When I talk to executives across Europe and the US about digital transformation in retail, I often sense a growing anxiety. The old ways of doing business no longer work. Customer acquisition costs keep rising relentlessly, and new players from China are bringing change and no one knows where it will end. Many companies have spent the last decade optimizing the same metrics—traffic, conversion, and sales—only to find themselves facing mounting costs and unprecedented competition. The reality is that incremental optimization has reached its limits.

In the Chinese market, by contrast, change is nothing new—it’s a constant fact of life. Dominant players like Alibaba face relentless pressure from completely new entrants like Douyin (TikTok in China) or PDD (parent company of TEMU). Constantly finding new ways to do business is the norm, not the exception. This environment has made companies remarkably creative with pricing, turning it from a tactical lever into a powerful tool for marketing and customer acquisition. 

This was the topic of my recent talk at the Dynamic Pricing Community in Munich, where I presented ideas from my Re-Thinking Digital workshop series—a monthly forum where we learn from China’s digital innovation and explore the forces reshaping digital commerce. In this article, I want to highlight the key insights and explain why Western retailers and brands must pay close attention to these shifts—and how they can best respond.

Stagnation in the West vs. reinvention in China

Let’s start with the problem. For more than ten years, Western e-commerce has followed the same playbook: pay for reach, drive traffic, optimize conversions, and hope the numbers add up. The challenge? Customer acquisition costs keep rising, often exceeding what the ROI allows—making the old ways unprofitable.

The cost pressure often comes from players like SHEIN and TEMU. They’re buying up all the advertising inventory, driving up prices and everyone’s asking: how could this make sense? The answer: they’re following a completely different logic. They’re not buying reach to turn it directly into sales. Instead, they’re building lasting relationships that they monetize repeatedly over time. This means they can afford higher customer acquisition costs—unlike Western players who often have to buy every customer again and again for each purchase.

Pricing as a media investment

One of the most instructive lessons from China is how companies reframe pricing strategy. In the West, we often perceive discounts as a sign of weakness or desperation. In China, subsidized prices are viewed as a form of media investment—a strategic reallocation of marketing budgets.

Companies like TEMU take the money that Western brands typically spend on advertising platforms and redirect it. Instead of paying Meta or Google for ad placements, they pass these funds directly to customers through dramatically lower prices. (They still buy substantial amounts of advertising, of course—but the price subsidies represent an additional, parallel investment.)

Here’s the crucial distinction: these cheaper prices, often just on selected products, aren’t designed to drive immediate sales. They’re designed to pull customers in, generate word-of-mouth buzz, and ultimately create reach. That reach then drives app installations and repeat visits. Over time, returning customers refinance the initial subsidies through their ongoing purchases. It’s a patient, ecosystem-building approach rather than a transactional one.

In this model, prices don’t just drive sales; they buy reach. Reach, in turn, becomes the foundation for customer acquisition, engagement, and loyalty. It’s a fundamental redefinition of what pricing can achieve.

The AI-driven supply chain

Another key difference lies in how products are developed and scaled. Traditional fashion retail is still primarily driven by forecasts and intuition. Merchants place their bets months in advance, often resulting in overproduction of 30–40 percent. It’s wasteful and environmentally damaging.

SHEIN turned this model on its head. The company launches thousands of new designs every single day. These aren’t hopeful bets—they’re live market tests. SHEIN analyzes customer engagement data from the app to identify which designs resonate with users. Only those that show real customer interest get produced at a large scale. The result is a data-driven, AI-powered system replacing the guesswork of the traditional model.

SHEIN uses the cost advantages from eliminating overproduction to offer aggressively low prices. But here’s an intriguing insight: the same system could work in reverse. Instead of mass-market products at rock-bottom prices, this technology could enable highly individualized products at premium prices. The infrastructure is flexible—it’s the strategic choice that differs.

Shopatainment: Where shopping meets entertainment

When Western e-commerce emerged 20+ years ago, it was built around a simple promise: the easy and comfortable way to buy things without going to physical stores. That value proposition still makes sense. The problem is, we never evolved beyond it. We optimized for convenience but never expanded to address other customer motives.

In China, the industry took a different path. They added a second dimension: the idea that shopping online can be exciting and entertaining. This isn’t just a superficial change—it represents a paradigm shift in the goals and KPIs of the entire business.

The fact that we’re still stuck in the “e-commerce is there to be easy” paradigm means we mostly think in terms of search-driven commerce. The customer knows what they need, and the store helps fulfill that need. It’s a use case like Google: find what you’re looking for.

When TikTok Shop launched, many Western observers didn’t know what to make of it. The search-driven thinking explains the confusion. TikTok Shop isn’t about finding what you want—it’s about finding out what you might want. Just as TikTok isn’t about searching for specific videos but about being entertained by a feed, TikTok Shop is about browsing and discovery.

