All Alexis Madrigal wanted was a coat. So when one popped up in a sponsored post on his Instagram feed, he was intrigued. He'd never heard of the retailer, but it billed itself as "luxury for modern gentlemen." Plus, the coat was a steal at under $100.
So Madrigal bought it. The jacket, however, turned out to be less an expression of luxury and more a lesson into how e-commerce has changed in the age of Instagram and Facebook.
In his words, what arrived in the mail "kind of looked like a carpet ... formed into a roughly coat like shape."
Madrigal wrote about his experience for The Atlantic and spoke with NPR's Scott Simon about how e-commerce is affecting the fashion industry and why entrepreneurs are able to make money without ever touching the products they advertise.
On how Madrigal's shopping experience led to him doing some digging
Well, so what I got really interested in was that when the coat showed up, it showed up in a black plastic package from China post. So I thought I was buying a coat from some brand that represented itself as kind of this modern gentleman — you know I was expecting it to have its headquarters, you know, in New York or San Francisco or Los Angeles or something, and this thing is shipped direct from a technology park in China. So I kind of started thinking, "Well, what is this brand?" And I started diving into this new class of online retailer that use a tool called Shopify, which allows anyone to kind of spin up a retail store in five minutes; sucks products in from a service called AliExpress — which is sort of like Amazon, but in China and it's dedicated sort of to the export market for Chinese and other Asian manufacturers — and allows, basically, consumers in the U.S. to take a different route into this manufacturing ecosystem, which makes so many clothes, which makes so many consumer goods in Asia.
On who uses Shopify and how they use it
Shopify says they have 500,000 merchants. The overwhelming majority of them are small- and medium-sized businesses, and some subset, although no one is totally sure exactly how large it is, are these people who do what's called dropshipping, which means that they never handle the goods that they sell. They essentially are a front end, just a way of accessing these items that are then directly shipped from their Chinese manufacturers. So in some weird way it sort of cuts out the middleman of sort of an H&M or Zara or some other fast fashion place, but it inserts this new middle person, which is a Shopify e-commerce site that took somebody five minutes to set up. And one of the people that I found doing that was this you know 17-year-old, or at least presumed, he called himself a 17-year-old, living in like suburban Dublin.
On how the business model isn't all that different from traditional companies
The way that I've thought about these Shopify stores is there undoubtedly strange because they're new, but their model is fundamentally not that different from like a big corporate enterprise. It's just that the tools have democratized the ability for people to tap into the globalized economy. And so before, it took the idea of having a supply chain and having all these people who would know factory owners in China and all these other kinds of things. That took a lot of infrastructure. What these tools have done is eliminate the need for all that infrastructure, and so now it's this alternative way into what is a real thing about our economy, which is that many, many of the goods that we all purchase are made in Asian factories and are sold to us at a very high markup from their production costs.
NPR's Isabel Dobrin produced this story for the Web.