Joe Tsai is the cofounder and vice chairman of Alibaba and we had the chance to catch up just as Singles’ Day was about to kick off earlier this month. We were a small group at the Pudong Shangri-la, which allows us to chew over both Tmall as well as a nice dinner. Tsai is brimming with ideas and geniality and for those of us in the e-commerce space, it is a lot of fun to spend time kicking around theories about China e-commerce. So I tested out some thoughts on Tsai.
Why does Tmall work? Tsai, naturally, details the massive technology, the cluster effect, the extraordinary selection, ease of transaction, and so forth. In short, Tmall works because it is massive and because it is really, really good. He’s right, of course, but there is something beyond the sheer functionality and utility of the site.
Joe is explaining why Tmall is the best platform. But the broader question is: Why do platforms work? My theory: because they fit with the consumer psychology in an era of mass prosperity.
In pre-prosperous societies, consumer spending focuses overwhelmingly on necessities and behavior is linear. People need certain things and they purchase them.
In prosperous societies, consumer spending focuses on discretionary purchases and consumer behavior is non-linear. The journey involves at least five key steps:
- Discovery. What’s out there? Why should I fall in love with it? Yesterday’s consumers went to the store with a shopping list, knowing what they needed. Today’s consumers view shopping online as a discovery process. I might need something, I might not. Court me. Enchant me. Seduce me.
- Engagement. Can the brand have a conversation with the consumer? Why should the consumer listen to the brand? Does the brand have the capacity to listen as well?
- Entertainment. Dazzle me. Make me laugh. Tell me something useful. Use video.
- Validation. Do my friends approve? What about KOLs? I want to feel good about this purchase.
- Transaction mechanics. Make it fast and simple, with consumer protection.
So a consumer today might know she needs a tennis racket, but has only a vague opinion of what brand and style. She won’t find a better selection and better range of prices than on Tmall. Beyond that, the consumer can easily check online for data points such as which brand of rackets was used by the winners at the French Open and her decision is guided. The platform to the rescue.
Every consumer has a different appetite for these five steps and every brand has a different commitment or competency in undertaking them. Hence the enormous value of Tmall. One brand might fall short, but the platform in general will come through.
So Tmall is not just about consumer choice. It is about consumer psychology.
Tsai nods as he picks at his salad. He has spent no small amount of time on this point. Today’s consumers are more sophisticated, more demanding, more curious, more particular. Only a platform can meet those needs.
Increasingly, the consumer journey is as important as the destination. And Tmall offers the best journey around.
Frank Lavin is the CEO of Export Now, the leading operator of China e-commerce stores for international brands. He previously worked on China issues in government, finance, and communications.