The e-commerce track is ushering in a new player, the social giant Tencent with 1.2 billion WeChat daily activity in hand.

According to reports, in early October, Tencent announced an internal personnel adjustment: Lin Jinghua, senior vice president in charge of the smart retail business, was appointed as a new member of the "General Office".

Tencent's official website shows that the smart retail business focuses on the digital transformation and upgrading of the retail industry. To put it simply, it takes WeChat's traffic and payment system as the underlying foundation, and small programs as the gripping hand, to bring actual business increment to offline stores.

"General Office" is Tencent's highest decision-making body, whose members are divided into two categories, one is the person in charge of functional work, such as human resources, finance, etc. The other is the person in charge of several of Tencent's main businesses. The other is the person in charge of several of Tencent's main businesses, such as Zhang Xiaolong, president of the WeChat business group, and Ma Xiaoyi, head of the game distribution business.

The significance of Lin Jinghua's promotion to the "General Office" is extraordinary. This means that smart retail has been regarded by Tencent executives as one of the main business segments in the future.

According to Tencent's financial report, the total transaction volume of WeChat's digital commerce has exceeded 800 billion yuan for the year 2019. It is expected that this year, the GMV scale will exceed 2 trillion yuan.

According to the GMV growth rate of WeChat commerce, Tencent will become the second largest e-commerce company in the country, and become the most rapidly growing commercial body.

But at the same time, as the WeChat business ecological boundaries continue to expand, Tencent may be difficult to avoid business friction and competition with centralized e-commerce platforms such as Jingdong, Pinduoduo, and even Taobao.

By then, the e-commerce track will usher in a round of reshuffling.

Lin Jinghua's moves

"If you don't forget, there will be an echo." -Li Shutong, "Evening Sunset Collection"

At that time, Taobao, which won the market competition with eBay, was eager to realize the traffic, and took the risk of launching a bidding ranking service. The result was fierce opposition from sellers, and Jack Ma was caught in the vortex of public opinion.

But what makes him more anxious is that Tencent's slash and burn. On May 15 of the same year, Tencent's e-commerce platform pat.com, tit for tat, announced that "the next three years completely free", and will give buyers 600 yuan shopping coupon reward.

With QQ and other social platforms continuing to drive traffic, in just one year, PaiPai's turnover surpassed that of eBay and became the second largest C2C site in China.

The rise of Tencent's e-commerce was seen by Jack Ma as a case of robbing the company while the fire was still hot. He quickly adjusted Taobao's charging strategy to attack PaiPai after the "bidding ranking" fiasco was put to rest. Ali and Tencent's first encounter broke out.

But the fact is that Tencent had not yet found the know-how to do e-commerce. In Taobao's onslaught, pat.com is losing ground. Data shows that in the second quarter of 2007, pat.com's share of the C2C market was more than 9%. And by June 2013, its market share was only 4.7%.

The hard-hit Tencent realized that it was not the right place for e-commerce at the moment. In the words of Lin Jinghua, "The payment problem has not yet been solved, the logistics link is still weak, and the traffic end has not yet grown."

Therefore, in 2014, pat pat network as tencent "capital flow" strategy of negotiation chips, was acquired by jingdong. Since then, the market, the media clamor, about "Tencent does not have a gene of e-commerce," the article was all over the place.

But Ma Huateng, who is naturally calm and rational, did not care. Because in his and Liu Kiping's thinking, socialization and investment are another dimension of e-commerce. And WeChat, which is the core of Tencent's e-commerce map.

Ma Huateng's bottom line is that, as of the end of 2014, WeChat has more than 500 million monthly activity, has become the largest social platform in the country, tied to the bank account of WeChat Pay and QQ wallet users more than 100 million.

And today, WeChat's monthly activity exceeds 1.2 billion, and WeChat Pay's market share in the offline payment market has ranked first. Among them, the market share of WeChat Pay has reached 80% in the offline payment market in lower tier cities.

In six years, WeChat has not only cultivated the largest and most mature traffic pool in the country, but also filled Tencent's gap in the payment market. Previously, QQ Wallet mainly served the purchase of virtual game products, rarely used for physical commodity transactions.

Today, WeChat covers both online and offline payment scenarios, and also provides a closed loop of social and payment services.

Based on this, Tencent, on the one hand, by virtue of the "left-handed flow, right-handed capital", Jingdong, Pinduoduo, Vipshop and other channels of e-commerce platforms into the WeChat Jiu Gongge.

