On the heels of Cyber Monday, the fourth most downloaded shopping app — ahead of Best Buy, eBay, Macy’s or JCPenney — is Wish, a platform that connects customers directly to Chinese sellers to shop products at a discount.
The site sells iPads for $100, suits for under $40 and smartwatches for under $15 — deals that may be hard to find even on Amazon. There’s a catch, however: Customers have to pay unpredictable delivery fees and may wait up to a month to get items shipped.
Still, the effort is worth it for customers looking for deals. Wish, an 8-year-old San Francisco-based startup, which claims to have 300 million users and is reportedly valued at $8 billion, offers deep discounts because its marketplace sellers ship directly to customers. The company reportedly made $1 billion in revenue last year and expects it to double this year by banking on a hunger for the lowest price possible from a customer segment that’s out of reach for Amazon and eBay. The company has so far raised $1.8 billion in funding.
While direct-to-consumer is a driving force in online retail, standalone consumer brands have struggled to compete with the breadth of Amazon’s product selection. Wish is focused on lower-income shoppers, and it plans to build out its supply-chain capabilities to drive more inventory while keeping prices low.
“It’s literally a channel from China,” said Juozas Kaziukenas, the founder and CEO of e-commerce research firm Marketplace Pulse. “It works for Wish because they’re not trying to compete with Amazon for simple products consumers need — most people on Wish probably don’t have Amazon Prime.”
According to Marketplace Pulse, 94 percent of Wish sellers are from China. According to Kaziukenas, 30 percent of Wish’s customers are from the U.S., while most of its other customers are based in Europe. Customers join the platform by signing up with their email address or Facebook login. The platform then shows a personalized inventory feed it claims are tailored to the customer; the Wish seller site says it shows products to relevant consumers based on their demographics, purchase behavior and wishlists, which they build on site. Wish’s customer growth benefited from low shipping rates from China; however, moves to raise shipping fees on Chinese sellers (brought on by the U.S. intent to withdraw from the Universal Postal Union) could challenge its growth in the U.S. Wish also must contend with reputation issues stemming from recent claims a makeup product caused unwanted side effects and concerns with counterfeit products. Still, analysts say its deep discounts and an adaptable sales model mean it still has room to grow.
“Wish has built warehouses in the U.S. and Europe, so Chinese sellers can store inventory,” said Kaziukenas. An adaptable supply-chain model, along with persistent e-mail marketing based on a customer’s browsing method, has the capacity to hook customers. He added that it’s unclear whether the business model is generating repeat business. Regardless, industry heavyweights like Amazon are taking notice; for example, Amazon earlier this year rolled out a bargain section of its site with cut-priced items that ship for free.
Despite the challenges with buying price-cut inventory from China and a customer experience that’s far from the Amazon experience, Wish has a niche among price-sensitive shoppers in the U.S. and beyond. Franklin Chu, U.S. managing director at Azoya, a company that helps U.S. brands sell to the Chinese market, said as long as customers are hungry for bargains, the platform will grow. It’s also a way to manage inventory for Chinese manufacturers, adding an incentive for them to continue selling through the platform. Wish reportedly generates revenue by taking a cut of sales.
“It’s great for American customers [seeking discounts], and for Chinese manufacturers, it’s a convenient way to find another sales channel and move excess inventory,” said Chu.