from China. Most of Wish’s customers are working-class people who can’t afford Amazon Prime and are more likely to shop at dollar stores. Today, only 20% of the company’s customers spend more than $ 119 a year for Amazon Prime, while almost 90% frequent Walmart.
Wish now has around 500 million “registered users” (meaning they created an account or downloaded the app, but didn’t necessarily buy anything). It was the world’s most downloaded shopping app in 2019, and the fourth largest online marketplace in the US by sales. Wish sells around three million items every day, with about a third of its order volume coming from the US, from bamboo fiber socks (10 pairs for $ 4!) And fake fireplaces ($ 178) to anti-snoring pillows (special! $ 14) and “Irish Drinking Team” t-shirts ($ 9). The company was valued at more than $ 11 billion after its last round of financing in 2019, pushing Szulczewski, who owns roughly 18%, into the multi-billion dollar ranks with a net worth of $ 1.8 billion.
“Instead of building dozens of expensive and large department stores like Amazon, we said look at all these stores that are suffering and are looking for additional sources of income and foot traffic.”
The pandemic has only made the ultra bargain site more attractive. Not just for existing customers, but for a growing swath of population that is recovering from blockages. With 30 million Americans now out of a job, Wish could become an attractive option for those looking to stretch their dollar even further. Downloads have skyrocketed in recent months, with the app racking up 50 million installations worldwide since early April, according to Sensor Tower, a mobile app research firm.
From the beginning, Szulczewski has served those in the bottom 25% of US households by income, with annual incomes of $ 31,000 or less. Often their credit cards were declined just before payday. “We looked at a set of consumers who were all overlooked,” says Szulczewski.
Aided by her new physical presence, Wish sales increased 70% in the second quarter; You are on track to post your first annual profit after ending the first six months of the year in black numbers. Last year, the company lost around $ 100 million in $ 2 billion in revenue.
But there is a big problem. Wish was created almost entirely with a grant that allows packages weighing 4.4 pounds or less to be shipped more economically from China to the US than it costs to ship within the United States. For example, shipping a 5-ounce electric nose clipper from China to Atlanta used to cost $ 1.55. Ship those same 5 ounces within the US and you’d pay $ 2.80, about 80% more, says Bryan Wyatt, director of supply chain consultancy Chainalytics.
Growing up in communist Poland in the 1980s surrounded by empty shelves, Peter Szulczewski started Wish as an online trading emporium for low-income people.
Jamel Topin for Forbes
The love agreement ended on July 1. That is the date that the Universal Postal Union, an arm of the United Nations that has governed international shipping rates for more than a century and was criticized by President Trump, cut the subsidy, basically doubling the shipping costs of the overnight. . Since the company relies on Chinese merchants to ship packages directly to consumers (unlike most retailers who ship things in bulk to warehouses and stores in the United States), it is an existential threat.
“This is ultimately what allowed Wish to exist in some way,” says Juozas Kaziukenas, founder of e-commerce research firm Marketplace Pulse.
Add to that the notoriously slow shipping times from China, and Wish faces mounting pressure to find a better way to compete with retailers like Walmart, Target and Amazon.
That’s why he started courting US and UK merchants a couple of years ago and now has a few hundred sales on the platform, still a small merchant base totaling more than a million. “We would love to diversify,” says Szulczewski. The benefit: your merchandise does not come from China. Often these are overloaded or returned items that large retailers have downloaded for pennies on the dollar. For example, your main US supplier sells refurbished laptops and other electronic products.
It has also searched for ways to store items from China closer to customers in the United States and Europe, as a way to speed up delivery. As early as 2015, she began experimenting with warehouses to maintain a limited inventory. She currently has two in the United States, one in Los Angeles and one in Orlando.
But long-term warehouses are too expensive if you want to remain a place for crazy bargains. This is how the idea of partnering with small business owners came up. “Instead of building dozens or hundreds of expensive and large department stores like Amazon … we said look at all these stores that are suffering and are looking for additional sources of income and foot traffic,” says Szulczewski.
Wish now bundles more and more orders in a warehouse in China and then ships them to stores in the US, where customers can pick them up. That helps offset the rising costs by shipping items in bulk, rather than individually to people’s homes.
“For our value-conscious consumers, saving $ 1 or $ 2 makes a big difference.”
Adds Scott Benedict, Director of the Center for Retail Studies at Texas A&M University, “You can take advantage of an existing network of small businesses at little or no cost.”
In January 2019, he started courting these stores, hanging up his customer base in exchange for storage space. They get 50 cents for every in-store pickup, plus Wish is offering a $ 4 bonus if retailers deliver an order to someone’s home. “It helps stores get traffic and survive or hopefully prosper at a time when things are harder than ever,” says Szulczewski. Customers, in turn, are discovering that more items may be available for pickup or immediate delivery through a local store. If an item needs to be shipped, they can get a 15% to 20% discount if they deliver it to a store. Szulczewski adds: “For our value-conscious consumer segment … saving $ 1 or $ 2 makes a big difference.”
However, customers who want the same low prices they were used to now have to deal with the hassle of going to a store and picking up an order themselves, plus they can wait longer if their item is included and sold. ships with other orders. . Customers who want items delivered to their doorstep will endure the same long wait times, but now pay more.
The entire game is up to small business owners, who are now being asked to accept, sort, store, and deliver packages to customers. It is too early to tell if they will see a large enough increase in pedestrian traffic to warrant the efforts, or if they will do a good job.
Szulczewski, who grew up in Communist Poland in the 1980s, moved to Canada at age 11, the same year that the Soviet Union fell. He studied computer science at the University of Waterloo Ontario, which also has the founders of Instacart and Kik Interactive among its former students. After graduating in 2004, he landed a job in Google development software that helped advertisers guide people’s searches. He left in 2009 to start his own software company with the idea that he could predict someone’s interests based on their internet searches and link them to a potential product or ad. After two years of tinkering, he relaunched the company as Wish.
It wasn’t until recently that you ever considered a physical presence. But now he says he sees great potential. Target 100,000 stores on the platform by the end of the year and ten times more in the future. “If you think about it, Walmart has around a billion square feet of retail space. If we have a million stores that subscribe to our service with approximately 1,000 square feet per store on average, we have a virtual Walmart, ”says Szulczewski.
If you’re worried about relinquishing control to thousands of small businesses, which are increasingly serving as the face of your business (and could spoil things), you won’t let it go. “The world’s largest lodging company has no hotels or real estate. That is Airbnb. The world’s largest transportation company, Uber, does not own a car. We believe the best way to conduct a physical physical retail operation is to partner with stores that understand their communities very well, ”says Szulczewski.
It sounds like a desperate move from a company that had to either spin quickly or be overrun by competition. Time will tell if the bet is worth it, or Wish becomes a relic of the past decade.
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