Small Business Advice: The Power of Social Recommendation

Small Business Advice: The Power of Social Recommendation

By Kai Fu Lee, CEO at Innovation Works

A few days ago, I had a chance to try a particular brand of frozen dessert maker, which was only available in the United States. I sent out a “tweet” in China on Sina Weibo, sharing my experience.

To my surprise, this tweet was retweeted over 100,000 times, as Chinese young people and parents showed great interest in having such a machine.  Even more surprising, within 3 hours, Taobao (China’s eBay) had hundreds of sellers, offering to buy such a machine in the US and shipping it to China for the buyer.

Even though the shipping cost was more than the machine, thousands were sold within a day (one store reported 51 sales, and there were over 100 stores that carried it).  There were also some unhappy buyers who didn’t read the instructions and got shaved ice instead, and tweeted nasty (but undeserved) gripes being misled by me.

Some observations from this: •There is still significant information asymmetry among countries, suggesting cross-border e-commerce can be very appealing.  There are many Chinese goods that Americans would find novel or unique or inexpensive, and vice versa.  One company that does this is lightinthebox.com.

•To profit from this opportunity, one needs to address high shipping and logistics cost.

•Trust the power of social e-commerce, and “trusted recommendations”.  Perhaps Facebook and Sina haven’t quite figured it out yet, but this is a goldmine waiting to be disovered.

•A sincere endorsement from a trusted person may be worth more than a paid endorsement from a celebrity.

•Everybody loves frozen desserts!

•Nobody reads instructions!

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