The Secret to successful Cross-Border China e-Commerce in WeChat
Personal Engagement Platforms
Active demand generation through personally authenticated engagement could be described as a strategic key to cross-border e-commerce in WeChat.
Unlike the mass aggregation China etailing platforms from Alibaba or JD, the WeChat ecosystem is not instinctively built for e-commerce. However, due to its unique business model derived from a core function as a chat app, its huge penetration, nation-wide and overseas footprint, and its widespread heavy user metrics, WeChat has now scaled to be a primary platform where ‘social’ relationship-based e-commerce happens.
The underlying reason for this is a self-managing authenticated person-to-person experience across a personalized channel. It’s attainable and scalable because of the strict rules and restrictions controlling how a WeChat personal account is created, maintained and how connections are made on the chat platform.
For example, the feature whereby WeChat users accept contact requests is by default from people they interact with already through other channels. In WeChat itself it is virtually impossible to ‘harvest’ contacts as happens in FaceBook or Twitter where the platforms place algorithmic triggers to extend your social network beyond your immediate and largely relevant circle.
Operating as an end-to-end messaging platform with social features as opposed to a social network with messaging features, WeChat limits your social reach and reverts to atypical offline, and more human, person-to-person relational networking habits. Groups are the only real exception where social signals can drive behaviour but they are restricted in size to a maximum of 500.
This is a useful filtering process which has made WeChat quite unique in a country where ‘digital life’ is susceptible to an even greater amount of counterfeit and fake sources of news, content, products and relationships.
Therefore when considering B2C, B2B or C2C #wechatecommerce this gives Tencent’s WeChat platform a unique commercial advantage over others by delivering an incremental level of trust that can naturally occur in all transactional and relational activity.
WeChat Customer Funnel Layering
Typically WeChat is situated between the middle to the lower end of the customer acquisition funnel.
[Note: the funnel reduces in size with a smaller % of potential customers converting to each subsequent stage as they move down through it. The funnel is based on the AIDA sales model. Awareness -> Interest -> Demand -> Action (i.e. Purchase)].
While most people have not up until now used WeChat to proactively search for products themselves that is changing rapidly. WeChat has been built as a social sharing and discovery platform where users interact with trusted sources for relevant social, transactional and relational information.
This has created a ‘virtuous economic circle’, bolstering an unrivaled messaging-commerce ecosystem where authenticity is a cornerstone and so has hyper-driven consumer demand within the platform for both products and services.
Tencent’s WeChat data shows that users depend on it it for almost every other possible digital application from chat, social sharing, video calling, document transfer, hailing a taxi and paying bills just to name a few.
So inevitably while they come for other apps-within-the-app, they want to stay for more.
Time spent on the platform [DAUs in Q4, 2016 = 768m, 50% of all users are on WeChat for more than 90 minutes per day] and its growing central role in their digital lives proves that they all want to shop on WeChat too [2015–16 WeChat shoppers doubled to 31% of total users].
Optimising customer engagement is essential to a good shopping experience and on WeChat the user can become very loyal, but it almost always starts with some form of a hybrid online-to-offline (O2O,or visa versa) underpinned by a good series of customer touchpoints, or interactions, that will convert a passive on/offline retail experience into an active one.
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Below is a snapshot of business models that can exist in #wechatecommerce both within China and cross-border.
Model: C2C (customer to customer)
After purchasing products from a brand, supplier or merchant’s existing sales channel (online/offline) or within WeChat itself, an individual Weishang (WeChat personal business owners, or micro-sellers) or Daigou (Weishang based outside of China who handle product and fulfil the orders cross-borders) will sell directly to their clients via a social or chat channels.
WeChat is preferred because it confers greater credibility upon a seller; the WeChat ID is authenticated, payment is integrated, communication has real-time immediacy and the platform provides benefits whereby traceability, verification and notification can amplify trust.
Sellers receive payment for the goods or services within WeChat (linked to their bank account) and/or they may receive commission out of the sale depending on the sales and distribution business in use.
