Wednesday, May 3, 2017

The Online Marketplace That’s a Portal to the Future of Capitalism

About three years ago, like millions of other Instagram users, I became acquainted with an app called Wish. At first, my awareness was purely subliminal. Wish ads appeared in my social-media feeds without explanation or context, peddling a deliriously weird selection of heavily discounted products: a smartwatch for under $20; selfie sticks for around $5; a “self-stirring mug.” By the end of 2015, though, these posts were appearing with striking frequency. That year, Wish’s parent company was reported to be one of the largest advertisers on Facebook and Instagram during the holiday season.

Finally, I relented. A friend and I signed up and agreed on an amount each of us would spend on the other. The packages, ordered over the course of New Year’s Eve, would be surprises. Ordering on Wish, I soon found out, is dangerously easy. (When I signed up, the first purchase was free; I chose yellow toe socks.) Shopping involves scrolling through an intoxicating admixture of goods: Commodity necessities appear next to fast fashion and knockoff apparel; extraordinarily cheap but on-trend electronics mingle with what I can only describe as global manufacturing overspill. Among the items I sent to my friend, on our modest budget: a laser pointer; 100-count “super strong” small magnets; a functioning violin; a spare part for the window mechanism on an Audi A6; a deep-V-neck sweater; and of course, the self-stirring mug. Shipping was often free, or only a dollar. The items were extraordinarily well reviewed, often by thousands of customers. The deals seemed, if not exactly too good to be true, at least economically unfeasible — which, close enough.

My experience as a recipient was more informative. A sampling of my haul, clearly selected under the influence: “Macho Man” Randy Savage-style sunglasses with built-in Bluetooth speakers; a pillow cover emblazoned with unrepeatably offensive text; a T-shirt with an obscene graphic print; a pale silkish robe; a bag of loose Sri Lankan coins; a fondant mold shaped like a human fetus; and a 12-hole ceramic ocarina. Packages arrived in waves over the next month, carrying with them a hint at what makes operations like Wish possible: their shipping labels. Most were classified as “ePacket,” courtesy of the United States Postal Service and China Post.

These shipments were made in accordance with a bilateral trade agreement between the United States and China that originated in 2010, meant to address the rising tide of cross-border e-commerce. Items up to 4.4 pounds — more than the weight of, for example, a violin and bow — can be shipped as ePackets, at extremely low rates with tracking numbers and delivery confirmation. Tracking is crucial for foreign sellers that are up against consumer skepticism and comparatively slow shipping times. The deal seems to have worked: ePacket’s usage has ballooned in recent years.

This obscure trade deal has become the quiet conduit for an explosion in a new and underexamined American consumer behavior: buying things directly from their countries of manufacture. (Similar agreements also exist with Hong Kong, Singapore and South Korea.) This, obviously, presents a problem for the stores and retailers accustomed to serving as importers themselves. Brick-and-mortar retailers are already experiencing a grim 2017, shedding tens of thousands of jobs a month under pressure from e-commerce. Cross-border purchases compound the issue: Because of ePacket, and the decades-old international postal agreements that serve as its foundation, lightweight product shipments from China are heavily subsidized by the U.S.P.S. “It’s providing an artificially low rate,” says Jim Campbell, a consultant and lawyer specializing in international postal law. “It’s redistributing wealth, and the winners are essentially the big exporters.” Accordingly, these agreements have drawn intense criticism from American retailers large and small. In 2015, an Amazon representative testified in front of Congress about what he called a “completely unnecessary and illogical” system.

by John Herrman, NY Times |  Read more:
Image: Daniel Salmieri