A Delivery Guy on Every Street Corner…Literally

Building an internet company in China can be very different than that of the USA. Google began its advertising business in the US by using telephone and online sales to acquire business advertisers. When Baidu Mobile first started its search business in China, the best way to attract advertisers to its online search engine was to send representatives directly to small businesses door-to-door. With the massive amount of inexpensive labor this made sense in China.

This inexpensive labor pool in China has always been a competitive advantage for China and this is no more obvious in the massive logistics and delivery infrastructure that has been leveraged by Alibaba, Tao Bao and other online ecommerce platforms in China. Unlike the US which has Fedex, UPS and other large players, most deliveries in China are handled by small independent delivery people riding an electric scooter and under contract to Alibaba etc. Jack Ma (Founder of Alibaba) recently revealed that 2M delivery people already exist in China but that number will rise to 10M in the next 10 years. Already there are 30M packages being delivered today in China rising to 300M in next 10 years.

But it is not only online marketplace companies that are getting into the delivery business, Baidu (China’s internet search giant) is now doing food delivery in dense urban areas.  Smaller O2O (offline to online businesses) are also innovating around delivery. A company that I recently visited in Shanghai called Z+ is taking it to a whole new level by leveraging neighborhood based entrepreneurs to do staple food delivery right from their own apartment.

The delivery world in the US is certainly being innovated through such players as Munchery, Postmates and even Uber but perhaps some of the real learnings can come from managing a large, diverse and independent delivery system such as what has already been done in China for the last 10 years. They certainly got it figured it out when I can order something and have it delivered in 10 minutes!

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Wechat Marketing: How to get a Wife in 30 days

I’ve been back and forth between China and the USA for a good many years and in that time many things have changed on how I have been able to communicate between the 2 countries. It used to be the good old wired landline (and lots of long distance charges!), then to Microsoft MSN Messenger (is that around any more?), then to Skype and now the last couple of years it is using Wechat.  Wechat is an mobile phone based instant messaging App like none other. One of the leading Apps in China at 750 million users it has a plethora of features from online banking, video calling, instant messaging etc etc.  But just like any other powerful tool, it also has some interesting unintended uses that are just being discovered and explored. In fact, a friend leveraged a Wechat feature to meet new people and in a short 30 days was married!

So what are the secrets of Wechat marketing? Lets take a look at how to use some of the features that  are being used today to reach customers:

  1. People NearBy: this is a location awareness feature that allows you to browse people that are nearby you.  If you are in the mood to chat or send some interesting information then this is the way you can do it. In the US, there are many established dating apps like eHarmony, PlentyOfFish, match.com and new entrants like Tinder, League Dating app etc.  Putting together Wechcat with more robust “dating funnel” features from these other Apps would certainly be an interesting “habit forming” feature.
  2. QR Code scanning: walking down a road in Shanghai I noticed a table where there were a bunch of excited people looking at their phone playing with an App and eating oranges. It turns out distribution of Apps in China is not typically done online (like the App stores or through online ads) but actually is physically done by setting up a table and giving away food to people in exchange for downloading the App.  The QR scanner feature on Wechat allows App developers to easily get peoples’ account information quickly and also allows the user to be exposed instantly to the App in exchange for some goodies. Win-win!
  3. Company Groups: online business communication and group communication is now primarily done through Wechat. These group chats allow people to seamlessly communicate on any issue instantly.  It also allows companies to setup their own private group, which people to subscribe to and get updates from the business.  I’ve personally seen dozens of such groups setup on people’s accounts.

With all the marketing noise in China it is a never ending battle to capture the attention of the Chinese consumer.  Wechat is certainly a key marketing platform to any business trying to grab a piece of that attention.

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Why Internet Tech Companies Should Be Building Cars

The fastest I have ever driven a car is 180 km/hr on the German Autobahn.  The slowest I have ever driven a car was in Shanghai in 2016 when it took me about 2 hours to travel 700 meters when a major overhead car lane was damaged. That’s the equivalent speed of a crawling baby! So although it seems the “killer app” of autonomous cars is that I can drink my latte while scrolling through some cat videos on Youku (Youtube equivalent in China), that’s not what I am waiting for. One of the real disruptions of self driving cars is their ability to remove traffic delays from my life (and having a latte while watching Youku is a nice bonus).

Sohu.com is a leading internet brand in China, providing online games and news to over 400 million people,.  In a recent conversation I had with Charles Zhang, the thoughtful and humble CEO/Founder of Sohu.com, he commented that internet companies will be eventually building cars.  Internet companies building cars? Although this does not seem obvious, the idea of Charles Zhang is to take the efficiency and power of information provided by the internet to understand what the Chinese consumer really wants in an automobile. This allows Sohu.com to build cars that are tailored specifically to the Chinese consumer.  Baidu’s CEO Robin Li says that “China has a lot more population and hence has more chance to uncover needs before US companies do”.  By aggregating search queries (in Baidu’s case) and looking at sales of used cars through online classifieds (in Sohu’s case), these companies are getting an unprecedented view into automobile consumer needs and wants.

Most traditional auto companies are also now pivoting their strategy and are now envisioning a future where selling a car is not about the car at all…its about how to give the consumer a better experience while traveling IN the car. Nissan’s CEO Carlos Ghosn commented recently in January 2014 that “we are moving from the car being a slave to becoming a partner”.  Toyota designers are pondering the question of how to make the time in the car the most valuable part of your day.  General Motor’s recently created a position of “Senior VP Customer Experience” with their philosophy being the product is not the car anymore, the car is the container of the experience.  Ford is focusing on Infotainment for the car and their tagline is to deliver cars that are “safe, green and smart”.  The pattern is clear and the auto industry is heading towards a future of the “conscious car”.