Demand generation source: personal social networks
Timeline posting and sharing, word-of-mouth, WeChat group chatting, re-posting brand and product/services marketing messages are the typical demand generation methods.
The most important feature of many Weishang/Daigou sales and distribution model is the commission based micro-selling agent model structure.
As people normally will only add friends, family, colleagues and people they personally know and are open to being acquainted with on WeChat (i.e. those that are trusted and/or authenticated across their own personal network), a social sharing model is the best way to increase the pool size of potential customers.
Traffic can explode in a short period of time but can pose a challenge to increase to the next level of organic sales without an underpinning structured programme and management system under the control of the brand or merchant.
Pros and cons
Good for brands, suppliers or merchants to test during a China market-entry phase, building up brand recognition by word-of-mouth. But hard to manage sales & promotional activities, track accurate sales agent performance and review the revenue and profit line returns from indirect selling unless you have a back-end WeChat-integrated dashboard and weishang agent management system.
The supplier or brand significantly or exclusively relying on a Weishang/Daigou channel can lose control or erode brand integrity. Customer service, marketing, sales and product-service issues are hard to identify and overcome, unless the distribution and sales model offers a closed loop system. As such if this channel to market does not incorporate feedback, reporting, authentication and validation throughout all stages there is commercial risk.
[Disclosure: our ACTTAO Cross-Border Merchant Services Platform has this functionality and it has been operating successfully since 2015].
Model: B2C (business to customer)
Setting up a WeChat Official Account (OA) and a brand/supplier/merchant owned WeChat store affiliated to the WeChat account is now a key part of an omnichannel e-commerce strategy. This supports the capturing of orders from end users directly and receipt of payments via WeChat to a business bank account usually via a cross-border payment gateway provider incorporating a RMB FX settlement service.
Demand generation source: WeChat marketing campaigns
Continuous and consistent lead generation campaign is a priority. KOL campaigns, programmatic advertisement, O2O campaigns, content marketing, or utilising a brand managed multi-level agent sales structure (WeChat groups and weishang/daigou) can all contribute to the targeted lead generation and be part of the sales and distribution strategy.
Pros and cons
Brand equity management and control throughout a direct/indirect end customer channel is the key benefit. This can really boost and extend audience size with direct brand engagement after an initial market testing phase with a Weishang/Daigou distribution model or marketplace channel.
For many brands the WeChat OA and Store can be the tipping point from a Paid Media demand generation programme to an organic Earned Media inbound marketing model. The risk is that the brand owner or supplier must underwrite the majority of the resources (administration and channel management) and costs (sales commissions or marketing investment) in scaling up.
Model: B2B2C (business to business to customer)
Brands or suppliers sign up and list their products on a third party WeChat marketplace store to sell indirectly to the end user. Marketplace stores in WeChat will remit the payment they receive from purchasers back to the supplier on an agreed basis of settlement.
Demand generation source: combining Weishang/Daigou & WeChat store strategies
All marketplace stores operate similarly to a brand owned WeChat store. They face the same challenge of building traffic and maintaining engagement because WeChat is a closed social platform, protecting user privacy through authenticated-only social connectivity (which is the unique benefit of the channel as well). Independent stores will use all the available WeChat marketing tools and multi-level sales structure to sell.
Examples include ACTTAO’s Meimor WeChat-integrated beauty and cosmetics e-commerce and business management platform, and ACTTAO’s Yilian WeChat-integrated fashion and design supply chain and e-commerce marketplace platform.
Both platforms offer cloud-based software modules for supply chain and sourcing, e-commerce sales and micro-marketing, social media sharing and content publishing, inventory and accounts, distribution, order tracking and delivery fulfilment, CRM, customer privilege services and loyalty rewards.
Pros and cons
Specialist or large scale marketplace WeChat stores contribute to a good omnichannel strategy, supporting a brand’s reputation and providing substantial expertise in a given market sector, audience niche, product category or sales channel.
Marketing costs and resources are reduced (but not removed as often there is the need for additional budget allocation for promotional and incentive campaigns) but margin is shared and total control over price, promotion and product is diluted.