WeChat opens door to small merchants

Tencent aims to monetize app's huge user base via e-commerce

By lowering the threshold to set up stores in China's popular mobile messaging application WeChat, Tencent Holdings Ltd, the maker of the app, is pushing further into mobile e-commerce.

The move could represent a threat to the country's leading online retailer, Alibaba Group Holding Ltd.

Shenzhen-based Tencent announced at the end of May that it will allow small and medium-sized merchants to open stores inside WeChat, a messaging app that claims more than 500 million users in China.

The announcement marks Tencent's latest move into mobile e-commerce. The decision allows any merchant with an official account on WeChat to have a unified Web-based online dashboard where they can easily create and manage a store inside the messaging app.

WeChat already has millions of official accounts. But monetizing that group, and the giant user base, is critical to Tencent as well as WeChat, said Lu Zhenwang, an independent e-commerce expert and chief executive officer of Shanghai-based Wanqing Consultancy.

He said it's clear that Tencent wants to make the best use of WeChat in boosting its e-commerce and online-to-offline business. Through investing in JD.com and giving China's second-largest e-commerce player access to WeChat, Tencent has become a strong competitor in business-to-customer e-commerce in the mobile era.

The move to launch the WeChat store feature is an attempt at entering customer-to-customer e-commerce, said analysts.

"Compared with Alibaba's two major e-commerce platforms, Taobao and Tmall, the cost to set up a store inside WeChat is next to zero, which is expected to get the attention of small merchants," Lu said.

Since WeChat integrated payment functions into the app last August, many merchants have turned to third-party developers to open stores inside WeChat. The new WeChat store feature allows such vendors to start doing business with no technical threshold, according to a statement from WeChat.

Ehaoyao.com, a leading pharmaceutical online retailer, is one of the companies that has opened a shop on WeChat.

Zhang Dingding, marketing director of ehaoyao.com, said that the new WeChat store feature is very useful for small businesses, which are weak in technology.

"A small team of one or two people can manage the operation and maintenance of the store," Zhang said. He declined to reveal sales figures for the company's WeChat store, but he said that the performance of the store has been "beyond expectations".

Analysts said it will be a challenge for Tencent to truly transform the huge traffic of WeChat into great sales numbers for stores.

Lu Jingyu, an analyst with the Beijing-based iResearch Consulting Group, said that Mobile Taobao accounts for about 75 percent of China's mobile shopping market. "For WeChat stores to grab some serious market share from Taobao takes time, and it is not something that can be achieved within one or two years," she said.

She said that Taobao's mobile shopping is a very open system, in which customers can easily search for the products they want.

However, the WeChat store is a closed system, where people can only buy from the official accounts they follow. "So the selection on the WeChat store is relatively limited.

"Tencent is clearly testing the waters in mobile e-commerce via the WeChat store. It is likely that the messaging app will launch new features in the future to optimize its shopping function," she said.