So will internet tech companies transform the automobile industry? Well if Google and Baidu is any indication the shift has already started. Google heavily invests in mapping technology through Google Maps, it’s a leader in autonomous vehicle technologies, has a mobile phone OS through Android and recently purchased a company called Waze (which does crowdsourced traffic updates). All this technology allows us to be more efficient with the modern day automobile. No longer do you need to buy a car… maybe you can use it less, share it or get one only when needed because you are a lot more efficient through the use of these technologies.   This is the “dematerializing” effect that technology will have on the auto industry…a lot less cars and we are a lot more efficient with them.  So maybe Sohu or Baidu will not build the cars, but they will certainly make the use of them a lot more efficient and customized.

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China App Hacks That Are as Addictive as Good Dumplings

In March 2016, the largest gathering of Buddhist Monks since the Qing Dynasty reigned over 2000 years ago took place in a small mountain town of WuTaiSha, China. With my family having roots in Sri Lankan Buddhism and my wife who was a newly minted “Master Administrator” of one of the many Buddhist temple groups in China, we took the long voyage to participate in this gathering. It was a live 3-day spectacular gathering of people and monks showing their devotion to the Buddhist way of life. As intensive and social as this event was, there also is a very heavy use by Chinese Buddhist Temples to spread their teachings through the online environment. Wechat groups which aggregate hundreds of followers and managed by volunteers help to keep the community vibrant and alive. What is surprising though is that it just maybe the subtle features of Wechat that keep the community alive rather than the actual teachings of Buddhism.

One such innovative feature on Wechat is called “Red Packets” which allows a member of a group to send any amount of money at any time to other members of the group. The brilliant (and habit forming) part of this feature is that people don’t know how much is actually being sent. A typical example is:  Bill sends a red packet of $10 to the group. The people on the group gets notified via the App that someone has sent a packet of money which is an unknown amount. People then have the option to accept and whoever accepts splits the money.   At one point, my wife had asked her Buddhist group to send in some information on how many times they had done something. No response from the group. She then decided to send $1 as a “red packet” to see if people were actually online. Virtually everyone responded and accepted the packet! The power of small monetary awards in China can go a long way!

Another China App that brilliantly tapped into their members motivation was Didi Dache, which is the largest taxi based App service in China. Because of the large demand for Taxi services during peak hours it can be very difficult to get a Taxi in any reasonable amount of time.  In this case, the taxi drivers had all the control and would be able to accept or deny rides at their discretion. Some clever passengers decided to use the “voice chat” feature to not only tell the taxi driver where they were located but to make the messages funny and enticing for the driver to choose them over others. The drivers actually benefitted the most, giving them some humour and power of their otherwise dreary driving day on the congested streets of China. By adding a little bit of mystery to every ride request, the Didi Dache App added some fun to their driving day.

Basketball is gaining a lot of traction in China as a sport. Michael Jordan to this day is still an icon in Chinese culture even after retiring 13 years go.  This is no more evident in the shoes that bear his name and that Nike sells as an exclusive product every couple of months.  These exclusive deals are typically sold out online in seconds.  People would literally by waiting online at the precise moment of the opening of the web page to get on the list. Because of the overwhelming demand, even if you get on the list there is still a random selection process that happens afterward.  The list is constantly being updated which causes consumers to continually monitor the Nike App to get the latest information.   By adding randomness, exclusivity and time pressure the Nike App cleverly retains the attention of those shoe addicts for the duration of the deal!

Thanks to the work of Nir Eyal (author of Hooked) and research at Harvard, habit forming tactics are now an integral part of the design of the best Apps in the world. China Apps have certainly embraced their own unique twist on it.

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Why Zappos Would Fail in China

There are many ways to deal with the punishing air pollution that sometimes falls upon the big cities of China. When outside you can wear a mask and when inside an air cleaner can be used to scrub the pollutants.  When we first shopped for our first air cleaner in Shanghai it was still common practice to choose foreign brands over those that were locally designed and manufactured. A quick comparison of Japanese models and we settled on a Sharp model. A long 2 hours later we were back at home, deboxed the unit and proceeded to get on with the cleaning of our apartment air. Unfortunately that was just to be the start of our woes as a rattling noise emanated from the unit.  My first reaction was “great…another 2 hour commute to return the thing and get another one”. Fortunately this is where my assumptions went wrong. With a quick dial on the mobile phone, my wife called the manufacturer and proceeded to discuss a way to remedy the situation. And this is where I discovered that service and support takes on a very distinct meaning in China compared to the USA.  Within the next day a service person showed up to do the first level fixing and within the next week another 2nd level team had arrived to remove the unit, give us a temporary replacement and take it to their repair shop. Within a day of that the unit was returned and all was well.

This pattern of servicing defective products rather than replacing them was a pattern that I experienced repeated over and over during the next years in China.  Whereas in the USA returns are a commonplace occurrence, this is rarely the case in China. Many factors have led to this unique practice including low labor cost (it is cheaper to pay someone in China to repair something rather than return it).  Structurally there is also financial reporting friction for most manufacturers in tracking returns because of the paper based accounting methods still demanded by Chinese government tax  requirements. Finally because of the frequent fraudulent schemes that are pursued by some consumers, manufacturers are reluctant to give money back after a product is purchased.  What that means for most hard-good companies coming into China is that having a robust service team or partner that can deploy people for repair and servicing is going to be expected by the Chinese consumer. Whereas Zappos would just say “go ahead and return the product no questions asked” with any product problems in the USA, the model would definitely need to be a lot more hands-on and personal in China.

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