WeChat has gone through three distinct rounds of growth in terms of both functions and user activity. The latest round – a set of payments functions – is incredibly exciting.
The first round of growth was with basic messaging, where they replaced simple text messaging (SMS) and basic communication functions otherwise performed through SMS. In this way they started off as being similar to WhatsApp, a free way to send text messages to friends.
The second round was the addition of social networking functions through its “moments” function, where users can send status updates with pictures and short snippets of text. This could be looked at as the Facebook or Path layer of functions inside of WeChat, allowing users to create a diary of personal memes. It is/was an important addition because it also introduced to WeChat a more public, visible social media channel where updates can be openly shared and viewed by a wide group of connections. Brands have taken advantage of “public accounts” to create awareness and spread messages “virally” through the use of influencers, celebrities, and key opinion leaders (KOLs) in a way similar to how they are/were doing with Weibo.
While WeChat’s social functions are not as open as Weibo’s and the structure makes it harder to create massive followings, features like “look around” (people can add each other based on proximity), “Shake” and “Message Bottle” (for random connections), and “QR Codes” (a path to the user’s account from wherever they share the code) have all helped to create more growth in the number of connections.
The third bundle of functions introduced by WeChat are those focused on enabling e-commerce – most notably the linking of consumer bank cards, credit cards, and Tenpay and Wepay accounts. The linking of these payment options allow WeChat to be a totally enclosed ecosystem where social can be linked seamlessly with sales. A user inside of WeChat never has to leave the app on their mobile phone.
This provides a lot of very interesting opportunities for companies that want to sell inside of WeChat. The question, though, is how to effectively use WeChat for sales. There are four basic “paths to purchase” inside of WeChat that brands can experiment with.
1. Through the Content Stream
With a “Subscription Account,” brands can create content and present new products and offers to followers. These contents can be linked through to an e-commerce store built inside the WeChat application, or outside of the application (ideally an HTML5 mobile store). This is perhaps the simplest way to explore the potential of sales through WeChat. A “Subscription Account” can be built in an afternoon by using the tools provided by WeChat’s www.Fengling.me. The only catch is that your company has to be registered in China. For companies without a China registered office, there are other ways to access the market but they don’t allow for the same control over presentation and process.
2. Online-to-Offline Sales
As a mobile application with the location services of a smartphone, WeChat allows for some promising location-based opportunities for brands. The current location-based functions of the app still leave a lot to be desired. Ideally the app would allow for location-based messaging from retailers, and/or contextual targeting. But Tencent is making some attempt at protecting privacy, so that might not be possible anytime soon. They might create an “opt-in” process but it’s very unclear if and when this would occur. So, at the moment brands can take advantage of the location-based abilities of the app by creating a loyalty card and/or by encouraging users at a specific location (a retail shop) to add (follow) the brand account. The “Loyalty Card” account inside of WeChat is basically a CRM tool which audiences can opt-in for and find locations nearby (of retail shops), receive discounts, promotions, points, and rewards.
Retailers are using QR codes and other invitations to encourage customers to sign up for WeChat accounts. They typically do this on-location, taking customers from offline to online, and thereby collecting contacts within the CRM accounts of the brand.
Moving from online to offline, brands are starting to experiment with creating promotions online that drive users to a retail location. For a restaurant or cafe this could mean sending out a “flash” alert to followers about a promotion taking place “in the next hour” for a free trial or a discount. For a fashion company it could allow them to activate a pop-up shop within a short timeframe for a launch or product demo/trial. Once users come to the restaurant, café, or pop-up shop, they can pay on location, provided they have the payments function set up on their WeChat. It makes the retail process much more flexible. Brands can take pre-payments or set up small sales without cash registers, for instance.
3. WeChat Shops
There are a growing number of shops, malls, group-buy (TuanGou), and flash-sales (MianGou) channels being built into WeChat. Brands such as Xiaomi, ONLY, and Sephora have created branded stores (as “Service Accounts”) where they sell products directly. To do this, though, requires the brand to have a plan for building awareness (traffic to their store) and to have a logistics/fulfillment capability.
So, most products being sold through WeChat are moving through “malls” of some sort – many of which are controlled by WeChat/Tencent. Tencent has done a good job of implementing its most important companies, applications, and investments into WeChat. Grouped together inside the payments section, key WeChat/Tencent owned/invested channels are highlighted, including; “Specials” (linked to its e-commerce mall yixun.com), Weituangou (linked to its group buy site gaopeng.cn) and Dianping for restaurants. Tencent also has accounts for other invested companies, including eLong, JD.com, OKBuy, Tongcheng, and Sougou.
There is a very long list of other channels (from inside the “Service Account” section), including “malls” for; Dangdang, Amazon, VIP.com, Lefeng, Mougujie, Meilishou, Suning, Guomei, No1Shop, and Qunar…to name a few.
The challenge for brands in selling through “malls” and group-buy channels is in managing the presentation of the brand and in gaining significant enough visibility in a crowded channel. And, to get significant visibility in these channels, brands often have to pay hefty fees to the “malls” to get priority listings. Ultimately, the “malls” control which products get sold and so there is a real loss of control for brand owners.
4. Affiliate Sales
The final e-commerce option inside of WeChat is through affiliate networks. Similar to Amway and other direct sales models, they are pyramid sales structures with affiliate sales linking social connections together in order to create sales by word of mouth.
There are a growing number of affiliate sales channels, including Weidian and OKWei, where links (pictures and basic details) are shared through user networks, and proceeds of sales are split between people who shared through to the final purchaser.
OKWei allows WeChat users to pick products from the brands they know and like to share with their personal community. A direct sale earns the person who started the sale a reward (some percentage of the margin on the product). Each connection involved in the final sale earns some share of the margin set aside as commission. For a direct sale, the reward is 100 percent of a pre-set margin for the “Sale Owner.” If the link is shared to a connection one degree removed from the “Sale Owner,” the reward is split between “Sale Owner” and the person whose contact made the final purchase.
The products currently on offer to people inside of OKWei are not great and the process has the potential to become very complicated (where there are too many links/connections involved in a final sale). Despite these hurdles, “affiliate networks” built inside/around WeChat hold a lot of potential. It’s this type of link between social and e-commerce which makes WeChat very powerful for brands.