Iris Mir Authors

Social Commerce in China Goes Beyond Sharing

January 27, 2013

Mogujie's 'waterfall': Users of this social commerce site share pictures of the ithings they have bought on Taobao, helping followers find trustworthy sellers.
Mogujie’s ‘waterfall’: Users of this social commerce site share pictures of the things they have bought on e-commerce site Taobao, helping followers find trustworthy sellers.

Dabbling in social commerce might help Chinese e-commerce companies deal with fickle consumers and heightened competition.

11th November 2012 marked a watershed moment in the history of e-commerce in China. The date marks Singles’ Day or Guanggun Jie, a curious festival that came up to celebrate bachelorhood. Whatever its origins, today Singles’ Day has become less about bachelorhood and more about shopping—China’s clever e-commerce retailers have turned it into a marketing gimmick by whipping up a crazy sales frenzy.

On 2012’s Singles’ Day, Tmall and Taobao’s 24-hour sale broke all previous records, making Singles’ Day the world’s biggest online shopping event of the year. Alibaba, China’s biggest online retailer and owner of Tmall and Taobao, reported sales of $3.1 billion on that day alone. The figure is not only significantly higher than last year’s Singles’ Day revenues of $1.25 billion, but it also exceeds America’s Cyber Monday and Black Friday sales of $1.47 billion and $1.04 billion respectively.

According to Tmall spokeswoman, Florence Shih, the shopping festival was a “testament of the fact that e-commerce is becoming an accepted way (of shopping) for more and more Chinese consumers to buy everything from household goods to cars”. Indeed, it is. But it’s not that simple.

Growing Market, Fickle Consumers

China’s e-commerce market is the world’s second-largest currently, and according to research by Bain and Company, it is set to become the most valuable in three years. China has about 193 million online shoppers—or online shopping penetration of only 30% in a population of 1.3 billion.

According to Boston Consulting Group, in 2011 online sales amounted to $119 billion in China. The number is estimated to grow to $364 billion by 2015. Contrast this with the US, which is currently the world’s biggest online market: in 2011, US e-tailers clocked $200 billion in sales, according to figures by Forrester. If current projections are accurate, by 2015, China might overtake the US as the biggest online market.

China’s e-commerce market is growing at a fast clip, but it’s at a very nascent stage of development. The basis of competition in e-commerce is still very much price. Competition in China’s e-commerce sector is characterized by cut-throat price wars, and customers are quick to shift allegiance at the first sign of a lower price.

While customers benefit from low prices, skirmishes such as this one severely erode e-commerce retailers’ profits. Competing on price alone cannot be a sustainable source of competitive advantage for a long time as customers are also evolving. According to Bain and Company research, “While price remains the primary motivator for shopping online, convenience and variety now are major considerations for a surprising segment of shoppers. Online consumers have started to diverge, with a significant number evolving from ‘price sensitive’ to ‘experience sensitive’.”

Bridging the Disconnect

Clearly, China’s e-tailers need better tools in their arsenal—both to compete as well as to build brand loyalty.

Luckily, a convergence of two forces—China’s ever powerful social media landscape and e-commerce—might provide the e-commerce companies with some innovative ideas.

Yihaodian, China’s biggest grocery e-commerce retailer has been experimenting with social commerce since the site was launched in 2008. Back then, they partnered with Tianya, a popular photo-sharing, and microblogging community in China. By embedding themselves in this popular social media site, Yihaodian managed to get themselves known. As CEO Gang Yu, explains, “Social commerce is an opportunity that opens many doors. It’s an effective way to acquire costumers. It also gives us valuable information on their shopping behavior.”

Starting with a very humble experiment on Tianya, Yihaodian is now trying to become more innovative with its social commerce initiatives. It recently entered into a strategic partnership with aimed at taking advantage of this social site’s very active community. Together, Sina and Yihaodian are developing projects such as online customer services and a group purchase application to encourage people to share their shopping experiences and attract others to shop on Yihaodian.

Companies like Yihaodian have found a smart way to ride piggyback on Chinese social media. According to eMarketer, China has an estimated 366.2 million people on social media sites. Sina Weibo, the popular microblogging service, alone has 324 million users.

It’s easy to see why social commerce—a new form of e-commerce based on integrating social networks with online shopping—can help online retailers to build a long-term relationship with their customers. Gang stresses that it is a two-way street: social commerce can “help consumers get what they want” based on the opinions of “other consumers and public leaders”. “On the other hand, it can also help e-commerce retailers,” he says. “They can determine the product offer depending on customer discussions.”

He adds, “It’s a word-of-mouth effect: if you provide a good service, if you have a good product and if you really stimulate opinion leaders by letting them talk about your service, the message will be easily propagated.” This is really important in the Chinese context, where customer service is still considered poor and customers suffer from a general mistrust of companies. They tend to trust other customers instead who have had some experience with these products and brands.

Enter Social Commerce 2.0

As the synergies between social media and e-commerce come to the fore, some smart entrepreneurs are evolving business models based entirely on the points of intersection. Sites like Mogujie and Meilishuo borrowed their idea from Pinterest—and then went a step further by adding a layer of e-commerce on it. The result is a new business model that effectively bridges social commerce with online commerce.

Take Mogujie, a social network that allows users to “tweet with pictures”. Founded in 2011, Mogujie helps users find the things they want to buy through the sharing of shopping experiences. As the company’s Chief Marketing Officer and Partner Li Yanzhu highlights, this website with 30 million registered users and 100,000 online comments is one “with Chinese characteristics”. He explains: “In Taobao [a popular e-commerce site] one can find the same product at very different prices. Customers need to know which one is better.” This is the niche that Mogujie sits in.

