In China, e-commerce is an industry dominated by seemingly impenetrable internet giants.
With e-commerce platforms like Taobao and JD.com, it’s hard to believe there is any room left for smaller players. Each of the largest internet giants Alibaba, Baidu and Tencent, in turn each own a stake in the booming group-buying industry.
These multi-billion RMB platforms rarely leave enough light on the forest floor for smaller entities to grow, but a boom in the Micro-Shop market indicates that’s exactly what’s happening.
For new sellers, the giant platforms pose a daunting challenge. Often getting exposure in a popular category on Taobao can be a very expensive task. Budding new stores will have to fork out for advertising and placement ads if they want to find their way to the top of the search list, they then have to deal with the specific payment requirements of each platform. Given that most of the giant platforms are backed by companies that also run payments brands, such as WeChat payments and Alipay, they often pigeonhole sellers into one method, which is challenging for a cross-platform seller.
The ruthless competition between giants often creates crippling barriers for new sellers. Alibaba has disabled a function allowing webpages from its marketplaces being displayed on Tencent’s social platform WeChat after the two began to compete directly.
While the large platforms keep pricing low for consumers, sellers can often feel gridlocked by competition and platform-specific features. It’s leading to a rise in micro-stores, smaller platforms that are unaffiliated with the payment companies, meaning they allow a wider range of payment options along with a less competitive initial market space. Since 2013 a number of mobile social shopping startups have emerged to capitalize on the complex needs of small e-commerce businesses. A few have managed to snag venture capital and set themselves apart with both good design and the right combination of products.
The Rise Of The Micro Market
Alibaba Group, whose online retail marketplaces have been dominating China’s e-commerce market for years, were understandably nervous after WeChat, the mobile messaging app of the Chinese social networking giant Tencent, added mobile payment capability, a public account system for businesses to interact with consumers, and then a mobile shop system in 2014.
In the past year or so, an increasing number of WeChat users have began running what they call “micro-shops” as a part-time job, sharing what they sell onto Moments, the content sharing platform within WeChat, as well as directly to their WeChat contacts. Goods they sell range from regional food specialties to cosmetics. A survey conducted earlier this year by the Beijing News and local research firm Top Think Tank shows that 85% of those surveyed saw their WeChat contacts selling beauty products such as facial masks.
But not all items shared on WeChat are from its own mobile shop platform. A number of mobile shopping startups, “Taobao for mobile” wannabes, have emerged in China, and many existing businesses also want to leverage the popularity of mobile social shopping.
Suning, the leading Chinese consumer electronics store chain, developed an micro-store system to encourage its own employees to set up storefronts on it. Suning pays employees bonuses for extra sales generated through the platform. About 50% of Suning employees signed up before 2015 Spring Festival and over 200,000 orders were placed through item pages shared to their social circles during the seven-day holiday (source in Chinese). Gome, another consumer electronics retailer, has developed a similar program.
BAT Looking To Tap Into the Micro-Market
Tencent has led a massive funding round into Weidian. Weidian launched its mobile shop marketplace app in early 2014. It has released APIs for merchants or business-facing developers to build sophisticated features for stores.
Another well-publized mobile shop system is Youzan, formerly Koudaitong. The company started as a service enabling businesses sell goods through their WeChat public accounts and manage customers before the launch of its WeChat-based mobile shop system.
Both Weidian and Youzan have begun monetizing their platforms with marketing programs.
It is probable that mobile micro-shops will outnumber Taobao stores before long. Tencent-backed Weidian claims its platform had had 29 million registered sellers as of the first quarter of 2015. (source in Chinese) Though we believe the number is exaggeratedas many Chinese startups do so, it’s possible the total number of registered sellers in the micro-shop market is close to or has surpassed Taobao’s ten million.
It’s too early to predict who will be the Taobao on the mobile web, as the mobile market is quite different. The screen sizes of mobile devices affect advertising displays, which is one of Alibaba’s major revenue sources. Increasingly, more purchases will come from social sharing, platforms should consider how to leverage this trend.
Wang Ke, CEO of Weidian, said in an interview that they didn’t ask Tencent for any fixed placements on WeChat, as mobile micro-shops depend more on shares and forwards on several social networks (source in Chinese). As social sharing increasingly becomes a dominant force in e-retail, only time will tell which platforms will come out on top.