Shopping apps that allow consumers to ‘shop like a billionaire’ have lessons to learn from Qing dynasty traders

Wu Bingjian, a Chinese merchant known as Howqua or Houqua among foreign traders, was said to be the richest man in the world in the early 19th century. He accumulated massive wealth via trade between the Qing dynasty and the rest of the world.

As a senior merchant in Canton, Wu was one of only a few authorised dealers allowed to export Chinese silk and porcelain, two sought-after commodities produced by China at the time. He was so rich that according to one tale, his silver melted into a two-mile river during a fire that burned down one of his treasure rooms.

In the long period of history that followed Wu’s age, China’s role in global trade diminished even though the power to trade with foreigners was still seen as a privilege.

At the zenith of China’s command economy era in the 1950s and 1960s, the country’s foreign trade was tightly held by a dozen state-owned trading houses. However, market reforms since the late 1970s have turned the country into the world’s factory floor, making it once again a key sourcing destination for foreign traders.

This time around it is not simply a case of vases and silk. China is now the world’s top producer of an array of products, from microwave ovens to massage chairs. According to United Nations data, China’s share of global exports rose from 0.8 per cent in 1978 to about 15 per cent in 2020.

Today, the right to trade with foreigners has been granted to all businesses. In reality, though, whether a Chinese entity can do business with the outside world is subject to a number of barriers. These include basic stumbling blocks like translation – one of Alibaba co-founder Jack Ma’s first business ventures was called Hope Translation – to customs clearance issues, with many agencies created to facilitate China’s trade.

And now digitalisation is coming to the fore. In the Silk Road E-commerce exhibition at the second global digital trade expo in Hangzhou this month, Beijing’s desire to project China’s trade power and ability to maximise profits from digitalising commerce has converged on a handful of cross-border trade apps.

Alibaba Group Holding’s AliExpress and Lazada, along with similar offerings from fast fashion retailer Shein and PDD Holdings, have touted how their services can help Chinese manufacturers access consumers across the world in a cost-effective manner. Foreign giants like Amazon have also opened their arms to local businesses. Alibaba owns the South China Morning Post.

In a break from the traditional cross-border e-commerce model where a merchant opens an online shop on a platform, an increasingly popular approach is “total custody”, where a manufacturer ships goods to designated warehouses run by the apps, with the rest of the work done by the platforms.

In other words, the apps have become “super agents”, just like Wu in his Qing dynasty days. While this process removes the direct contact small businesses have with the outside world, many are grateful, as it saves them time and trouble.

Under this approach, the apps take full control of data and logistics flows, enabling them to be more efficient and manage prices. PDD-backed app Temu has a slogan that says it allows consumers to “shop like a billionaire” by offering bargain deals such as US$2.88 winter gloves and an US$11.99 smartwatch. Meanwhile Shein is said to be preparing a big initial public offering in the US.

However, there are limits. While the apps may woo consumers by inflating “relative purchasing power”, it is questionable whether an ultra low-cost strategy can be sustainable amid a gradual uptick in China’s labour and production costs. Ultimately the apps should help China move up the development cycle, not lock it into low-cost production.

Lastly, Wu and his peers lost their edge when China was opened more widely to foreign trade. Today, China’s shopping apps face regulatory headwinds in destination countries like Indonesia, with Jakarta’s recent decision to ban live-streaming e-commerce on TikTok the first warning shot.