“We connect people who want to buy quality things with quality sellers” - Li Yanzhu, Chief Marketing Officer and Partner, Mogujie
“We connect people who want to buy quality things with quality sellers” – Li Yanzhu, Chief Marketing Officer and Partner, Mogujie

Here’s how it works: buyers share the links of what they like on Taobao and these are posted like a ‘waterfall flow’, organized by tags. Every time someone clicks the ‘like’ button or posts a comment, that picture goes up instead of flowing down. Thus, the pictures at the top are those with the most referrals. When a user clicks on an image on this Pinterest-style interface, he or she is redirected to the seller’s page. As Li explains, Mogujie is “like a rating system in the form of social interaction”. This system follows what the company calls the FOR model: Fragments Organize Re-organize. Links are posted (‘fragments’) and organized by tags, and through users’ social interaction they are re-organized.

Mogujie has 30 million registered users. What makes it so popular? Compared to older generations, younger female shoppers are more picky, Li points out. And his company gives the extremely demanding 16-26 year-old female consumers a platform to filter bestsellers on Taobao. The emphasis is more on the buying experience, rather than just price and discounts. “We connect people who want to buy quality things with quality sellers,” he says.

By making this connection, Mogujie earns revenues in three ways: commission from sellers, sellers’ advertisement, and brands’ advertisement. While the company declined to share figures, according to Marbridge Consulting, Mogujie’s monthly ad revenue amounts to RMB 4 million. This comes from the Taobao Alliance ad union. On top of that, retailers are spared the need to offer heavy discounts since Mogujie helps them in the critical task of customer acquisition (and thus, removes the need to undercut competition by offering lower prices).

Meilishuo is another popular social shopping site for women and claims to have more than 21 million users. Launched in April 2010, it cooperates with 40 e-commerce sites, although around 80% of the products are sold on Taobao. Its CEO Xu Yirang was quoted in Caixin as saying that “Meilishuo helps generate up to RMB 700 million worth of business for Taobao a month.”

Building a Sustainable Model

While Mogujie and Meilishuo have managed to foster customer fidelity and generate revenue by advertisement, have they hit the sweet spot between e-commerce and social networking?

While the jury is not out on that yet, previous experiments in this industry may hold some lessons for the new players. In early 2009, Taobao launched a site called Taojianghu to encourage social commerce. But the experiment bombed and the site was eventually integrated into Taobao’s main site. After Taojianghu came Taohuabao, another Pinterest-style social site that according to Marbridge Consulting was closed in order to lead way to Taobao’s latest social commerce site, Wantu.

But that’s not all. One month before the launch of Wantu, in March 2012, Taobao presented the beta version of Faxian e-tao. These two new additions also use Pinterest-like interfaces that redirect users to Tmall and Taobao to complete their purchases.

The main goal of these sites is to help customers make smart purchasing decisions. In other words, they put the customer first to find new ways of learning from their shopping behavior.

But what kind of customer experience is Taobao aiming at with the launch of so many social sites? Are Faxian e-tao and Wantu here to stay? Alibaba declined to give specific details on the launch and closure of these social sites and the goals behind them. However, they did share with CKGSB Knowledge their efforts to “create an environment that allows users to better connect with each other”. According to spokesperson Shih, ”We are trying to add more social networking service (SNS) elements to our existing platforms such as and, what we have to do is to make it easier for consumers to make purchase decisions and merchants market their products through various SNS functions.”

Taobao’s failures—and repeated attempts—in social commerce point that there can be various pitfalls along the way. Still, its parent company Alibaba is betting heavily on social commerce. In a recent article in Caixin, Alibaba’s Chief Strategy Officer Zeng Ming was quoted as saying, “Maybe in the future, a third of Taobao’s traffic will come from homepage categories, a third from online search and a third from interactive social networking.”

The success of a social commerce model depends on the existence of a very sophisticated ecosystem. And that’s where the risk lies: it might be too fragile. Eric van Heck, professor at the Rotterdam School of Management, Erasmus University, has done extensive research on Alibaba. He thinks that “the growth of the network will depend on the ability of each of the partners of the network to create sustainable value to the customers over time. This is the most crucial part: how to keep track of this process and manage growth”.

Mogujie is already thinking of ways of expanding a “too limited service”, something that Li sees as the company’s main challenge. Going forward, besides offering a tool to browse products, they are thinking of offering some other kind of things such as participating in discussions and organizing some activities. “Only by doing this we can have a stable position in this ecosystem, otherwise we are too fragile,” he says.

The key factor at work in social commerce is putting the customer at the center. However, making the consumer the protagonist entails a new set of rules, and lessons from the experience of pioneers like Mogujie and Meilishuo will help social commerce evolve in China.


Enjoying what you’re reading?

Sign up to our monthly newsletter to get more China insights delivered to your inbox.

Our Programs

Frontiers in Digital Innovation: AI, Future of Tech & Data Science

Global Unicorn Program Series

This program offers you the opportunity to master AI algorithms and data analytics, navigate future technology landscapes, and embrace cross-cultural perspectives.

LocationColumbia University, USA

DateMay 20-24, 2024


Learn more

The Biotech Accelerator Unicorn Program

Global Unicorn Program Series

This program equips CEOs and founders in the life sciences and biotechnology industry with the essential knowledge and connections needed to thrive in this rapidly evolving sector.

LocationUniversity of California, San Diego, USA

DateSeptember 9-13, 2024


Learn more

Emerging Tech Management Week: Silicon Valley

This program offers insights into emerging technology developments and the skills required to innovate, grow, and transform your business strategy.

LocationUniversity of California, Berkeley, USA

DateNovember 3-8, 2024


Learn more