WeChat, known as Weixin in China, started as a social media and messaging app in 2011. Capitalizing on its growing audience, the app continued to add different functions, allowing users to pay bills, play games and hail cabs.
The launch of WeChat Pay in 2014 was one of the app’s most transformative moves to date. WeChat Pay originally focused on peer-to-peer and in-app transactions within WeChat, but moved into the offline world with the ability to pay at stores through QR codes, which gained traction in 2016.
WeChat has 1.1 billion monthly users and WeChat Pay has more than 800 million monthly active users as of June 2019 and November 2018, respectively. Adding a payment function to an app with an already large user base allowed WeChat to move beyond a marketing and customer service tool to a retail platform, enabling the purchase of products through the app.
Mini programs changed the game for commerce on WeChat
Like other social media companies, WeChat has official accounts for businesses. In January 2017, WeChat launched mini programs that link to these business accounts and enable certain features like additional content, loyalty programs and transactions.
WeChat users embraced mini programs because they can discover and buy products without downloading another app or being redirected to another website, saving time and memory on their phones. According to WeChat, as of October 2019, there are over 1 million WeChat mini programs across over 200 industries. Consumers open their mini program four times per day on average.
Here’s how a WeChat user can make a purchase through a WeChat mini program.
An example of a WeChat purchase：EUROMONITOR INTERNATIONAL
Mini programs enable new types of commerce on WeChat
The functionality of mini programs goes beyond an in-app purchase and can be leveraged for several transactions.
1. Scan-and-go: Shoppers can use a retailer’s mini program to scan products and checkout without waiting in line. Walmart China said that more than 30% of in-store transactions are done via Scan & Go functionality in its WeChat mini program as of December 2018. It also allows consumers to opt for home delivery.1
2. Omnichannel experiences: Mini programs allow shoppers to buy online and pick up in store. For example, Uniqlo’s mini program allows shoppers to buy online and ship to the store within an hour for pick up. If there a product is out of stock at a Uniqlo location, shoppers can still scan a QR code for the product for home delivery.1
3. Group buying: Companies offer discounted prices to shoppers if they encourage enough people to purchase. The original shopper shares a product with the discounted price with their social network on WeChat. If enough people make the purchase, everyone will get the product at the discounted price. Feelunique ran a six-day campaign that offered a 40% discount on a Caudalie set that brought in new customers.1
4. Social selling: AS Watson, a health and beauty retailer, incorporates social selling into its mini program. Users of Watsons’ mini program can recommend and sell products to their own WeChat followers.2
5. Key opinion leader (KOL) sales: Key opinion leaders (also known as influencers) can put product tags in their content that lead shoppers to a product detail page and the ability to buy within WeChat. For example, Becky Li, a KOL on WeChat, posts sponsored content to her feed on her official WeChat account. These posts link to WeChat mini programs that direct shoppers to the product’s purchase page. 2
6. Unattended stores: Unattended stores do not have a cashier or other types of frontline staff. Retailers are turning to WeChat mini programs to enable shoppers to enter a store, walk out with their items and receive the bill through their WeChat account. EasyGo’s mini program provides a QR code that shoppers scan to enter the store. Products have RFID tags that are scanned when a shopper exits and payment is made via WeChat Pay.3
A third way to thrive in China’s competitive e-commerce market
Offering a frictionless solution to close the transaction within its app has made WeChat a serious challenger to the leading e-commerce brands, Tmall and JD.com. Both brands have seen the cost of customer acquisition increase as their marketplaces become crowded. In addition to lower acquisition costs, WeChat enables brands and retailers to own the relationship with the customer. These businesses have access to data on consumer behaviors, such as buying pattern and demographics, for free.
There are already a few shifts from Tmall to WeChat mini programs for closed-loop transactions. Uniqlo, for example, used to redirect shoppers to its Tmall storefront in its mini program until November 2018 when it switched to completing the transaction within its own WeChat program. Executives from Lululemon stated in their June 2019 quarterly earnings call that while Tmall accounts for the bulk of their digital business, their own local website and WeChat mini program are expected to take share.
Because of mini programs, retailers and brands need to view WeChat in a new light. WeChat provides a new way to grow e-commerce sales and implement omnichannel functionality. Instead of solely looking at Tmall or JD.com as the gateways into China, retailers and brands need to think about WeChat strategically and invest accordingly.