China’s WeChat joins retail and mobile payments with social media

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While many U.S. consumers and retail executives haven’t even heard of WeChat, the multipurpose app is taking China by storm. And with built-in mobile payment capabilities, it is radically transforming retail on a scale unlike anything seen in the West.

Experts say the app’s rise to prominence in China has been driven by several factors, including government influence and leapfrog tech adoption by Chinese consumers. WeChat is now one of the most visited and used social platforms in the world: 90 percent of its 1 billion active monthly users visit the app daily, and an estimated 80 percent use the app’s mobile payment function. But what really makes WeChat unique is that it enables consumers to engage in dozens of activities within the app.

“It’s the equivalent of the operating system of the Chinese smartphone. You spend all of your time in it — you do everything on it,” says Jefferey Townson, Chinese consumer expert and author of “The 1 Hour China Book.”

From the consumer’s point of view, the greatest benefit of the do-everything platform is they don’t have to juggle dozens of apps. WeChat puts everything from social media and transportation to retail and banking in one platform, enabling consumers to message friends, play games, book a medical appointment, access bank accounts and make purchases without having to switch apps.

WeChat users can also engage with state-run agencies, and last December state-run Xinhua Media Co. reported the app will soon become the country’s electronic ID system.

It’s a “super app that can do pretty much everything,” says Michelle Evans, head of digital consumer research at Euromonitor International Inc. “It’s all about bringing together this connective web of services, and it touches all aspects of consumers’ lives, anywhere from communication to finance to retail to social.”

Rob Garf, vice president of industry strategy and insights at Salesforce Commerce Cloud, has been tracking WeChat’s impact on the digital experience. It’s having a “shining moment” in China because it fits squarely in the evolution of where commerce is happening, Garf says.

“It is the remote control of their daily lives,” he says, “and so it’s moved from a messaging platform to an entire closed-loop platform where consumers are scheduling dry cleaning, ordering goods, doing their banking, buying merchandise, all within the context of their social sphere.”

A perfect storm for development

WeChat rose to prominence in China in a relatively short time, and its adoption, especially in retail and mobile payments, has happened far faster than anything comparable in the United States. Unlike social media sites in the United States, WeChat was almost destined for app dominance due to China’s cultural development and political environment. The app was released in 2011 and originally started as a project at the Tencent Guangzhou Research and Project Center with subsidies and support from the Chinese government. Its rise to market dominance was also partly enabled by the government’s elimination of the competition — Beijing bans Facebook Messenger, along with WhatsApp and the Korean-owned Line app.

According to the 2018 WeChat Impact Report by WalktheChat, the app now makes up 34 percent of all mobile traffic in China. That’s more than double Facebook’s hold on 14 percent of all mobile traffic in North America. Consumers aren’t just using the app, they’re paying with it at an astonishing level: More than 97 percent of users under age 18, and more than 46 percent of users over age 60, have used WeChat payment. Adoption of payments across all age groups has doubled in the past two years, with the most popular payment applications being at supermarkets, convenience stores, online shopping, for food, travel and entertainment.

This is quite a contrast from the United States, where mobile payment adoption has been struggling to gain ground for years. A Federal Reserve Survey found many U.S. consumers see little benefit in making in-store mobile payments; 80 percent said it’s “easier to pay with a card.”

Chinese consumers have also taken to mobile payments faster because they haven’t been bound by legacy infrastructure, says Jonathan Cheng, principal in Bain & Company’s Consumer Products and Retail practices.

Because many consumers never had landlines, or even credit cards, smartphones and the internet opened the doors to mobility and digital payments all at once. “China didn’t have the legacy infrastructures in place so they’re able to leapfrog a lot of the old, last-generation infrastructure then into the next generation of innovation,” Cheng says.

Rolling into retail

WeChat’s value for consumers is that everything can be done so easily within the app, Cheng says. For example, many McDonald’s and KFCs in China are WeChat-enabled, allowing consumers to order, press pay, scan their fingerprint then pick it up in the store. “You can scan it. You can pay. You get multiple different customer journeys but all within the app,” Cheng says.