Here lies TikTok Shop’s fundamental advantage: people are there to look at stuff that might be interesting. They’re not on a mission to buy something specific. The platform creates opportunities to introduce products they didn’t even know they wanted. It’s true discovery-driven e-commerce.

And TikTok Shop has another significant advantage. One that’s new to Western social media but standard in China: seamless in-app checkout. For the first time, a major Western social platform makes impulse buying effortless. No leaving the app, no friction, no abandoned carts.

This also has implications for pricing strategy: attractive prices fuel impulse purchases, and in-app checkout removes the barriers that would normally kill them. Used strategically, this makes TikTok Shop the perfect channel for discovery-driven transactions—a radically different model from search-driven e-commerce.

Yet even as discovery-driven commerce opens new possibilities, it exposes a deeper problem in Western retail.

From sponsored ads to sponsored relationships

Another consequence of the singular focus on optimizing the reach-to-sales process is the neglect of real, long-term relationships with customers and fans. For too long, many Western companies have been chasing ROI at the expense of customer experience and loyalty. Everything remains efficient, but it’s no longer truly effective. In many cases, this has turned yesterday’s love brands into today’s burnout brands.

Now they face a huge challenge: How can brands rebuild this lost trust on online retail channels that are fundamentally built only for easy, quick sales processes?

Physical retail has an answer. Mono-brand stores serve as brand touchpoints that let customers experience a brand beyond just buying products. They create atmosphere, tell stories, and build emotional connections. Why doesn’t something like this exist for online retail?

Actually, it does—in China. TMall from Alibaba pioneered the concept of online flagship stores. These aren’t just product listings with a logo slapped on top. They’re immersive brand experiences that combine commerce with content: live video, exclusive launches, and interactive features. Brands are given sophisticated tools not just to sell but to build lasting relationships.

It represents a fundamentally different approach to retail media: from sponsored ads to sponsored relationships. In this model, pricing isn’t divorced from brand building—it’s an integral part of it. Attractive prices can be part of the brand experience, a way to invite customers into the ecosystem and keep them engaged over time.

Three lessons for Western retailers

So, what can we learn from all this? Here are three ideas I believe are critical for the future of Western retail:

  1. Build relationships alongside transactions
    Keep optimizing your sales processes, but don’t stop there. Layer on ecosystem thinking and long-term relationship building. The goal isn’t to choose between immediate sales and lasting connections—it’s to do both. Create value that extends beyond individual purchases.

  2. Treat pricing as a marketing investment
    Consider using strategic pricing to buy reach, not just drive sales. Subsidized prices can generate buzz, pull customers into your ecosystem, and create the basis for the long-term engagement mentioned above. Think of pricing as media spend, not just margin management.

  3. Create experiences, not just storefronts
    Move beyond search-driven, transactional e-commerce. Build immersive brand experiences—whether through discovery-driven platforms, online flagship stores, or community features—that give customers reasons to engage beyond the checkout button.

The meta-lesson: The willingness to learn

Ultimately, the most significant lesson from China isn’t a single tactic or tool. It’s the willingness to constantly question, experiment, and reinvent. Chinese companies move fast not because they have better capabilities, but because they’re willing to challenge fundamental assumptions at a pace that feels uncomfortable in the West.

Western retail should adapt and learn how to test, to adapt, to question our assumptions. If we can cultivate that mindset, we won’t just be reacting to disruption from China. We’ll be creating our own.

China’s e-commerce shows how this is true for pricing: it can be a very powerful strategic tool in e-commerce. It’s no longer a back-office function relegated to margin management—it can be a lever for customer acquisition, brand building, and creating lasting relationships. When TEMU redirects advertising budgets into subsidized prices, when TikTok Shop sellers use attractive pricing to fuel impulse discovery—these aren’t tactical pricing decisions. They’re strategic choices that reshape business models. The question for Western retail isn’t whether pricing matters—it’s whether we’re willing to reimagine what pricing can achieve.

About the author

Björn Ognibeni is based in Hamburg and has been advising companies on the opportunities of digital transformation for over 20 years – with a focus on strategy, product development, marketing, and sales. His clients include companies such as Deutsche Telekom and Volkswagen, as well as numerous consultancies and agencies.

His approach: not just talking about trends, but acting as a “Practical Visionary” to develop concrete ways of turning emerging technologies and market shifts into real impact.

A key focus is on digital innovation from China. With the online think tank ChinaBriefs.io, which he founded, he helps Western companies gain new perspectives on what is already reality in China – and how to translate those insights into actionable strategies.

He also teaches at the Hamburg School of Business Administration (HSBA) and at the Marketing Center of the University of Münster, where he is co-founder and strategic director of the “XR Lab.”

To explore Björn’s Re-Thinking Digital approach further, visit his website.