Online Retail's New Path: Two experts talk about TikTok vs. Amazon, areas of growth and more

"The world of online retail is facing a stark reality: During the pandemic, when many people were stuck at home, they went shopping online. Now that things are returning to normal, e-commerce sales are slowing or falling.

What are online sellers going to do?

For insight into the issue, The Wall Street Journal's Preetika Rana spoke with Kirsten Green, founder and managing partner of venture-capital firm Forerunner, and Lydia Jett, managing partner of SoftBank Investment Advisers at The Wall Street Journal's annual Tech Live conference. Here are edited excerpts of the conversation.

WSJ: Kirsten, I want to turn to you. Why didn't sales stay strong?

MS. GREEN: I think of e-commerce and commerce as one and the same. Being home for so long or having changes to your routines had people shopping online more than ever, and getting comfortable shopping online in some new categories like grocery. Coming out the other side of it, it's not as much of a slowdown in e-commerce as much as a reorientation or a distribution across all of the channels.

WSJ: So when we were locked up at home, watching Netflix, and shopping on Amazon, that's where our dollars were concentrated. And now that we're out, we want to take a vacation, we're maybe spending those same dollars on Airbnb or booking a flight. Lydia, did you expect this to happen?

MS. JETT: Consumer experiences change. The expectations have changed. How we will behave has changed. We see that in so many different facets of how we're living today.

But we are in a market where we've had supply shocks. We've had big economic shocks in terms of how do you capitalize companies. And you're talking about consumer inflation. You're talking about consumers who had to think about, "How do I outfit a home office," now saying, "How do I go experience the world?"

We see growth across the e-commerce portfolio. That makes us bullish on the future when we get past all these big shocks we're playing with right now.

WSJ: In the past year, we see money pour into businesses that were virtually selling anything online. One industry that comes to mind is fast-delivery startups that deliver, say, toothpaste and toilet paper to you within 15 minutes. A lot of these startups died a pretty fast death. How has the past year changed your investment thesis?

MS. GREEN: Some of that overexuberance toward that trend was people simply looking and saying, "There's a big market. Behavior is shifting. We want a piece of it. And we're going to approach it with this level of aggression." At Forerunner, we've really spent our time thinking about, what does the developing customer look like today? What does that signal for the future? And thinking about where the market is meeting that opportunity, where they're maybe not meeting that opportunity and what business-model opportunities exist there.

WSJ: Let's talk about some behavioral trends that are here to stay from the pandemic.

MS. JETT: We are huge proponents of two major trends, one of which is automation and improving that entire experience from a customer standpoint for online commerce. How do we think about using automation to deal with worker shortages? How do we think about using automation to accelerate a customer journey through a transaction? The other area that we're just seeing more and more green shoots around is the concept of video. How do we apply this to a U.S. market?

WSJ: Speaking of video, SoftBank has invested in TikTok's parent company, ByteDance. TikTok is making a big foray into e-commerce. Could you talk about what TikTok has that, say, Amazon doesn't, and what Amazon has that TikTok doesn't?

MS. JETT: What TikTok fundamentally has is user engagement on just a wild scale. If you count the number of minutes an Amazon shopper spends on that site relative to the number of minutes a consumer on TikTok spends, the discrepancy is enormous.

TikTok has been only really trading in commerce in China for the last two years and has become a very big platform. We're all looking for instantaneous response here in the U.S., whether it's Facebook, or TikTok, or any of these social platforms. I think it's going to take a couple of years.

On the other hand, Amazon has a huge advantage in the fundamental fulfillment architecture that they've built over the past 15 years. TikTok is starting to think about that, but it won't necessarily be their advantage in this market. Amazon has a very good understanding of customer-purchasing behavior. It is based upon decades of data and customer understanding.

WSJ: We're seeing inventory that was stuck because of the supply-chain problems finally line up at warehouses. Does that mean as a consumer I'm going to get more discounts this holiday season?

MS. GREEN: Probably. On average, inventory is up about 20% in warehouses this year over last year. And 30% or so of consumers are reportedly planning on having tighter budgets. So the mix of that does sort of seem like maybe demand is down or shifted a bit and inventory is up. Not a great place to be if you're a retailer." [1]

1. Technology (A Special Report) --- Online Retail's New Path: Two experts talk about TikTok vs. Amazon, areas of growth and more
Rana, Preetika. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 31 Oct 2022: R.5.