20 January 2019

Tencent’s radical brick-and-mortar approach to e-commerce

Tech giant Tencent (00700.HK) has paid a premium to become a strategic investor in one of the nation’s biggest integrated logistics and trade centers for industrial materials — China South City Holdings (01668.HK). To observers, it’s Tencent’s way of throwing down the challenge to Alibaba, king of the e-commerce heap.

The deal will clearly aid Tencent’s development of online and offline trade services, including e-commerce, outlet services for branded goods, O2O retail business, online payments and warehousing and logistics arrangements. Still, Tencent’s playbook is quite different from Alibaba’s.

For Alibaba, “e-commerce” more or less stands for the war between traditional brick-and-mortar retailers and internet sellers. But Tencent is challenging that concept of e-commerce by working out how the two can complement each other.

Tencent launched an upgraded version of its “Wei Shenghuo” {微生活} merchant service package in September. The package is a bundle of O2O services for account holders on Tencent’s WeChat (Weixin) mobile messaging application, with the updated version including mobile customer relationship management (CRM) tools, a customized public account menu, mobile customer service, and “WeChat Pay” third-party payment functionality.

The CRM function is the most valuable service because it helps users track customer data, such as food preferences, store visits and spending tallies. It’s the kind of information that most retailers have not had access to before.

Then this month, Tencent rolled out another free service called “Wei Gouwu” {微購物}.

Lin Qiao, vice president of Bestseller-owned Danish fashion label Vero Moda, told the 21st Century Business Herald how Wei Guowu made a difference.

Before the service was launched, she said, only two or three out of every 10 customers would actually buy clothes in the store, but afterwards the ratio rose to around half. That’s because customers can now use a mobile app to reserve the clothes online if they cannot make up their mind whether to buy then and there. If they do decide to buy, they just tap the screen, pay through WeChat and wait a few days for the clothes to arrive on their doorstep.

It’s the shopping experience that stimulates the sales, Lin said.

Tencent’s services help traditional retailers overcome the tech barriers to and lower the cost of setting up their own e-commerce platforms. Several department stores like Intime Retail Group (01833.HK); Rainbow Department Stores (002419.CN) and Maoye International Holdings (00848.HK) are already using Tencent’s services. And other well-known brands in the Bestseller stable like Jack & Jones and Only are integrating the O2O services into their businesses.

As of October, more than 3,000 retailers used Tencent’s O2O services, the 21st Century Business Herald quoted Wu Xiaogang, CEO of Tencent’s e-commerce division, as saying.

But, Tencent’s service charges are not friendly to small retailers. The company offers two kinds of service fees for Wei Shenghuo, both are above 10,000 yuan (US$1,651) and out of the reach of most smaller players.

- Contact the writer at [email protected]



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