WeChat has also made it simple for retailers to engage consumers by easily and quickly creating their own “mini-apps” directly on the platform, rather than through iTunes or Android. Those apps can then be seamlessly linked to their social media within WeChat and to their payment capabilities without requiring new registration, passwords and usernames.

According to the WeChat Impact Report, business users created more than 580,000 mini-apps by the end of 2017, with more than 170 million daily active users using mini-apps in some capacity. Yongui Superstores saw the digitization of its users skyrocket from 30 percent to 87 percent after adopting WeChat mini-apps.

JD.com, one of the largest ecommerce retailers in China, implemented a new shopping function with WeChat in June that enables people to shop within WeChat with just a few taps. Lacoste also opened a WeChat store to break down what it said was the barrier between inspiration and purchase. Walmart is using a WeChat mini-app in China and launched scan-and-go in a strategic alliance with Tencent. And Intime Retail, one of the leading department store and mall operators in China, allows users to pay through the app.

Such in-app WeChat stores don’t need to be complex or visually complicated. They only need to be where their potential customers may be watching, Garf says. “They’re not necessarily looking for that extremely intimate and experiential shopping environment in WeChat,” he says. “They’re just looking to have it embedded in the thing they use multiple hours per day.”

The simplicity and ease of mobile payment has become a highly disruptive force in China’s retail economy, says Deborah Weinswig, CEO and founder of Coresight Research. It helps bridge the gap between social media and ecommerce through engagement with customers and has created a new way of shopping in stores by enabling consumers to use the app to scan barcodes.

From there, it lists the Chinese ecommerce sites that have the products along with mobile payment options that immediately enable them to pay online or in the store. Retailers can also engage customers with news, promotions and loyalty programs, creating near real-time marketing and sales opportunities wherever consumers are.

Looking to the United States

China currently leads the world in mobile payment adoption. More than three-quarters of Chinese consumers made a mobile point-of-sale purchase in 2017, compared with a quarter of U.S. consumers, according to research firm eMarketer. Nearly 62 percent of all mobile transactions last year were performed by Chinese consumers; within China itself, WeChat constituted 40 percent of the mobile pay market in the third quarter of 2017, according to data from Analysys International.

Unlike in China where mobile payments are ubiquitous, they are not as widespread in the United States due to “missteps by early vendors and market limitations,” Weinswig says. The U.S. mobile pay market is not only fragmented, it’s often limited and offers consumers little incentive to use it. While Apple Pay is consumer-friendly and easy to use, the hardware is a closed system and only recent model iPhones have the necessary NFC chip to make it work; it is also limited by Apple’s market share.
Retailers such as Starbucks and Walmart are experiencing success with their own mobile wallets, but it’s unlikely consumers will want to juggle dozens of separate apps for each retailer they visit.

Retailers could take a page or two from WeChat to learn how they might cultivate or encourage more mobile payments. They would first have to put engagement and retention at the forefront of any online platform, Weinswig says.

Even as it reaches its peak of user adoption, WeChat continues to expand because it’s relevant and offers value. Daily average users spend 82 minutes per day on WeChat, while the total number of messages sent per day has grown 67 percent year over year. The app has also created an enviable environment for future monetization through sophisticated advertising.

“It’s an enabler of disruptive ecommerce, as it bridges the gap between social marketing and actual engagement with customers. There is an increasing trend for traditional brands to adopt WeChat as part of their marketing platform,” Weinswig says. “WeChat can be the key to access China, and potentially the first step to establishing an online-to-offline channel.

WeChat is starting to enter the U.S. market, but it’s mainly being used to target Chinese consumers, Garf says. Luxury brands in certain cities, including New York, Boston, Los Angeles and San Francisco, where Chinese consumers come for vacation and want to buy U.S. brands, are starting to offer WeChat Pay. Lacoste and Burberry have been early adopters, and iFresh Inc., a leading Asian American grocery supermarket chain and online grocer, announced in August it would accept WeChat Pay in its
U.S stores.

“It’s not a question of if, but when the brands make it easier for consumers to buy, and when consumers see the value of integrating the commerce experience within their social experience,” Garf says.

Craig Guillot is based in New Orleans and writes about retail, real estate, business and personal finance. Read more of his work at www.craigdguillot.com.

Footage Vector Photo/Shutterstock.com

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