China’s eCommerce industry has undergone drastic change in the last few years thanks to the emergence of digital disruptors like WeChat. Trade expert Lisa Goodhand examines the changes and the way business can benefit in the future.
China – what does it look like now?
You only have a couple of minutes spare, so how do you book a restaurant for dinner, make an appointment to see a doctor, invest in your favourite stock market shares, check the latest fashions on the Paris runway and message a friend?
Easy. The answer is quite literally in the palm of your hand.
Enter WeChat, the so-called “super-app” for mobile phones that has taken China by storm, transforming the way people socialise, shop and connect.
Devotees insist it’s the very best of What’sApp, Facebook, Skype, Uber, Instagram and much more, rolled into one. The services offered by the one-stop WeChat app are almost endless.
But perhaps WeChat’s most impressive feature is a digital wallet. You don’t need to carry cash anymore or credit cards, for that matter. Spending, these days, requires little more than the swipe of a finger.
And should you decide to buy the old fashioned way – by visiting a shopping centre – don’t forget to consult the WeChat heat map, which will tell you how crowded the shops are. It’s the quirky little extras like this that have made the app so popular with users.
Consumers have embraced WeChat into every part of daily life. It’s estimated the app has more than 700 million monthly active users. While the majority of those users are in China, the app is said to be nearing domestic saturation point and its creators are pushing to gain real traction in foreign markets too.
In Sydney, 7800 kilometres from Shanghai, Chinese Australians are already using WeChat to contact with friends and family back home. The app is also finding its way into the wider community.
All of this is great for consumers but how is business coping with the WeChat juggernaut?
It’s the extraordinarily rapid rate of change that is seeing the market scramble to play catch up.
TenCent launched WeChat in 2011 as an SMS (short message service) app. Today, it’s China’s go-to app for just about everything from ordering food, posting photos, booking a hospital admission, buying cinema tickets to connecting with friends and family and much more.
All of that in just five years. And if you go back a little further, the rapid rate of change seems even more mind-boggling. My adventures in China started back in the mid-80s when shopping was practically impossible, with foreigners only permitted to make purchases using Foreign Exchange Currency (FEC). The shopping experience was limited to spending in the pricey Friendship Store and even there, the choices were not great.
Time was passed considering other more meaningful pursuits, such as learning Chinese and Tai Chi. Ah, the good old days.
A few years and a 360 degree head spin later, changes in the way Chinese consumers research a vast range of products and services and buy them, has turned the entire market upside down.
WeChat is changing the way small and medium-sized businesses attract new customers. Lots of new customers and quickly. And that’s got big business worried.
It’s a total game changer. The industry term is digital disruptor – apps that in a very short time can force established businesses to completely change the way they operate.
Online eCommerce basically gives everyone an opportunity to become an instant online store and you don’t even need a bank account to do it.
All you need is to do is register with the likes of WeChat and eCommerce is a few quick clicks away.
Cash or card? Forget it, all you need is a phone. If you don’t have that nifty little mobile phone app they call, Didi Chuxing good luck catching a cab in Shanghai, never-lone trying to pay for it.
With Didi Chuxing, passengers can hire a taxi, private car or designated driver via Smartphone. It services 300 million users across 400 Chinese cities and in August 2016, it was announced that rival Uber had agreed to sell its China operations to Didi. Analysts speculated that it was Didi’s use of WeChat that gave it the commercial edge it needed. Such is the power of these types of apps in business.
Financial institutions are nervous too. Consider this – 236 million people are outside the banking system in China already, meaning they do not have a bank account. Of these 92% have a mobile phone account and therefore access to eCommerce purchases without the need for a bank. Is this the future of business? It’s no wonder the banks are moving quickly.
Quite simply, WeChat, is causing disruption to an already challenging market and financial services sector, not to mention the regulators who don’t even know which way to look.
