15 Sept 2014
Could WeChat Stores Present a Serious Online Challenge to Taobao?
WeChat stores have empowered an army of small volume e-commerce operators. As the mainland sector matures, can these players – many of them based in overseas markets – survive both increased competition and new legislation?
There is now a growing trend for mainland e-commerce operators to shift from Taobao and the other traditional e-business platforms to WeChat stores (Weidian). Many conventional operators – including shopping centres, hotels, part-time purchasing agents and even second-hand goods dealers – are now using WeChat stores as a primary marketing platform.
Lu Ping, a veteran of overseas online shopping, believes that WeChat now has a distinct advantage in the marketplace. He says that as these stores are connected to the WeChat accounts of the online store operators, they offer a number of distinct benefits – including personalisation, spontaneity and immediacy of interaction.
Global Shopping Made Easy
The approach taken by Lu Ping, a young female Beijing-based consumer, exemplifies the WeChat advantages. She recently posted on her account: "I wish to buy SUQQU sakurakaba colour eye-shadow, but my Taobao purchasing agent in the UK says it is out of stock. Are there any friends out there in Japan who can help?"
Lu Ping's WeChat contact list is crammed with shopping information. Among her contacts are agents specialising in buying the clothes worn by Jun Ji-hyun in My Love from the Star, a South Korean Sci-fi show, the latest Kate Spade and Coach bags from America, cheap off-season UGG boots from Australia, and Chanel cosmetics and jewellery from France.
Commenting on her use of the service, Lu said: "Many of the people whose purchasing services I use on WeChat are overseas schoolmates or friends. I have a number of WeChat friends who have started their own 'WeChat store' business."
According to "Grace", a Chinese student at college in the US, many mainlanders studying overseas take up purchasing services via "WeChat" as a part-time job. She says: "Running a WeChat store gives me an income without affecting my studies. On Taobao, there are many purchasing agents and competition is keen. I would have to commit a lot of time and effort to Taobao to make it work.
"Running a WeChat store, however, does not affect my studies. I love shopping, and updating my contacts is something I do every day anyway. I don't have to think of ways to promote my products. In fact, more and more people are opening WeChat stores as WeChat Payment comes of age. As I only do business among close acquaintances, my trading volume is not high. I can make about US$200 a month for comparatively little work. Although the money is not huge, I am doing something I enjoy."
Another advocate of the WeChat store system is Xiao Xiao, a Hong Kong-based housewife, who specialises in purchasing maternity and infant products. Speaking to HKTDC Research, she said her key reason for opting for the "WeChat store" format for her business was convenience. She has to prioritise looking after her children and operating a "WeChat store" means she doesn't have to sit in front of her computer all day long.
She says: "I sometimes receive orders when I am playing with my kids in the park, but it is still easy to communicate with my clients by phone. I dispatch the goods by courier at a fixed time each day and make purchases when I do my daily shopping. It does not take up too much of my time."
Unlike many part-time purchasing agents, Xiao does not just do business with her friends. A number of customers discovered her maternity and infant goods store via Koudai ("pocket") a mobile shopping app. The app is said to be the only one that currently supports WeChat store browsing.
"Inner circle" Marketing Strategy
As the primary advantage of WeChat stores lies in interaction with close acquaintances, cultivating a circle of online friends is essential to success. The greater number of friends you have on WeChat then, obviously, the higher profile your store has. Repeat orders are also very important for WeChat stores operators. Sending out information that shows your unique character, having one-to-one chats with customers and giving away small gifts on festive occasions can all help secure customer goodwill and trust. Such activities all help to build a core customer base and ensure sales volume.
Operators of stores selling maternity and infant goods can also share parental experiences with customers, while those selling cosmetics and fashion can share beauty and style tips. Customers can also easily be influenced by opinion leaders who share similar values. These techniques, together with personalised communications and informal chat, can prove highly effective in winning the trust of customers. According to Xiao, success comes more from focusing cultivating customers rather than running a conventional business.
Many online store operators tend to carry massive amounts of promotional messages on their webpages. There is no denying that this method can help promote sales to a certain extent, but it is also liable to irritate users. When it comes to running WeChat stores, then, it is best to run such promotions only sparingly.
Overall, an online store operator should limit the frequency of WeChat store promotions on their webpage to no more than one a day. It is also best to focus on promoting new items, rather than repeatedly promoting the same items.
New Overseas Purchasing Legislation
Recent legislation may also have an impact on WeChat store operators. Of particular note is the Announcement on the Supervision of Entry/Exit Goods and Articles in Cross-Border E-Commerce, released by the General Administration of Customs on 1 August 2014.
Assessing the new rules, one veteran operator said: "This is the General Administration of Customs endorsing qualified overseas purchasing companies and individuals and looking to outlaw those selling counterfeit and contraband goods." Overall, the Announcement is likely to lead to those companies and individuals conducting cross-border e-commerce becoming properly subject to Customs regulations, with strict regulations that they will need to comply with.
The Announcement, however has divided many industry players. Some believe the move will lead to WeChat store operators becoming more reliable and properly-regulated. Others, however, see the legislation as likely to push up prices, with such operators now subject to customs duties.
Still others see the legislation as difficult to implement. While regulating players on the larger platforms, notably Tmall, is comparatively straightforward, monitoring the individual players who comprise the WeChat store network is far more problematic. At present, most WeChat store items are posted into the country as personal items and only have to pay a small postal articles tax.
According to some industry sources, only when the levels of these WeChat store goods reach a certain quantity will they be subject to customs declaration and tax liabilities. In essence, the new regulations mean that large orders will no longer be eligible for personal postal articles tax, while small quantities will not necessarily be affected. This may compel cross-border e-commerce operators to change their purchasing system, possibly lowering the overall efficiency of the business. Many, like Xiao, however, believe that as their business only involves small quantities, they will not be affected by the new legislation.
According to one senior member of staff at Tmall International, which has established co-operative ties with six cross-border pilot companies, it is still trying to establish the exact customs tariff requirements. It does, however, accept that the development of cross-border e-commerce is subject to national policy, as well as an important spur for boosting consumption. It is hoped that both consumers and businesses will ultimately benefit from the tax concessions and cheap prices offered by this policy.
Ren Yuan, Special Correspondent, Beijing