The $290 billion e-commerce trend you’ve never heard of

World-changing trends can start anywhere in the world today.

Because the social media platforms evolved differently in Northeast Asia, e-commerce developed differently as well. And because of recent shifts in regulation and social attitudes, Western social media is going to start to look a lot more like it does in Aisa, and e-commerce trends will follow.

Today Masa Shimizu, founder of Zeals, explains the origins and structure of chat-commerce and how it might lead to a friendlier, more enjoyable, and more profitable internet.

It's a great conversation, and I think you'll enjoy it.

Show Notes

An introduction to chat commerce How to teach a support chatbot to sell What the death or retargeting means for chat commerce Why some university startups get support, mentoring, and funding but and others do not $39 M fundraise in equity and debt, and why that's becoming a popular model Why Asian social media evolved differently Why Facebook and Instagram are about to become more chat-like How Japanese VC discourage startups from going global

Links from the Founder

Everything you ever wanted to know about Zeals

Zeals on LinkedIn Coverage of Zeal's $39 M fundraise

Follow Masa on Twitter @masa_zeals Friend him on Facebook Connect on LinkedIn

Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we are going to talk about a 290 billion eCommerce trend that is sweeping through Northeast Asia, but hasn't taken off in the US or Europe. Well, at least not yet. You and I are going to sit down with Masa Shimizu, founder and CEO of Zeals. And we're going to talk about Chat Commerce. Now Masa will explain this structural reasons that this has been so popular in Japan, China, and Korea, and why it's about to take off in the West. And it's not just Masa and me saying so, Zeals just raised 39 million to fund their US expansion. So, this is a trend you need to know about. We also talk a lot about the Japanese concept of Omotenashi, which is usually translated as hospitality and yeah, kind of, I mean, that's probably the closest word we have for it in English, but there's more to it than that. It's kind of obsession and a giving of yourself honestly and wholeheartedly to make your guests comfortable and satisfied. It's kind of a satisfaction and happiness that you get from making your guests happy. So, Masa and I talk about Omotenashi, about a structural change coming to global social network platforms. How we can get more Japanese startups to go global and why the third party cookie ban means the death of retargeting and the birth of the Chat Commerce boom. But Masa tells that story much better than I can. So, let's get right to the interview.

