“Social e-commerce” is a buzzword. “Interactive e-commerce” is a phenomenon

The full version of the paper Defining interactive e-commerce: A model as observed through the case of Pinduoduo is available for download at any of the following links:

Weiyun | Dropbox | Slideshare

The term “social e-commerce” has become ubiquitous in recent years as a dominant trend in the social media, e-commerce, and marketing fields. Yet as some industry experts have pointed out, there is much which falls under the definition of “social e-commerce” that is not in fact “social” at all. In researching the rise of Chinese e-commerce platform Pinduoduo, my colleague Matthew Brennan and I found this disconnect to be particularly evident. Although one of the most frequently-cited cases of “social e-commerce,” Pinduoduo’s business model is not purely social in its nature. When interviewing employees and executives at the firm, it became evident that “interactive” was a primary descriptor internally, and perhaps offered a more comprehensive term for what often may incorrectly be labeled as “social e-commerce.”

In a recently-published paper, we have sought to comprehensively define the concept of “interactive e-commerce, explain how it fueled Pinduoduo’s rise, and examine how it is being applied elsewhere.

What we found was that interactive e-commerce centers around a fundamentally different philosophy from its more traditional e-commerce counterparts. While traditional e-commerce models have largely been search-based and have focused on efficiency, wider choice, and convenience, they have largely neglected the broader recreational and emotional role that shopping has traditionally played in lives and societies.

Interactive e-commerce is a model that humanizes the online shopping experience. It is an approach that takes the enjoyable, social, and psychological experience of shopping in the physical world, and applies it to the digital age. This approach has led to an integration of tools from elsewhere in the digital economy: recommendation, entertainment, and community together with one core proposition: value for money.

Interactive e-commerce is the integration of recommendation, entertainment, and community features into the digital shopping experience in order to produce value for consumers and vendors.

Recommendation

The integration of ai-driven recommendation into the interactive e-commerce experience is done with the goal of creating sense of “serendipity,” so key to the pleasureful shopping experience in the physical world, but which traditional e-commerce has often lacked. Rather than assuming that the shopper largely knows what they are looking for beforehand and pursuing an efficient experience, the assumption behind the interactive e-commerce model is that the shopper does not always have a clear idea of what product they are searching for specifically, and that through the shopping process, they can find the elusive item that they did not yet know they needed and find the deal that will make their day. 

Recommendation in an interactive ecommerce model is further enhanced by the integration of insights from its users’ social networks. This allows the app to suggest items based on trends and preferences that go beyond simple search and purchase history, creating a stronger sense of serendipity, and ultimately a more pleasurable online shopping experience for the user.

Entertainment:

Whether in the form of live streaming, games, flash sales, or countless other methods, the second component of interactive e-commerce prioritizes fun and stimulation for the user, attracting them to the platform, lengthening the duration of their visits, and incentivizing regular and active involvement.

The essence of the entertainment component of interactive e-commerce lies in that it both continuously and predictably delivers a stimulus to the user, while involving a sense of novelty regarding how such a stimulus will be applied. While the prioritization of continued user engagement and stimulation has long been a core component of social media and gaming platforms, this has not always been the case in traditional e-commerce. In the interactive e-commerce model, these are integrated into the shopping experience with the goal of delivering greater value to the user.

Community

With interactive e-commerce, the involvement of a broader social component not only provides insights for improved recommendation (mentioned above), but also creates a digital shopping environment that meets the innately human need of connecting with others.

In the early stages of Pinduoduo’s rise, this was done by leveraging Tencent’s popular WeChat app. Pinduoduo’s team purchase feature offered discounted prices on everyday goods like produce and household staples for group-purchasers. To compose a large enough group of buyers, Pinduoduo’s users were encouraged to recruit members of their social network to join their group. This created a virtuous cycle of social engagement, better insights for Pinduoduo’s recommendation algorithm, and improved value for the user.

Value creation and competitive advantage

Combined with a direct connection between consumers and manufacturers, interactive e-commerce’s greater insights on user preferences, size, and scale allow for superior delivery of value for money to the user. By removing the added cost and friction of the traditional distribution chain and replacing it with a digital consumer-to-manufacturer (C2M) model, producers can more accurately predict and aggregate demand. This helps to lower the price of products while ensuring that producers are offering what consumers find most valuable.

Pinduoduo’s application of interactive e-commerce and C2M distribution can offer improved cost-effectiveness in the agricultural product supply chain.

Indeed, Pinduoduo is far from the only firm applying interactive e-commerce models. Facebook and Instagram have been building out the e-commerce functionality of their social platforms, as has Bytedance’s Douyin. While the label of “social e-commerce” certainly applies in this case, the merger of social and e-commerce models is simply one element of a far larger trend: the e-commerce experience is becoming increasingly interactive.

The full version of the paper Defining interactive e-commerce: A model as observed through the case of Pinduoduo is available for download at any of the following links:

Weiyun | Dropbox | Slideshare