On the other hand, Tencent's internal decision to re-war e-commerce. But the difference is that this time, Tencent's goal is to do the e-commerce track infrastructure enabler. One of the most direct examples is that WeChat has the ability to "operate the system" of e-commerce.

Why would Tencent switch directions?

In relation to the general background of the times, the core reason behind this is that the current C-end traffic dividend has gradually dried up, and the B-end business value is hidden.

Tencent must seize the B-side business resources in order to continue to lead the industry in the future.

Therefore, Tencent does not want to be a simple e-commerce platform, nor does it want to sell goods, but to build a decentralized business ecosystem relying on WeChat applets.

Tencent's financial report shows that the total transaction volume of WeChat's digital commerce in 2019 has exceeded 800 billion yuan, a year-on-year increase of 160%.

And in the first eight months of this year alone, the GMV of physical goods in WeChat's small programs grew 115% year-on-year, and the GMV of brand merchants' self-owned small programs grew 210% year-on-year. Lin Jinghua believes that "it is not a big problem for small program GMV to double on the basis of 2019".

According to this projection, this year, WeChat digital business ecological GMV is at least 1.6 trillion yuan. And if calculated according to last year's 160% growth rate, the GMV scale of WeChat's digital business ecosystem this year will exceed 2 trillion yuan, equivalent to the size of Jingdong's 2019 full-year transactions.

Zhang Xiaolong's trade-off

"Fish, I desire; bear paw, also I desire." -Mengzi -Guizi Shang

"Now, WeChat is facing the problem of 'what to do', and now thinking, what is what we should try, and how to organize it. " Earlier this year at the WeChat open class, Zhang Xiaolong deliberately absent from the scene.

He "said Zen" in a pre-recorded video: worried about the impact of technology on humans, reflecting on WeChat's past mistakes, and whether the current WeChat is overloaded......

Zhang Xiaolong's worries are not unreasonable. WeChat has more than 1.2 billion monthly activities, it is not only a national-level application, but also the foundation of the trillion Tencent building.

If WeChat deviates from the scales and falls to the side of over-commercialization, the foundation of the Tencent building will be impacted.

Therefore, although Zhang Xiaolong is currently striding under the complex internal and external needs, but still walking on thin ice, the rhythm of commercialization of WeChat firmly in their hands.

But the e-commerce track is an exception. And let the product manager - Zhang Xiaolong "loose mouth" is Lin Jinghua.

"Davis (Lin Jinghua) accompanied a few years of golf, and finally fixed Xiaolong." Caixin quoted a Tencent insider as saying.In 2015, Lin Jinghua was officially promoted to head of the strategic development department, and every other week he had to drive from Shenzhen to Guangzhou, where WeChat is headquartered, to report to Bruce Zhang, rain or shine.

Outside of work, Lin Jinghua and Bruce Zhang had golf dates from time to time. During this time, the two had numerous conversations about the future possibilities of WeChat, including sensitive topics such as "how WeChat can make money".

In the end, Zhang agreed to test the waters of WeChat's commercialization, but he was extremely restrained. Therefore, at the beginning of the launch of the small program, many traffic entrances are not open. At that time, what is the goal of the small program in business, WeChat employees are not clear.

Until July 2018, after WeChat's small program opened a one-time live video plug-in, e-commerce small program and other functions, WeChat's commercialization path is gradually clear. Since then, following the east wind of the industry, WeChat's commercialization process has been accelerating.

Early this year, the new crown pneumonia epidemic is a catalyst. By the "black swan" event, the offline traffic is completely exhausted, users, merchants have to look to the online, but the traditional centralized traffic distribution platform is not friendly to the new merchants.

This undoubtedly brings new commercialization opportunities for Zhang Xiaolong and Lin Jinghua. in February, WeChat live small program to start the public beta, smart retail small program in WeChat nine palace grid, in Shenzhen, Fuzhou and other places on line. in April, WeChat open small program jump function. in June, WeChat trial open small program share to the circle of friends. According to reports, recently, WeChat small store has been fully open for public testing.

In this regard, a person close to WeChat said, "This year to do big GMV is the unified goal of WeChat and merchants."

At this point, back to the original point of view, surging growth of WeChat business ecological transaction scale does not mean that Zhang Xiaolong gave up his product bottom line. On the contrary, in many internal and external games, Zhang Xiaolong is more and more clear about the future of WeChat to achieve a balance between user experience and commercialization.

