China’s tech giants are moving rapidly to take advantage of opportunities created by the evolving e-commerce sector. No matter whether they call it new retail, smart retail, or boundless retail, the underlying driver is the same—the merging of online and offline commerce via new technologies.
Tencent is a major advocate of the trend. They first ventured into the realm of retail in late 2017, then set up the dedicated Tencent Smart Retail unit in March of last year to lead the company’s charge and focus resources.
After a year and a half of development, Tencent Smart Retail now offers services to around 100 clients spanning department stores and supermarket chains, as well as partners selling apparel, cosmetics, mom-and-baby products, and commercial property. In all, the services have contributed to sales growth of up to 10%, Tencent Smart Retail director Houfer Chen told TechNode in an interview.
“Out of the total, we conduct in-depth cooperation with over 20 clients, most of which are Top 10 players in their areas,” he said. The other partners cooperating with Tencent are part of a booster program launched in May. The program provides consulting services to more than 200 enterprises, while offering training to 1,000 smart retail professionals.
Tencent dubbed the smart retail initiative a “CEO project” to emphasize that most fundamental changes must be made on the part of offline retailers and brands to effect a real transformation.
“Although most companies we talked to are very positive about the prospect of smart retail, one challenge we’ve faced over the past year is that smart retail can’t be achieved by the involvement of a single unit or several executives. It requires cross-department cooperation or even structural adjustments,” said Chen.
Tencent’s smart retail business forms an intrinsic part of a recent expansion beyond its traditional strengths in customer-facing services, such as social networking and gaming, to more business and industry-focused customers.
In Tencent’s shift to B2B services, priority will be given to clients with significant consumer-focused elements, such as retail. This means those that could gain greater business benefits from existing Tencent products such as mini-programs and WeChat, said Dowson Tong, head of Tencent’s Cloud & Smart Industries Business Group (CSIG) and the company’s senior vice president, in a previous interview with TechNode.
Launched last year in September as part of the company’s reorganization, the CSIG unit integrates the company’s cloud business and enterprise-facing services. Shifting to business-facing services is a common theme underlying recent moves among China’s tech giants. For example, Alibaba launched a commercial operating system in January this year, as part of its A100 Strategic Partnership program to help enterprises realize digital transformation across the Alibaba ecosystem.
The process of connecting different resources within companies might be slow due to various uncertainties, while some related problems are unable to be solved with technical solutions, Houfer Chen noted.
Tencent’s smart retail service remains in its early stages of commercialization, according to Chen. “Most of our current solutions are customized. As we cooperate with more partners and gain a better understanding of their demands, we plan to launch standardized solutions very soon either in the form of SAAS or infrastructure services,” he said.
WeChat-centric strategy
Tencent’s smart retail concept is very much integrated with the company’s ubiquitous app WeChat, which serves as the starting point for enterprise clients to interact with individual consumers.
Clients from different industries have to contend with different pain points when addressing the digitalization of their existing businesses. For example, supermarkets such as Walmart want to make life easier for their in-store shoppers by reducing wait times at the checkout. Tencent’s solutions allow Walmart customers to use WeChat mini-programs to scan the barcode on items in store and to complete purchases on their phone using WeChat Pay.
In addition to improving in-store experiences, apparel brands also need to build their community and engage with customers. WeChat mini-program flagship stores bring the online and offline shopping experiences together by offering offline pick-up and various after-sales services.
Tencent’s smart retail encourages consumers to explore new modes of shopping. Store associates can connect with regular customers via WeChat to promote new products.
“By using WeChat mini programs, brands can create shareable fashion tips for their shopping guides to share with their regular customers,” said Chen. Brands like Jack & Jones and Vero Moda sell a large portion of products outside of the shops’ business hours, he explained. Chen oversees Tencent’s cooperation with these brands, as well as the cosmetics chain Sephora and baby products retailer Kidswant.
Around one-fifth of the RMB 45 million in monthly sales of the apparel brands Jack & Jones, Selected, and Bestseller Outlets is generated via WeMall, the official mini-program, according to Tencent.
Leveraging the social nature of WeChat, the company also uses social media campaigns and games to increase customer engagement and brand recognition.
“Mini-programs are not only an ecosystem for sales, but also for different types of engagement,” Chen said. “It’s hard to navigate the customer decision-making journey, but what you need to do is spread out to different touch points that you can engage with consumers and collect all the information back to one aggregated point, which can be one WeChat mini-program.”
Enabling smart retail
For its smart retail business, Tencent is taking a hands-off approach and limiting its role to that of an “enabler and infrastructure provider” for companies using its services.
Company founder Pony Ma once explained that Tencent’s goal is to enable digital versions of existing physical stores and improve customer experience by upgrading technological capabilities via partnerships. “For us, there is no conflict of interest. We are just like a provider of utilities, such as water or electricity,” Ma told local media.
Chen echoed Ma’s idea, saying, “We are eager to work with more retailers. We know retailing is a difficult business to do and it is not what we are good at. So we decided to adopt a more open business model to assist the development of different enterprises and industries.”
Tencent’s hands-off approach to retail is quite different from its multifaceted rival Alibaba, which owns retail prototypes like Freshippo and has inked a flurry of stake-controlling deals in offline stores like Intime Retail and RT-Mart.
It’s interesting to note that the different approaches taken by Tencent and Alibaba for smart retail mirror their investment approaches. While Alibaba tends to take large or controlling shares and get deeply involved in the operations of these companies, Tencent takes a milder approach by only buying up minor stakes.