Interview Tim: I'm sitting here with Masa Shimizu the founder and CEO of Zeals, who is a driving force behind Chat Commerce. So, thanks for sitting down with us. Masa: Thank you for reaching out. Tim: To start out with, what is Chat Commerce? Masa: Chat Commerce is next eCommerce innovations. So, on eCommerce website many people feel concerned to purchase online, especially expensive items or complex items. We can support through communication experience and we believe this is Omotenashi experience. Omotenashi is Japanese word which means hospitality. It's very exciting and helpful experience I think. Tim: So, when you're talking about Chat Commerce is this interaction over social media? Is this interaction over like chat at corporate websites? What's the main channel where this conversation is taking place? Masa: Mainly is SNS. In Japan case, line platform is most important because many people use this platform. And as a country, other channel is very important. The example, WhatsApp, Facebook Messengers, WeChat and Instagram and so on. Tim: Okay. That makes -- and its funny people coming into the Japanese market often underestimate the importance that line plays in social media in Japan. It's huge. Masa: Yeah. Yeah. Tim: So, yeah, let's walk through an example from the customer's point of view. So, would a consumer start out by just saying, you know, I'd really like a new pair of shoes. Does anyone have any advice? How does the interaction start? Masa: Start point is website or Instagram case, Instagram story, if it a post or advertisement. So, user watch advertisement and click list, typical eCommerce experience, jump website. But Chat Commerce case user watch advertisement and the click list, jump chat experience and communication and understand item and buy item from chat. Tim: Well, that makes sense because in that way it's maintaining this social network experience rather than having to transition to a eCommerce experience or a website experience. Masa: Yes. Yes. So, this Chat Commerce experience have been invented and spread from Asia market. It very unique progress I think. Tim: Later on, I really want to dig down on why this seems to be so unique to Asia, but right now, like just understanding the flow so we keep the user, the potential consumer in a social media framework, in a mindset. And are they chatting with a chatbot or are they chatting with people or is it a combination of the two? How does that work? Masa: Important questions. It's very simple on the chatbot. First timing we provide chatbot and personal chat. We provide both, but we step by step focus on chatbot experience through smart reply. This new experience we invented from now more and more companies focus on only chatbot experience. Tim: That makes sense from the consumer point of view, but you've got over 400 businesses using Zeals now. Tell me about your customers. Why are they using it? What's a typical use case? Masa: Example NTT Docomo, the biggest telecom company in Japan and Asahi Beer the top beverage company in Japan and recently Estee Lauder, Mac Cosmetic and enterprises interested in this area. Before Zeals, many enterprises focus on chatbot for customer support. So, inbound areas, FAQ and answer only, but we have opened up outbound area to make conversion through chatbot experience. Tim: So, I agree chatbots in general tend to be viewed as customer support or maybe some, I don't know, very light presales at the website type of thing. Masa: Yes. Tim: What did you do to change that into a more sales focused, commerce focused application? Masa: Important background one point is third-party cookie ban. So, retargeting advertisement from our decreasing from now retargeting marketing will be limited by performance. Tim: That's a really good point. And for our listeners who are not involved with eCommerce retargeting is when you'll visit a site and then you'll see banner ads and display ads for that site for the next two weeks, everywhere you go. And it can be a little creepy but it's very effective. Masa: Yes, or retargeting advertisement is very important for making conversion for any eCommerce customers. So, many eCommerce customers have big concern. What service say we will use about Chat Commerce? We don't use third party cookie but we can continually communicate with users through Chat Commerce. So, south party cookie bank is a big reason many company starting to use Chat Commerce. And second point line and Instagram and so on, invested a lot of money to grow this account but now those accounts cannot make actual sales only branding engagement. It's great but cannot make conversion or sales. Tim: So, if I'm understanding correctly, so one of the big advantages of Chat Commerce is that once a user initiates that conversation, they initiate that chat. You have a direct connection to them either via Facebook messenger or via line messenger. And so you don't need the retargeting and you don't need to pay Facebook to promote your post. You have that direct connection. Am I understanding it right? Masa: Yeah. Our strong point is 3 point. One point is huge conversational insight data for next revenue marketing. And the second is communication design specialist team to making great compensational experience. And the third point is Paypal performance fee business model. So, client use this with no risk. So, many case client have already line accounts or Instagram accounts and we'll connect with chat commerce. Tim: All right. I really want to dive into the overall market and the technology, but before we do that, I want to ask a little about you. So, you started Zeals back in 2014 when you were still a student, right? Masa: Yeah. Tim: Yeah. Originally you were focused on like robotics or you were doing something different. Masa: So, I established Zeals when I was a university student in 2014 and the first project was to develop a robot, but to be honest, we couldn't make this business profitable. This project needed a lot of money. We were very… Tim: Robotics is so hard. I mean… Masa: Yes, yes. Tim: Was there any one problem or it was just, you didn't know what you were doing kind of first startup? Masa: Yeah. So, I think its crazy first project. Yeah, but we ran many things through this project and we transformed robotics technology into communication technology on smartphone and chat. Tim: Yeah. So, you pivoted just a couple years ago on like 2019 to the chatbots. But before that, like when you were at university, what kind of support did you get from the university? Did they help you on your startup journey? What was that like? Masa: Yeah, definitely nothing. Tim: One of the most interesting things in Japan is the level of support that new founders get at different universities. So, at the university of Tokyo or KO or Kyoto, there's this huge amount of mentoring and funding support, but you went to a major university, right? Masa: Yeah. So, 2014, nothing and maybe Kyoto, Keio, Tokyo and so on recently more support for startups I think. They get support by university,