Posted on Dec 10. 2021 at 12:30
In nearly a decade, she built an internet empire and conquered Wall Street. Wish, the e-commerce platform that offers products at unbeatable prices, is a worldwide success. It is now in the crosshairs of Bercy, who views his business practices as misleading.
Wish is now banned from the internet by the Directorate-General for Competition, Consumers and Fraud (DGCCRF) until it conforms to European standards. A decision that has been challenged in court by the platform, which it considers “illegal” and “disproportionate”. A first session in “provisional suspension” will take place next Friday. This emergency procedure allows a citizen to request a judge to prevent the immediate enforcement of a sanction, pending the verdict of the case on the merits.
How did the platform come about? What is the success based on? What do we blame him for? Here are four things to know about Wish, often compared to a cheap Amazon.
1. A shopping experience that aims to be ‘affordable and entertaining’
Co-founded in 2011 by Piotr Szulczewski, a former engineer at Google, the American platform based in San Francisco, takes the official name ContextLogic. The principle: create wish lists by matching merchants with buyers. All at very low prices, in the vast majority of cases from China, with very low shipping costs. An “affordable and entertaining” shopping experience defends its creators in the report sent to the SEC, the United States’ stock market regulator, as it nears its listing in December 2020.
In short, a kind of cheap Amazon, employing 875 people full-time worldwide (Amazon has 1.5 million employees), more than half of them in the United States, which, before Europe, represents the largest market share.
In addition to the commission the platform takes on products sold, Wish’s revenue is fueled by its advertising costs (less than 10% of the company’s revenue in 2020), as well as the logistics department (20% of Wish’s revenue in 2020). — which relies on third-party airlines Wish negotiates reduced fares — which it instituted in 2018, specifically to cushion the fallout from the trade war led by Donald Trump against China.
2. Mixed Results
In just a few years, Wish has become popular worldwide, with the start-up now claiming 107,000 monthly active users and nearly 550,000 sellers, the vast majority of whom are Chinese. They were 21 million monthly users and 10,000 sellers in 2015. Between 2017 and 2018, the application became the most downloaded in the world. It also reportedly sold 640 million items in more than 100 countries between September 2019 and September 2020, or about 2 million products per day.
A success that is reflected in the numbers: the company revealed that it generated sales of USD 2.5 billion in 2020 (+34% compared to 2019), which seems to underline that it is fully benefiting from a Covid-19 effect . Paradoxically, the increase in revenues, from 57% in 2018, was only 10% in 2019. The losses are also very significant: 745 million dollars in 2020, compared to 129 million a year earlier.
Jagged results, which could be affected by the decision of the French justice this year, if the platform is not in line with European standards. Especially now that the general manager of Wish, Piotr Szulczewski, announced his departure in mid-November. He will remain a member of the Board of Directors and must be replaced by February 2022 at the latest.
3. Neymar, Pogba or Buffon in Wish Ads
The American company owes its success to an ultra-present marketing on social networks, such as Facebook or Instagram – where Wish is in the top 3 of advertisers. “Our advertising costs to acquire new users accounted for 94% of our sales and marketing expenses in 2020,” the report submitted to the SEC reads. That would represent over $100 million in social media advertising.
Wish especially insists on its brand image: the company works with multiple influencers in more than 25 countries and has been partnering with the Los Angeles Lakers since 2017. football stars, including Neymar, Paul Pogba or Luigi Buffon, in his commercials.
4. Before Bercy, Wish was singled out for his abusive practices
Before the initiation of the investigation, in 2018, by the Directorate-General for Competition, Consumers and Anti-Fraud (DGCCRF) into the platform’s “misleading business practices”, some consumer associations had already sounded the alarm. Such as 60 million consumers, in October 2018, who in particular pointed to false discounts and dangerous products.
Practices highlighted by the French fraud prevention services, which led to the platform’s ban from the Internet. Acts that, if proven, could result in a fine of up to 10% of the company’s annual revenue, according to the DGCCRF.