How Wish built (and fumbled) a dollar store for the Internet

(NYTIMES) - There were unbelievable bargains on "bestdeeal9", a store hosted on e-commerce platform Wish, including a US$2,700 (S$3,800) smart TV on the market for US$1 and a gaming computer advertised for US$1.30.

But none of the offers was real, and Wish knew it.

The company, an online novelty emporium that had more than US$2 billion in sales last year by dangling hard-to-believe discounts, created "bestdeeal9" as an experiment.

Listings that had been removed for violating Wish policies were reposted on "bestdeeal9" and used in part to track whether shoppers complained when their orders never arrived. Staff working on the project repeatedly pushed executives to take down the store, arguing that it was both illegal and unethical, according to three employees familiar with the project who spoke on condition of anonymity.

More than 213,000 people made purchases from the store, according to an internal document reviewed by The New York Times, although the document did not say how many received their items.

Mr Tarek Fahmy, then the senior vice-president of engineering in charge of the project, ended it in 2020 after it operated for several months, the employees said.

Mr Fahmy, who has since left Wish, did not respond to requests for comment. Wish declined to comment on "bestdeeal9".

Several employees said "bestdeeal9" is indicative of the kind of practices - giving priority to short-term growth over customer service - that initially turned Wish into an advertising and retail behemoth but have now left it desperately trying to right itself.

Since its founding in 2010, Wish has had many of the hallmarks of a classic Silicon Valley success story: started by a young coder and his college friend, rumoured to have turned down a US$10 billion acquisition offer from Amazon and described by Recode as an app "that could be the next Walmart".

It developed a reputation as the dollar store of the Internet, shipping odd gimcracks and thingamajigs directly from vendors in China. It blitzed shoppers with viral online ads for items such as US$1 plastic tongue clamps, US$3 "leather face diapers" for cats and a US$2 handful of worms.

For a while, the company was the top advertiser on Facebook and Instagram and among the biggest on Google, spending more than US$1 billion on sales and marketing last year. The Los Angeles Lakers won the NBA championship in 2020 with the blue Wish logo on their jerseys, thanks to a multi-year marketing partnership.

The company employed 1,218 people at the end of last year; half of its six offices were in China. At the headquarters in San Francisco, there were catered lunches, a bar for happy hours and parties, and a cafeteria with floor-to-ceiling views of downtown and the Golden Gate Bridge.

Mr Peter Szulczewski, the company's former chief executive, once compared Wish's success to Mr Donald Trump's 2016 presidential election victory, explaining that both the company and the candidate had appealed to "the invisible half" of Americans who were routinely overlooked by political pundits and Silicon Valley elites.

But Wish squandered its early promise, according to interviews with nine former employees. Deceptive experiments like "bestdeeal9" drove customers away, as did low product standards and unreliable shipping.

When the rising cost of ads forced it to scale back its marketing, the company struggled to attract new shoppers. Wish is now scrambling to turn itself around.

The company declined to make its newly hired crop of executives available but said in a statement that "over the past six months, Wish has undergone a massive transformation".

"We have already seen significant traction and remain committed to executing against our priorities and building a long-term platform for growth," it said.

But for Wish, making growth the top-most priority proved to be crippling in the long run. Even with stricter quality controls on products, merchants and delivery, revenue in Wish's most recent fiscal quarter plunged 76 per cent from a year earlier, it reported on May 5. There were 27 million monthly users at the end of the first quarter, compared with 101 million a year earlier. The company went public in 2020 at US$24 a share and now trades at less than US$2.

"Companies are supposed to evolve and mature," said Mr Christian Limon, who was Wish's head of growth and acting chief marketing officer in 2016 and 2017. "The easiest way to say what happened is that what worked for it stopped working and it never evolved."

The company's founders, Mr Szulczewski and Mr Danny Zhang, had been mathematics students at the University of Waterloo and recruited their first 10 employees from the Canadian school's maths department. In an interview with his alma mater, Mr Szulczewski described Wish as "very embedded in a culture of logic".

He and Mr Zhang did not respond to requests for comment for this article.

After graduating, Mr Szulczewski became a software engineer at Google and took inspiration from the tech giant's powerful automated ad business while building his own company, Mr Limon said. But many of those ads were delivered to people who had no interest in prosthetic feet or hats shaped like roasted turkeys.

It was as if Wish were "throwing spaghetti on the wall and seeing what sticks", said associate communications professor Jennifer Grygiel at Syracuse University.

Consumers have complained to the Better Business Bureau about items that never arrived or were unrecognisable when they did.

France, which was one of Wish's largest markets, ordered search engines and mobile app stores last year to remove the company from their online listings, citing the presence of dangerous appliances and other products.

Merchants on Wish faced lawsuits from companies like Peanuts Worldwide, which owns characters from the popular comic strip, claiming trademark infringement and counterfeiting.

Still, Wish, which is run by a parent company called ContextLogic, did well early in the coronavirus pandemic, as stay-at-home mandates stifled competition from physical retailers. But last year, as shoppers were venturing out more and becoming less engaged on Wish, digital advertising was also becoming more expensive, causing the company to scale back its spending. (It said it planned to pick up the pace this summer.)

Four employees said Wish's long delivery times grew even lengthier during the pandemic, amid supply chain disruptions. Without informing customers, the company began to extend its delivery deadline on orders that were running late to avoid having to pay out refunds, the employees said.

One internal document cited an example of a customer who waited for a missing order for more than three months before a request for a refund would be honoured.

Wish has recently announced more accountability measures for merchants. Existing sellers will be evaluated on metrics like customer reviews, with perks like greater exposure for top performers. New merchants (which the company said now include more sellers from outside China) must qualify to join.

Last winter, Wish hired Mr Vijay Talwar, a former Foot Locker and Nike executive, as CEO after Mr Szulczewski stepped down.

Employees said Mr Szulczewski, already an aloof figure in the office, seemed to have all but disappeared after the initial public offering. Several employees said they worked up to 18-hour days during the pandemic while Mr Szulczewski, whose US$15.3 million mansion in Bel Air overlooks an estate owned by media mogul Rupert Murdoch, posted topless selfies and photos of himself hanging out with figures like DJ Steve Aoki.

Wish and Mr Szulczewski did not comment.

However, many see reason to hope: Mr Talwar came into the office every morning early in his tenure to walk the halls and chat with people. This year, to alleviate burnout among employees, Wish began offering one day off each month as a "global refresh day". The company has also been responding to negative comments on Glassdoor, an online forum for anonymous reviews of employers, with promises to do better.

"We are going through a lot of new growth," the company wrote under one review, "and a great deal of change."