Obviously, Tencent executives are well aware of Bruce Zhang's bottom line and needs. Therefore, in accordance with the customary "horse racing" mechanism, Tencent has launched a point of view of the live, the little goose spell spell, QQ Huishou and other e-commerce platforms.

Public information shows that watch point live belongs to Tencent PCG (Tencent platform and content business group), focusing on e-commerce live, both App and small program end. The little goose spell spell focus on shopping, to "buyer recommendation + group" form of goods presentation, also belongs to the PCG business group.

Jiangfan's challenge

"Plan ahead before you move." -Sun Tzu - The Book of Plans

Jiang Fan, president of Taobao Tmall, probably did not expect how the transaction scale of WeChat's mini-program business ecosystem would grow so fast.

According to a research report by Founder Securities, it is predicted that in the next two to three years, the scale of smart retail GMV alone in WeChat's digital business ecosystem will reach 750 billion to 1 trillion yuan, and the scale of smart food and beverage WeChat applet GMV will reach 2 trillion yuan.

According to this conservative calculation, by then, the total GMV of WeChat digital business ecosystem will exceed 3 trillion yuan. WeChat digital business ecology is expected to surpass Jingdong and become the second largest e-commerce platform in China. The GMV of Ali's economy in 2019 is 7 trillion yuan, Jingdong's is 2 trillion yuan, and Pinduoduo's is 1 trillion yuan.

The second rise of the Tencent system of e-commerce is undoubtedly a great challenge for Jiang Fan, the helmsman of Taobao and Tmall.

In order to cope with the potential challenges, continue to do large GMV, to maintain the first-mover advantage, the Amoy system of e-commerce will be this year's "double 11" activity time ahead of the whole more than 10 days. "This year Tmall 'double 11' is the most special year ...... Consumers can choose to pay the final payment in advance, ten days earlier than in previous years to get the goods." Taobao Tmall president Jiang Fan said at the "Double 11" launch conference.

In addition, in order to revitalize the flow of the domain, the Amoy system of e-commerce has also launched a "cat" game, in order to achieve the flow of the store to the introduction, and ultimately contribute to the transaction.

But industry sources said, "Taobao's current traffic import is not accurate, like a needle in a haystack, can be a deal is a deal."

In addition, according to Ali's financial report, the Amoy system of e-commerce domain of annual users just over 600 million. And WeChat monthly activity has more than 1.2 billion, the number of users is almost twice the Amoy system of e-commerce.

And more importantly, at present, under the impact of the intelligent Internet wave, stationed in the decentralized traffic distribution platform call is getting higher and higher. A few years ago, small and medium-sized merchants have collectively "out of Amoy" defected to Pinduoduo, is the most direct example.

In this regard, Lin Jinghua said, "In foreign online sales, including Amazon and other platforms, e-commerce sales accounted for only 40% of the brand's own official website and other sales channels is the main force of online retail. But in China, the e-commerce platform is too powerful and mature, and brands have lost the opportunity to do App to pull in new self-employment."

Therefore, at the WeChat open class earlier this year, WeChat officials said that the primary task of the small program this year is to "help merchants create their own business closed loop." In addition, a few days ago, WeChat has begun to fully test the WeChat small store function, and the new online personal store. This means that WeChat's ambitions are not only limited to B2C e-commerce platforms, but also to C2C platforms.

WeChat's business ecosystem will eventually surpass the Amoy system of e-commerce? At the moment, we do not know. But if you look at the track, WeChat and Amoy e-commerce are also doing platforms. In the future, the two sides in order to compete for merchant resources, perhaps inevitably a war.

But from another dimension, merchants will not take the initiative to do "choose one". For them, the Amoy system of e-commerce and WeChat is just a different hand.

According to this can be predicted, in the coming period of time, the Amoy system of e-commerce will still maintain the industry's leading edge for a long time. The GMV scale of WeChat's digital business ecosystem will continue to expand and will become an important pole in the e-commerce track.

References:

1 | Wu Xiaobo, "Tencent's Biography"

2 | Caixin Weekly, Qian Tong and Qu Yunxu, "Tencent's Battle with E-commerce Again"

3 | Founder's Securities, Chen Mengzhu and Yao Lei.

Note: The data is from public disclosure, this article only represents the views of the author and does not constitute any investment advice.

- FIN -