Cash is dead and people can no longer communicate without their mobile phones in 21st century modern China. Just ask Tencent
For consumers, WeChat offers a one-stop, fix-all solution to online web surfing, social media and eCommerce.
It’s helping them make purchases in a safe and convenient manner. In fact the likes of WeChat and its competitors have spawned their own economic buzz word. “M-Commerce” is the new short-hand description for mobile commerce.
Some analysts predict that WeChat and mobile eCommerce in general is set to supersede PC eCommence in the not so distant future.
This will make China not only the world’s largest eCommerce community, beating the USA, but it will be well on the way to becoming the largest M-Commerce community by 2018 (McKinsey).
How is WeChat helping brands grow in China?
WeChat is not only a fun app to hang out on and catch up with friends and family, it is also a powerful tool for business to help capture and engage their audience.
It provides a turnkey solution, called the business ecosystem, that can literally capture all elements of your business from marketing, customer fulfilment to eCommerce.
WeChat’s eCommerce function became popular when it tapped into China’s annual New Year festival, creating the M-Commerce Hong Bao – or red packets. Not only could WeChat users send Hong Bao containing credit to their friends and relatives, a common practice in Chinese culture, but they could also select a ‘distribute randomly’ option.
This appealed to Chinese people on so many cultural levels, it’s no wonder it was well received and boosted WeChat Commerce right up the pole for top position.
Big business is catching on fast too.
Burberry for example takes Chinese fans to their London catwalks, where they can hear the latest tips and updates from the creative team and celebrities. Hotels use WeChat virtual membership cards to provide benefits, from membership rates to member only deals, and brands such as Loreal use it to seek valuable market intelligence about their customers likes and preferences, especially when it comes to a new colour range or product.
Is WeChat or M-Commerce for that matter likely to benefit Australian business in the future?
The simple answer is yes and both are already available in Australia, although merchant uptake is not quite as speedy as it has in China.
Perhaps fraught with fewer issues of fake currency and the fact that Australian consumers have a much higher propensity towards spending money they don’t have in the bank in the form of credit, could be part of the reason.
Recent history has also shown Australia is slower than other parts of the world to adopt new technology. But once it takes hold locally, Australian businesses will be able to target Chinese shoppers directly.
WeChat and Alipay may have paved the way but the next generation of payment platform systems, like Dinpay, have already hit Australian shores.
Dinpay offers, not only access to 19 different banks in China, but also WeChat, Alipay and Unionpay, giving it much broader appeal.
Chinese shoppers in Australian stores and online, will be able to transact in the way they are accustomed to back home and also using RMB, their own currency.
In technical terms, Dinpay can be plugged into an eCommerce website, or produce QR codes on an iPad or mobile phone that allows Chinese customers to simply scan to pay.
Dinpay is also said to be on the verge of releasing its own terminal which provides options for a range of payment methods, as well as producing a QR code for scanning and a transaction which takes place in real time.
Until now, payment options have been limited to a single provider like Union Pay or Alipay for example. But Dinpay offers all the most popular options in one.
Without major expense, Australian retailers can integrate this application and start trading with China from their own business, without the need to use a third party platform. And the set up is fast – as little as two weeks.
Where it’s most likely to be of value is in opening up Australian eCommerce websites to international consumers in China, who love shopping online.
It will also be a major drawcard for Australian restaurants, tourist destinations and retail outlets, who receive regular foot traffic from Chinese customers. By making payments easy, quick, safe and accessible to customers who only have RMB, they will fast gain the edge over their competitors.
The new technology is a game changer for Australian business. China has more than 500 million eCommerce shoppers who are expected to splurge $600 billion annually by 2020.
The future of business is changing. We are destined to become a cashless society and China is leading the way. It only makes sense for Australian businesses to point their websites and cash machines in the direction of the world’s largest eCommerce society.
We finally have all the tools to really make it happen. And the rewards of tapping into a whole new customer base that numbers in the hundreds of millions? Well, the sky’s the limit.