Wish builds empire under nose of Amazon and Silicon Valley elite
Before Peter Szulczewski became Canada’s youngest billionaire, he was a software developer on Google’s payroll.
He parted ways with the search engine giant in 2009, leaving behind an impressive legacy: code that helped advertisers expand their reach, and a Us$100-million spike in revenue.
Two years later, Szulczewski and a friend, Danny Zhang, launched an app that allows users to search for their favourite products online and add them to a wish list. Appropriately called Wish, the app immediately attracted a cult-like following, enabling the duo to monetize it using a pay-per-click model.
As their business grew, so did the app’s products and partnerships with merchants that sell in-demand products at a fraction of the price at competing retailers.
Connecting buyers with sellers who offered good-quality, unbranded merchandise at the lowest possible price helped Wish shed its startup skin to become a legitimate e-commerce player.
“Coming from Google, we knew how to look at consumer data and it was undisputable that this was a big opportunity not just in North America, but potentially an even bigger opportunity in Europe and elsewhere,” Szulczewski said.
Since those early days, Wish has grown into an online shopping mecca where 80 million consumers in the United States, Canada, Europe and elsewhere shop for affordable goods. The San Francisco-based company has become a global powerhouse and a rival to Amazon by building an e-commerce platform for consumers who prioritize price over fast shipping and pretty packaging.
Simply put, Wish has been able to build a multibillion-dollar empire in less than a decade by using transactional and behavioural insights about its users to provide an online entry point for shoppers with lean buying power, a strategy that continues to elude many other retailers trying to fend off Amazon’s market incursion.
Its direct-to-consumer approach means shoppers aren’t paying for advertising and distribution costs, and there are no membership fees to worry about either.
For those on a tight budget, Wish provides a no-frills online shopping experience.
On the Wish app, you’ll find sunglasses for $2, a jacket for $15, jewelry for $5 and a watch for $3.
The app’s bargain-priced selection is endless: apparel, electronics, home decor, hobby tools and other gadgets that are shipped directly from small-business sellers, mostly located in China.
Szulczewski rarely gives interviews and stays out of the spotlight.
He has also turned down at least two lucrative offers for Wish — including one from Amazon and one from Facebook. He said the offers came at different points during the company’s journey, but he knew Wish independently could move very quickly in the right direction.
The Polish-born immigrant moved to Canada with his family when communism collapsed in Eastern Europe and settled in Waterloo, Ont., just over an hour southwest of Toronto (and was once home to Research In Motion, the company that helped make the Blackberry famous). He enrolled in the computer engineering program at the University of Waterloo, where he met Zhang.
Wish has emerged as the No. 1 online shopping app in more than 40 countries. In 2018, the company doubled its revenue to US$1.9 billion and, as of its last funding round in 2019, it was valued at more than US$11.2 billion.
Given Wish’s explosive success, it’s surprising that in its early days, Szulczewski was repeatedly turned down by some investors who believed the company would never surpass the sales volume it had at the time. Turns out, they underestimated the needs of millions of buyers who simply can’t afford to shop on Amazon.
In recent months, Szulczewski has publicly compared his company’s success to Donald Trump’s surprising victory in the 2016 U.S. presidential election. In both scenarios, no one saw it coming, not the political pundits in Washington, and certainly not the tech elite in Silicon Valley.
“What Wish has been able to do is identify an unmet consumer need and deliver on that,” said Rachel Dalton, an e-commerce analyst at Kantar Group, a London-based research agency that analyzes industry trends.
Wish’s success hasn’t gone unnoticed and there’s now growing competition in the e-commerce space for value-conscious shoppers, with Amazon, for example, introducing new services for those receiving government aid.
Dave Marcotte, Kantar’s senior vice-president, said more retailers in general are likely to retool their online business models to stay relevant, which isn’t surprising given e-commerce’s growth. Sales online are expected to hit US$4.9 trillion in 2021, up 265 per cent from US$1.3 trillion in 2014.
Kantar’s recent ecommerce Outlook for Brands survey, which analyzes trends and patterns in e-commerce hiring and head count, found that e-commerce staffs have grown by 83 per cent since 2017 and that 76 per cent of brands are likely to increase their investment over the next year to help build out their teams and capabilities.
Szulczewski doesn’t seem worried that his core customer demographic will erode in the face of such competition, but, at the same time, Wish is investing money in key areas, starting with its logistics channels to speed up deliveries, better serve the needs of its existing users and draw in more affluent shoppers.
Last year, the company introduced Wish Local, a partnership that includes more than 25,000 brick-and-mortar mom-and-pop shops around the world, many of them struggling to survive.
The program is designed to revive local businesses and further improve customer experience by offering same-day pickup.
Szulczewski said mom-and-pop shops lack the data to truly understand consumer demands.
He said Wish Local helps these stores because they get access to customers who live in the area and are likely to make additional purchases when picking up their goods ordered online.
“I’ve never seen anything grow this quickly,” he said. “The number of pickup orders from local stores doubled from last week to this week. We’re talking tens of thousands, not a trivial number.”
The company is also expanding its home decor collection and older brand-name merchandise.
But there are no plans to charge a subscription fee to access the more than one million merchants on Wish.
Wish shares revenue with its sellers, taking a 15 per cent cut on every purchase. Setting up shop is easier than on most e-commerce platforms, but the biggest draw for sellers is the access to a huge market of consumers looking to buy on the cheap.
Szulczewski said most merchants use the platform responsibly, though some want to turn a quick profit at any cost, usually at the expense of the customer or the platform itself. False advertising and fake reviews are just some of the issues that have surfaced in recent months, prompting Wish to introduce fines to help police merchant conduct.
He declined to disclose how much the company collects in penalties, but said the fines are not a source of revenue for the company.
“Fines are a correction mechanism against these practices,” he said.
Tanzeen Syed, managing director of General Atlantic, a global growth equity firm that provided Wish capital and strategic support, said Wish has “remarkable momentum” and could become one of the world’s largest e-commerce and retail companies.
“Its addressable market is substantial: effectively all consumers across the world,” he said.
“It also has the potential of extending into numerous other product areas, including B2B and consumer finance.”
Szulczewski said he always knew Wish was destined to become a multibillion-dollar company.
“I think it’s probably just mindset,” he said when asked about the key to success. “It’s also access to resources, it’s luck and timing. There are a lot of things, but the one consistent thing or trait that I can think of is persistence.”
What Wish has been able to do is identify an unmet consumer need and deliver on that.