With contributions from Emma Lee

WeChat rolled out a series of updates last Thursday, laying bare Tencent’s ambitious plans for mini programs—to build a vast online marketplace for traders and sellers. The move puts China’s most popular social media app on a collision course with Alibaba, JD.com, and Pinduoduo in the e-commerce space.

The new changes include a customer review mechanism, tools for brand protection and shipping, as well as a consumer protection platform, among others. The features bring the these WeChat sub-applications closer to resembling an online marketplace.

“It definitely looks like WeChat is setting up features to create an online marketplace,” said James Hull, professional investor and co-host of the China Tech Investor podcast (powered by TechNode). “They’ve tried e-commerce before, so it’s safe to assume they want to get into the space,” he added.

E-commerce’s rising star

WeChat mini programs are lightweight applications that run within the super app. Users don’t need to download or upgrade them via app stores. Some 2.4 million mini programs already operate on WeChat as of August, according to a report (in Chinese) from mini program service provider Jisu App.

WeChat’s monthly active users hit 1.2 billion at the end of September, according to parent company Tencent’s third-quarter earnings report. By comparison, MAUs of Alibaba’s e-commerce apps were 693 million for the same quarter.

Online shopping transactions made up just shy of one-third of the total trade volume for WeChat mini programs that use Jisu App’s services for the first half of 2019, according to a company report.

WeChat can leverage its copious amounts of user data, its business-to-consumer ecosystem, as well as its advertising operation to build an e-commerce platform, said Hull.

“As we’ve seen with Pinduoduo, social e-commerce is powerful and it doesn’t get more ‘social’ in China than WeChat,” he said.

E-commerce-friendly features

Tencent’s goal for mini programs in 2020 is to “help developers build their own business closed-loop,” said Du Jiahui, deputy general manager of WeChat’s Open Platform, at an event keynote speech in the southern city of Guangzhou last week. Du’s team is responsible for mini-program functions. 

To get there, he announced plans to add more e-commerce friendly features to the mini program platform. They include:

  • Improving WeChat’s search function to include items sold in e-commerce mini programs in results.
  • Introducing a brand protection platform for companies to verify brands they own and help consumers to distinguish authentic items from counterfeits.
  • Rolling out a shipping solution that provides merchant services from couriers and helps customers track packages.
  • Most significantly, setting up a trade protection platform this year to unify order management in different mini programs and deal with disputes. Its purpose is to “make customers shop more safely,” according to Du.

Additionally, WeChat said it would open up mini program developers with three modules—live streaming, QR codes for goods, and technology for cameras to recognize objects—that could enhance their ability to engage with customers. 

Live stream e-commerce took off in China in 2019 and the market is worth an estimated RMB 440 billion ($83.8 billion). During last year’s Singles Day shopping event on Nov. 11, Taobao Live from Alibaba racked up sales of RMB 20 billion. The live streaming-based sales made up 7.5% of the group’s overall sales.

WeChat’s plan to develop more e-commerce and retail-friendly features is a “natural reaction” to new business models in the e-commerce sector, according to Sheryl Shen, analyst at market consulting agency ChinaSkinny. Adding live streaming “will be the standard practice to boost traffic and revenue given the sales numbers we saw from the past Singles Day,” she said.

Kickstarting Tencent’s C2C ambitions

Tencent is trying to rebalance its financial structure by growing its WeChat revenue, Shen said. The firm derives a huge chunk of revenue from gaming and was hit hard when the government froze new title approvals in 2018.

The whole consumer-to-consumer (C2C) landscape is shifting because of changes to regulatory policies, especially after the new e-commerce law came into effect in early 2019, she said.

The law requires most online vendors to gain approval from authorities before selling and was a huge blow to China’s daigou shuttle sellers. The merchants typically buy goods abroad and import them for resale online back home.

WeChat has carried out “the strictest yet” policy to crack down on personal shoppers who mainly use WeChat and other social media, Shen said. The platform “is also preparing the way for its future development in e-commerce and retail mini programs to eliminate potential competitors,” she added.

WeChat announced at last week’s event that the total transaction value from mini programs on the app exceeded RMB 800 billion in 2019, a 160% year-on-year increase.

Though the figure is a fraction of Alibaba’s fiscal year total transaction value of RMB 5.72 trillion, WeChat’s massive user base could pose a threat to the established e-commerce player, according to Hull.

“It would take some time before it could challenge Alibaba’s dominance, but all the companies already on the WeChat Open Platform and with mini programs give them a jump-start,” he said.

Writing about semiconductors and telecommunications.

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