China’s Babytree Makes The Case For Contextual Commerce

For most people, parenting is an all-or-nothing endeavor, a constant mindset and lifestyle, the lens through which the rest of life is filtered, and a bond that can connect fathers and mothers across neighborhoods, states, time zones and countries (thanks in large part to the internet, of course). An IPO from an Alibaba-backed online platform is fueled by those connections, and also serves as an example of the rise of contextual commerce, even if that debut has not gone as expected.

Here’s the news: Beijing-based Babytree, which was founded in 2007 and “operates an online platform for parents to exchange know-how, shop for baby goods and purchase early education services,” recently launched its IPO on the Hong Kong Stock Exchange. Babytree’s stock debuted at HK$6.91 (about 88 U.S. cents), compared to its IPO prices of HK$6.80. That reportedly put the company’s valuation at about U.S. $1.47 billion, below the figure in May of $2.19 billion, when China-based Alibaba invested $214 million in the company. Alibaba owns a 9.9 percent stake in Babytree.

News reports blame a weak market for the less-than-expected IPO success. But that’s not the only part of this story. The larger part — perhaps, even, the bigger trend — is what Babytree’s aim to gain more capital, revenue and influence means for contextual commerce.

Contextual Commerce

You might know what the phrase means, but in case you do not, here is a short refresher, along with data from PYMNTS that provides detail of this growing online retail trend.

Contextual commerce is a retail practice centered around discovery. A potential consumer might visit a social media site, or a site devoted to, say, home cooking, with the main goal of reading content, learning something or digitally hanging out with like-minded people. That person may have only a vague intention of buying something — or no intention at all — but follows an impulse and buys an item tied to the content and the original desire for discovery.

Contextual commerce is hardly rare. According to research from the Contextual Commerce Report developed by PYMNTS and Braintree, 48 percent of consumers have tried that shopping experience at least once. And those who have tried contextual commerce generally are seeking efficiency, as 59 percent of consumers who have tried it report using the online retail method for a faster buying experience.

It’s easy to understand how an online platform such as Babytree could enable contextual commerce. According to a report, the “parenting portal reached an average of 175 million monthly active users between July and September.” And those users, one assumes, all have a common goal: to learn about parenting. The report went on to say that “Babytree generates most of its revenues from advertising fees and eCommerce transactions, but [the company’s co-founder] said recently that paid content is one of the company’s fastest-growing segments.” In the first half of 2018, Babytree posted a 12 percent year-over-year revenue increase to nearly $59 million.

Trend Growth

Contextual commerce has gained more attention in recent months. For instance, when Netflix in late summer named Disney veteran Christie Fleischer as the company’s head of its global products team, a new position, the move was easy to interpret as one that would encourage contextual commerce.

She was tasked with overseeing “retail and licensee partnerships, publishing, interactive games, merchandising and experiential events.” Fleischer’s job involves “developing the consumer products portfolio across all categories for Netflix original series and films.”

At Disney, her most recent job was head of merchandise for parks, experiences and consumer products. The work involved product development and strategy, licensing, Disney stores, sourcing and other areas. A job description posted prior to her hiring described “books, comics, gaming toys, collectibles, soundtracks and apparel” as possible licensing opportunities. Merchandising, after all, is not only a solid way to make more money off content, but also a way to drum up interest in the original property.

Social, as one can imagine, is a big part of contextual commerce. The Contextual Commerce Index, in fact, found that 81 percent of consumers who have engaged in contextual commerce say they make at least some purchases via social media. And contextual commerce apparently pleases its biggest fans. The consumers spending the most are the happiest, according to that PYMNTS Index: 82 percent of shoppers who spend more than $50 per purchase reported having a positive experience, compared to 24 percent of those who spent less than $25.

So the story with Babytree can plausibly be described as this: Sure, the IPO did not meet expectations, but that recent activity shows that contextual commerce stands as an appealing prospect for retailers and eCommerce operators.