Browsing e-commerce: An untapped $250B+ opportunity

What is browsing e-commerce?

Looking at the ~$3T value creation in e-commerce over the last two decades, one might feel that the best of e-commerce is behind us. However, in Amazon lingo, I believe we are still on Day 1. Current penetration is still low (~17% in US). New categories are coming online such as grocery and pharmacy. Also, new models are emerging. Uber, DoorDash and Meituan are building operations to deliver anything under one hour. StitchFix and Blue Apron are building subscription e-commerce. Alibaba and ByteDance are building live streaming e-commerce.

However, the one model that I am the most excited about is browsing e-commerce. Current leaders, Amazon, Alibaba or JD, are mostly search based — users know what they want, they search for it on the app, and find the product within the first scroll. Browsing e-commerce is a model where users come with the intent of having fun, much like going to a shopping mall, browse for products and end up buying things if they like. What Amazon is to buying, browsing e-commerce is to shopping.

Browsing e-commerce has already been proven in China. PinDuoDuo (PDD) is a $180B+ GMV business (LTM Q2–20) built on this model. TaoBao and ByteDance have also built products on these lines, but I have not seen any solution at scale in the west.

Need for browsing e-commerce

The fact that PDD has created a $180B+ GMV business in China, taking ~15% market share from strong incumbents such as Alibaba and JD, all within 5 years, says it all.

However, on a more fundamental level, the following entertainment features are missing in the current models in the west:

  • Discovery: Current search-based models work for electronics and books, but not so much for apparel or home décor where users seek an element of inspiration and discovery. Users express their desire for discovery on platforms such as Pinterest and Instagram Explore instead.
  • Fun: Shopping malls offer various entertainment options such as movies, gaming, eating, social gathering etc. which are missing in current models.
  • Social: Most of our purchase decisions are driven by recommendations from our friends and family but current e-commerce models do not offer ways to integrate those recommendations.
  • Personalization: Though our Google search results and Facebook newsfeed are highly personalized, our Amazon homepage is still generic.

Learnings from China

PDD has built a differentiated experience using a blend of entertainment and e-commerce. To the western audience, PDD introduces itself as a combination of Disney and Costco. Within five years, it has grown to 683M Active Customers and 569M MAUs and $180B GMV (Q2–20 metrics). It took Alibaba 15+ years to reach the same scale. The reasons for its viral growth have been group buying and games such as Duo Duo Orchad (similar to Farmville). In addition, it has built high engagement via features such as daily check-ins and price cuts. As Lei Chen, current CEO, mentioned, “We are more like Facebook than Google in the e — commerce world. We push our product recommendation feeds to the consumers rather than wait for them to search on our platform”.

Alibaba had a great search-based e-commerce solution but is now building out both recommendation feeds (revenue contribution in teens) and live streaming e-commerce (~70% market share in China).

ByteDance, on the other hand, has great entertainment features, but is now building out its e-commerce engine for its ~600M DAUs.


First scroll on the home-page of Amazon, TaoBao (Alibaba) and PDD (PinDuoDuo)

Key characteristics of players in browsing e-commerce

The KPIs required to win in the search based e-commerce and browsing e-commerce models are different. While Amazon might be laser focused on 1) delivery time 2) SKU count 3) conversion; PDD might be laser focused on 1) user engagement 2) churn 3) SKU count. Amazon doesn’t look like making an effort to increase engagement on its app, whereas PDD is optimizing for high DAU/ MAU and time spent.

Platforms that can combine both entertainment and e-commerce will win this category. As proven in China, entertainment could be in the form of social network, live streaming, user videos, product build videos or influencer content. On the e-commerce side, categories such as apparel, home products or electronic accessories should be relevant. SKUs that are low intent, low price and non-branded would be more likely to succeed.

Current players in the US are good at either entertainment or e-commerce but none are great at both. Some companies that could be successful are:


Current contenders in this space

What’s ahead

E-commerce is still in Day 1. I am looking to get smarter and would love to chat.